KREDIT Microfinance Institution Plc. - Cambodia

Transcription

1 MICROFINANCE INSTITUTIONAL RATING EXECUTIVE SUMMARY KREDIT Microfinance Institution Plc. Cambodia FINAL RATING OUTLOOK BBB Stable Mission date: October 2015 Date Rating Committee : January 2016 Validity: 1 year if no relevant changes in operations or in the external context occur Previous Rating : BBB, 2012 (MFR) RATING SCORING BY AREA Microfinance Sector and R&S Mission, Governance and Strategy Systems and Controls Client Protection Assets quality and structure Capital Adequacy and ALM Financial and operational results D C CC CCC B BB BBB A AA AAA RATING RATIONALE FINANCIAL ANALYSIS AND CAPITAL ADEQUACY GOVERNANCE, RISK MANAGEMENT AND CLIENT PROTECTION Although lower than projected, KREDIT s profitability results remain adequate thanks to the portfolio expansion, the strong asset productivity and good portfolio quality. Net interest margins are strong but show a decreasing trend. Cost efficiency has not yet benefitted from the scale effect. Productivity levels could be further strengthened. KREDIT s solvency is adequate but the diminishing internal capital generation and the projected growth pace might put some pressure on capital adequacy in the short term. No equity injections are expected but subordinated debts will be issued by the majority shareholder if needed. KREDIT s majority shareholder has consolidated its position and demonstrated its capacity to support the institution. Ownership changes are expected in the shortterm with the exit of the minority shareholder. The plan to merge with Phillip Bank in the mediumterm is not yet fully defined, which brings some level of uncertainty. The board performs its supervisory function effectively. The decisionmaking process benefits from an upgraded risk management framework which however shows some room for improvement. The internal control systems fit the institution s decentralization and level of operations. The MIS has been upgraded but its effective implementation requires more training. KREDIT is working towards aligning its client protection systems with international best practices. Despite the overall adequate regulatory framework and credit bureau, the context risk of client overindebtedness is mediumhigh. Legal form Ownership Year of inception Regulator / Supervisor Networks of reference Area of intervention Financial Services Credit methodology NBFI Phillip MFIs Pte Ltd, World Relief 1993 as project, 2004 as MCI and 2011 as MDI National Bank of Cambodia (NBC) Cambodia Microfinance Ass. (CMA) Rural and urban Credit and savings Group, village banking, individual Institutional data Dec13 Dec14 Sep15 Members (#) 75, , ,773 Active borrowers (#) 73,115 93,081 90,336 Active savers (#) 8,308 27,368 27,853 Active loans (#) 73,115 93,069 90,336 Branches (#) Satellites (#) Total staff (#) 994 1,265 1,632 Loan officers (#) Gross outstanding portfolio (USD) 73,930, ,482, ,272,442 Total savings (USD) 16,217,004 35,592,440 47,865,970 Total assets (USD) 87,381, ,526, ,943,137 Female borrowers 90.4% 89.8% 88.8% MicroFinanza Rating Srl Via Rigola, Milan Italy Tel: info@microfinanzarating.com Indicators Dec13 Dec14 Sep15 Credit risk ratio 0.4% 0.4% 0.5% PAR % 0.3% 0.6% PAR % 0.2% 0.4% Restructured portfolio 0.0% 0.0% 0.0% Writeoff ratio 0.1% 0.1% 0.1% Risk coverage ratio 100.0% 100.0% 100.0% ROE 17.9% 15.4% 11.0% ROA 3.2% 2.8% 2.0% Portfolio yield 25.4% 26.2% 24.9% Operating expense ratio 13.0% 13.4% 13.4% Provision expense ratio 0.2% 0.2% 0.5% Financial expense ratio 7.7% 8.5% 8.1% LO productivity (borrow.) Cash Ratio 24.1% 22.5% 16.1% Capital Adequacy Ratio (MFR) 19.9% 19.5% 18.2% Equity to Assets Ratio 19.2% 19.1% 17.9% Client dropout ratio 10.5% 11.9% 42.8% Average annual percentage rate (APR) 27.6% Average transparency index 99.5% Average loan balance/gdp pc 100% 99% 118% Average disbursed loan size 1,206 1,492 1,758 As of September 2015 data are annual KREDIT Microfinance Institution Plc. Building Nº 71, St. 163, Sangkat Toul Svay Prey I, Khan Chamkarmorn, Phnom Penh Cambodia Tel: Copyright 2016 MicroFinanza Rating Srl. Any reproduction without the express permission of MicroFinanza Rating is forbidden.

2 KREDIT Cambodia Annex 8 Rating Scale The final rating grade does not consider the Country Sovereign Rating Risk, but it takes into account the effects of the political and economic context on MFI s performance. The information used in the current rating has been partly provided by the institution subject to the evaluation process and partly collected during the meetings with the head executives. The analysis is based on audited financial statements and other official sources. MicroFinanza Rating cannot guarantee the reliability and integrity of the information, as it does not conduct auditing exercises, and therefore does not bear responsibility for any mistake or omission coming from the use of such information. The rating has to be considered as an external and independent opinion and it has not to be considered as a recommendation to realize investments in a specific institution.

3 Standard Social Rating KREDIT Microfinance Institution Plc, Cambodia Oct15 SOCIAL RATING social performance management and client protection systems. Satisfactory alignment to the social mission. Social Performance Management Client protection, social responsibility Outreach Quality of the Social Rating Committee: January Previous Social Rating: BB, May Copyright 2015 MicroFinanza Rating Srl (MFR). Any reproduction without MFR express permission is forbidden. SOCIAL RATING RATIONALE SOCIAL PERFORMANCE MANAGEMENT SYSTEM BB D C B BB A A KREDIT s governance and BoD are committed to achieving the social mission although specific social goals, indicators and targets have not yet been fully defined. The decision making process presents a balanced financial and social approach despite the moderate reporting of social results, which reflects the shortcomings in the social performance tracking and monitoring system. The product design is adequate to reach a broad clientele, and the human resources management is adequately aligned to the mission. CLIENT PROTECTION AND SOCIAL RESPONSIBILITY Despite a still moderate gender balance, KREDIT displays an adequate social responsibility toward the staff, with a good level of turnover, remuneration and training. The social responsibility toward the clients is adequate thanks to appropriate product design, good transparency of the and responsible pricing. The policies and practices in place to mitigate the risk of over indebtedness are adequate however the high risk of overindebtedness in the country might challenge these practices. OUTREACH The breadth of outreach is large with a good geographical coverage. Outreach results suggest a good alignment with the mission in terms of gender and rural outreach and financing of incomegenerating activities while poverty incidence might be lower than the mission intentions. QUALITY OF THE SERVICES Despite a rather high client drop out ratio, credit products seem overall appropriate to meet clients needs thanks to the good delivery system, the accessible guarantee requirements and the overall flexible repayment schedule. Institutional data Active borrowers Active savers Gross outstanding portfolio, US$ Total active savings, US$ Branches Total staff Legal form Year of inception Network Area of intervention Credit methodology Financial Non financial Geographical coverage MicroFinanza Rating Srl Via Rigola Milan Italy Tel: info@microfinanzarating.com Sep15 90,336 28, ,272,442 47,865, ,632 NBFI 2004 CMA (Cambodian MF. Ass.) Rural Individual, Group, Village B. Credit, saving Trainings, Project development National Social indicators Rural coverage, clients Female clients Female staff Female staff in management Average disbursed loan amount, US$ Clients at third loan cycle Loans in > third cycle Average balance per borrower / GNI pc Individual methodology, portfolio Client dropout ratio PAR30 Staff turnover ratio Average annual percentage rate (APR) Average transparency index Growth in active borrowers See annex 2 and 4 for more details. Sep % 88.8% 31.0% 7.7% 1, % 22.5% 126.2% 89.2% 42.8% 0.6% 11.9% 27.6% 99.5% 3% KREDIT Microfinance Institution Plc Building Nº 71, St. 163, Sangkat Toul Svay Prey I, Khan Chamkarmorn,Phnom PenhCambodia Tel:

4 Area Social Performance Management system Factor Social mission Social governance Social Strategy Assessment Main results A formalised social mission is in place The mission statement is not complete and key mission terms are not defined. General governance good practices BoD commitment to the mission Guidance and supervision is adequate but affected by the lack of clear social indicators and objectives Mission drift risk due to ownership changes Social strategy and balanced management decisions Lack of a complete set of social objectives, operational targets and indicators alignment of the product strategy to the mission Social and financial balance Growth compatibility with sustainability and client wellbeing is affected by the high risk of overindebtedness investors' alignment to the institutional double bottom line Profitability compatibility with client well being and long term sustainability Overall good MIS reliability and fair data collection quality Social monitoring and reporting Limited capacity to track social information on the client profiles tools are in place to collect the client feedback on the satisfaction with the although drop out analysis could be performed more frequently. No system to measure the change in clients' lives is currently in place Rooms for improvement in the reporting of social information and results to the top management and BoD HR alignment to the mission staff recruitment alignment to the mission Staff performance appraisal does not include explicit mission related criteria (only soft skills) staff incentive scheme alignment to the mission 2

5 Area Factor Assessment Main results Client protection Appropriate product design and effective use of clients' and social feedbacks Product design and responsibility No list of acceptable and unacceptable collateral and clients delivery drop out reasons analysis is not sufficiently monitored (every 2 years) High client overindebtedness context risk The loan approval process does not solely rely on guarantees and is grounded on the client repayment capacity Prevention of overindebtedness Both incentive scheme and productivity targets balances portfolio quality and growth Credit bureau and client information sharing Management and BoD awareness of risk monitoring A multiple borrowing policy is formalized but could be more conservative especially for group loans The adequate internal control system ensures an overall uniform dissemination of the repayment capacity analysis. Transparency Responsible pricing Fair and respectful treatment Privacy of client data Excellent Excellent Mechanisms for complaint resolution transparency of thanks to the simple cost structure and the adequate written documentation High institutional transparency index Effective staff communication Market based pricing Code of conduct formalization The recovery process is formalized but there is room for improvement in the formalization of collection practices and nonacceptable behaviours The collection culture is not based on the zero tolerance for PAR Overall adequacy of the internal audit to verify compliance with clients protection principles A written privacy policy is in place confidentially and integrity of client information Client consent is asked for information sharing Existence of a complaint handling system offering timely resolutions complaint mechanism information Rooms for improvements in the induction training of the staff involved in complaints handling Complaint reporting system from branches to HO improvable. Social responsibility towards the staff personnel gender balance staff turnover, contractual conditions and benefits Formalised human resource policies staff satisfaction monitoring, evaluation and training 3

6 Outreach Area Factor Assessment Client protection and social responsibility Responsibility: community and environment Breadth of outreach Geographical outreach alignment Alignment to the mission of clients vulnerability and financed activities Alignment to the mission of client poverty and financial exclusion Main results socially responsible activities benefiting the community. community protection policy environmental risk management Green financial products in place although still marginal Overall good breadth of outreach coverage of poor areas Excellent coverage of rural areas outreach to households with low education outreach to vulnerable households and good outreach to women financing of income generating activities and selfemployment savings use for health, education and housing poverty outreach alignment of clients' assets with the mission alignment of clients' access to financial due to the significant presence of microfinance providers alignment of credit and saving size to the mission Quality of the Variety of financial Accessibility of credit Flexibility of credit Client dropout rate Quality of other financial Quality of nonfinancial Excellent variety of types of service variety to meet clients' financial needs Overall good accessibility of the service offered to clients and delivery channels Adequacy of the loan service delivery Adequacy of the loan disbursement time, procedures and guarantee Adequacy of the loan term and repayment schedule loan amount and field staff customer service client dropout level and trend appropriateness of saving Non financial service quality and relevance Nonfinancial scale and sustainability 4

7 Annex 5 Social Rating Scale Grade S AA S A S BB S B S C S D Definition Excellent social performance management and client protection systems. High likelihood of achieving the social mission. social performance management and client protection systems. Social mission likely to be achieved. social performance management and client protection systems. Satisfactory alignment to the social mission. social performance management and client protection systems. Partial alignment to the social mission Weak social performance management and client protection systems. Medium risk of mission drift Poor social performance management and client protection systems. Risk of mission drift. The modifiers and which can be added to the rating grade denote small relative differences within each rating category. More information: MicroFinanza Rating Social Rating section of our website Social Rating Methodology in english Metodología de Rating Social en español Méthodologie de Rating Social en français The information used in the social rating has been partly provided by the evaluated institution and partly collected during the meetings with the head executives, the staff and the clients of the institution. The analysis is based on internal MIS data and other official sources. MicroFinanza Rating cannot guarantee the reliability and integrity of the information, as it does not conduct auditing exercises, and therefore does not bear responsibility for any mistake or omission coming from the use of such information. The social rating has to be considered as an external and independent opinion and it has not to be considered as a recommendation to realize investments in a specific institution. 37