power of coop pesos
TRANSCRIPT
Power of
P. E. S. O. S.
The Power of P E S O SThe Power of P E S O S
BOOKKEEPER’S TRAININGAugust 26, 2013
What is
P. E. S. O. S. ?
P - PORTFOLIO QUALITY
E - EFFICIENCY
S - STABILITY
O - OPERATIONS
S - STRUCTURE OF
ASSETSThese are indicators for the financial performance of savings and credit cooperatives and other types of cooperatives with savings and credit services.
PESOS RATIOS GOALS:
• P ortfolio Quality
• E fficiency
• S tability
• O perations
• S tructure of Assets
A toolkit for good Cooperative Governance.
A risk assessment tool.
A toolkit for good Cooperative Governance.
A risk assessment tool.
A framework for risk based reviews and assessment of the credit cooperative’s risk management practices.
PESOS BASED
PURPOSES:
Supervisory &
Regulatory Tool Management Tool
To ensure safety and stability of credit cooperative through necessary operational and financial discipline that would surely protect the money of the members.
As Supervisory and Regulatory Tool
For supervisory and/or regulatory body designated
To ensure that the cooperative is operating efficiently and effectively and satisfying the needs/wants of the members and community in general and keeping the cooperative viable at all times.
As Management ToolFor BoD, GM and key implementers
P E S O S
PORTFOLIO QUALITY - 25%
1. PORTFOLIO AT RISK (PAR)
Measures the risk of default in the portfolio.
Formula:
Balance of Loans with 1 day missed payments Total Loans Outstanding
Standard: 5% or less15 %.
PORTFOLIO QUALITY
2. Allowance for Probable losses on loans
Measures the adequacy of the allowance for probable losses on loans
a) Formula 1:
Amount of allowance for loans
over 12 Months Past Due_____
Total Loans Outstanding over
12 months past dueStandard: 100%5%
PORTFOLIO QUALITY
2. Allowance for Probable losses on loans
Measures the adequacy of the allowance for probable losses on loans
b) Formula 2:
Amount of allowance for loans
1 to 12 Months Past Due_____
Total Loans Outstanding
1 to 12 months past dueStandard: 35% 5%
EFFICIENCY - 20%
1. Asset Yield
Measures the ability of coop’s assets to generate income.
Formula:
Undivided Net Surplus
Ave. Total Assets
Standard: At least Inflation Rate
4 %.
EFFICIENCY
2. Operational Self-Sufficiency
Measures the ability of coop to sustain its operation.
Formula:
Interest Income from Loans +
Service Fees+Filing Fees+Fines Financing Costs+Admin Costs
Standard: more than 100%
4%
EFFICIENCY
3. Rate of Return on Members’ Share
Measures the earning power of members.
Formula:
Interest on Share Capital
Average Share Capital
Standard: Higher than Inflation Rate
4%
EFFICIENCY
4. Loan Portfolio Profitability
Measures how profitable the loan portfolio is.
Formula:
Int. Inc. from Loans + SF+ FF+ Fines
Average Total Loans Outstanding
Standard: More than 20%
4%
EFFICIENCY
5. Cost per Peso Loan
Measures the efficiency in managing the loan portfolio.
Formula:
Financing Cost + (Admin Cost – Member Benefit Expense )
Average Total Loans Outstanding
Standard: P0.10 per P1.00 loan
2%
EFFICIENCY
6. Administrative Efficiency
Measures the cost of managing the coop’s assets.
Formula:
Administrative Costs
Average Total Assets
Standard: 3% to 10%
2%
STABILITY ………30%
1. SolvencyMeasures the degree of protection that the coop has for members’ savings and shares in the event of liquidation of the coop’s assets and liabilities.
Formula:
(Assets+Allow)-([Total Liab-Deposits] +Past Due Loans+LR+LUL)
Deposits + Share Capital
Standard: At least 110%10%
STABILITY
2. Liquidity
Measures the coop’s ability to serve itsmembers’ withdrawals and deposits on time.
Formula:
Liquid Assets-ST Payables Total Deposits
Standard: Not less than 15% 10%
STABILITY
3. Net Institutional Capital
Measures the level of institutional capital after subtracting the losses
Formula:
(Reserves+Allow for PLL) – (Past Due Loans+LUL+P Assets)
Total Assets
Standard: At least 10%10%
OPERATIONS
1. Performance of Membership Growth ….10%
Determines the performance of changein membership vis-à-vis target.
Formula:
Actual Increase in the # of Members Target Increase in the # of Members
Standard:
Target set in the Developmental Plan
5%
OPERATIONS
2. Trend in External Borrowings
Determines the percentage of change in external borrowings.
Formula:
Ending Ext. Borrowings –
Beg. External Borrowings Beg. External Borrowings
Standard:
Decreasing towards zero.
5%
STRUCTURES OF ASSETS – 15%
1. Asset Quality
Measures the percentage of total assets that are not producing income.
Formula:
Non-Earning Assets Total Assets
Standard: Not more than 5%
5%
STRUCTURES OF ASSETS
2. Asset Structure - 1
Measures the percentage of totalassets financed by deposits
Formula:
Total Deposits Total Assets
Standard: 55% - 65%5%
STRUCTURES OF ASSETS
2. Asset Structure - 2
Formula:
Total Loans Receivables Total Assets
Standard: 70% - 80%2%
STRUCTURES OF ASSETS
2. Asset Structure - 3
Formula:
Total Share Capital Total Assets
Standard: 35% - 45%3%
PESOS RATINGS SUMMARY
P - PORTFOLIO QUALITY …… 3….25
E – EFFICIENCY ………………. 6….20
S - STABILITY…………………. 3….30
O - OPERATIONS…………….. 2….10
S - STRUCTURE OF ASSETS..4… 15
TOTAL……………………….18..100
X …………... 80%
PESOS RATINGS SUMMARY
P PORFOLIO QUALITY (25%)1 Portfolio at Risk (PAR) 152 Allowance for Probable Losses on Loans
more than 12 months past due 53 Allowance for Probable Losses on Loans
1 to 12 months past due 5 25E EFFICIENCY (20%)
4 Asset Yield 45 Operational Self-Sufficiency 46 Rate f Return on Members' Share 47 Loan Portfolio Profitability 48 Cost per Peso Loan 29 Administrative Efficiency 2 20
S STABILITY (30%)10 Solvency 1011 Liquidity 1012 Net Institutional Capital 10 30
O OPERATIONS (10%)13 Performance in Membership Growth 514 Trend in External Borrowings 5 10
S STRUCTURE OF ASSETS (15%)15 Asset Quality 516 Asset Structure: Total Deposits/Total Assets 517 Asset Structure: Total Loans/Total Assets 218 Asset Structure: Total Share Capital/Total Assets 3 15
TOTAL PESOS 100 x 80%
What is the
“POWER OF PESOS”???
It will help the management
identify ratios which require attention and focus
Identify necessary intervention
The Power of PESOS
The Power of PESOS
Benefits:
•Board and management focus
•Incremental changes in innovation
•Quality, productivity and performance measurement
•Developing and applying new approaches
•Allocation of scarce resources
•Cooperative Governance and (Self) Regulataion
Indicator Intervention/Module
Portfolio Quality
•Delinquency Control•Credit Management
Efficiency •Capital Management•Asset/Liability
Management
Stability •Liquidity Management•Investment Management
Operations •Membership Growth•Trend in External
Borrowings
Structure of Assets
•Asset Quality•Asset Structure
The Power of PESOS
The Power of PESOS
SOME ACTION PLANS OF COOPS WHO REGULARLY MONITOR PESOS RATIOS
Monthly aging of loans receivables
Increased provision for allowance for
probable losses on loans
Housekeeping
In close watch with income and
operating expenses against budgeted
income and expenses
Increased % of allocation to reserve fund
Started funding the statutory reserves
Thank you!!!