Definitions of selected financial terms, ratios, and adjustments for microfinance (English)

microfinance definition world bank

Abstract

The evolution of the microfinance industry has led to a greater focus on the financial viability of microfinance institutions (MFIs). A variety of measurements have been used to measure MFI performance, many of which have been recognized as standard indicators. See More + The evolution of the microfinance industry has led to a greater focus on the financial viability of microfinance institutions (MFIs). A variety of measurements have been used to measure MFI performance, many of which have been recognized as standard indicators. On closer examination, it is evident these standard indicators are being calculated, and applied in different ways. This has led to confusion among practitioners and analysts, as well as to considerable distortions when comparing MFIs. Transparency is increasingly important in the industry, as mature MFIs look to commercial funding sources, and investors to support their growth. It is anticipated this

paper will contribute to a standard understanding of several financial terms, and ratios within the international microfinance industry. This document is intended for an audience with some basic familiarity with accounting terms, financial statements, and microfinance institutions. The primary objective of this document is to put forward standard definitions for selected financial terms, and to suggest a standard method of calculating certain financial ratios. The document is divided into three sections: 1) a list of financial terms and definitions, 2) a description of financial ratios, and, 3) a brief discussion and description of financial adjustments. In the coming year, the Small Enterprise Education Program (SEEP) Network intends to develop a more comprehensive guide on financial terms, ratios, and adjustments that will guide MFI managers on how to categorize accounts, and calculate key ratios and adjustments. See Less -

Document also available in. French

Source: documents.worldbank.org

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