Professional Documents
Culture Documents
October 2004
TARGET Worksheet
TABLE Worksheet
Step 2:
Find the Net
Financial Spread:
This section asks for four monthly loan portfolio inputs over the course
of one year: loan portfolio balance, total financial income, total financial
expenses and monthly loan loss provisions for the MFU. If the MFU
does not have data for a full year, but would still like to calculate an
average break-even, the supervisor can input the necessary data of all
available months.
The data for Month 1 should be 1 year before from the present date in
order to calculate an AVERAGE break-even for formalized AOs over a
period of a year. For example, if an MFU is designing an incentive table
from October 2004, then to obtain an average net financial spread,
Month 1 should begin with portfolio data for November 2003 next to
the Month 1 cell.
This section uses the following formula to calculate the Net Financial
Spread:
Gross Financial Spread
Less
Gross Receipt Tax
Less
Loan Loss Provision
Divided by 100
Where:
Less
Step 2 obtains the necessary accumulated data from the table in Step
1. As a result, no input is necessary in Step 2.
Step 3:
Compute for the
Direct and Indirect
Costs:
Step 4: Analyzing
the break-even
At this point, you have already calculated for the Break-Even Amount.
This is the portfolio amount that each account officer should have
reached in order to begin being profitable for the bank.
Once all the data for sheet 1 has been inputted, the template will
automatically generate the break-even yield for this MFU. This value is
the minimum portfolio that each account officer must generate before
they can begin turning a profit for the bank. Once the data has been
verified, the template user should move onto worksheet 2, where the
calculated break-even will be referenced.
Step-ByStep
Step 5:
Set the
minimum
incentive
targets:
Description
After completing the Break Even worksheet and the Break-Even amount has been
computed, move to the Targets worksheet to set the minimum incentive targets.
At this point, the bank has to establish the following parameters in order to get the
data needed by the incentive scheme table (Figure 1):
Portfolio data
o The bank needs to input the expected incremental amount to get the
minimum portfolio requirement for the AOs to begin receiving incentives
o The minimum portfolio requirement is the calculated break even portfolio +
the expected incremental amount. MABS recommendation is 50,000100,000 for the incremental amount of portfolio.
Portfolio at Risk data
o Maximum PAR for the MFU to receive incentives (MABS recommends that
this be no more than 3% over 30 days for the entire MFU portfolio)
o Maximum PAR per account officer to begin receiving incentives (MABS
recommends that the maximum PAR over 7 days for an individual AO should
not exceed 5%)
o Number of days PAR 7-days or 30-days
Number of clients outstanding
o Average loan outstanding portfolio per client
o Breakeven number of clients Note that this is automatically calculated
based on the average loan outstanding.
o Maximum number of clients to be reached by an AO (MABS recommends at
least 150 loans per AO)
Number of loans disbursed per month
o Minimum number of loans disbursed per AO (MABS recommends 20)
o Maximum number of loans disbursed per AO (MABS recommends 40)
Target Weights, in percentage, for each criteria (total of 100)
This section of the template allows the bank to change the weight of various
targets for computing incentives based on the priorities of the bank at any point
in time. Usually PAR is weighted the highest percentage of the incentive but
equally important is the level of outreach or loans disbursed per AO per month.
o
o
o
Maximum Incentive
o Incentive percentage of outstanding portfolio (MABS recommends 3-4%)
o Maximum incentive at minimum portfolio target Note that this is
automatically generated by the program based on the weights applied to
each of the incentive indicators
Step 6:
Analyze the
incentive table
Step 7:
Calculating the
incentive
distribution for all
staff involved with
the MFU
Once the break-even yield has been calculated and all the incentive
targets have been inputted, view worksheet 3 entitled Table. This is
the completed incentive table based on the specific MFU inputs.
At the end of each month, the MF supervisor must look at the portfolios
of all the regularized account officers and calculate the total incentives
that they have earned. Once this data has been tabulated, move on to
sheet four (Step 7).
The total incentives calculated for each AO will be distributed (if the
management so desires) to all members of the MFU in an effort to show
appreciation for other staff support in maintaining a good performing
quality portfolio. Also, international MF best practices show that a
distribution to other staff besides AOs can increase a sense of
teamwork and cohesion amongst the MFU staff.
The next step is to input each AOs name and input the amount of total
incentives they earned (according to the incentive table). Once this has
been completed, the worksheet will display how much each MFU staff
should receive.
One way that some rural banks share the incentives amongst all staff is
to host a merienda or beginning-of-the-month celebration to reinforce
the importance that all staff contributed to the MFU performance.