jerry.black at aspeninst.
08-07-2002, 02:56 PM
Ms. Miller,
The information I have, from a group of about 46 microenterprise lenders
participating in MicroTest, is that average costs per loan (which represents
a program's average cost to disburse a microloan, and includes, in addition
to the administrative costs associated with processing and monitoring its
loans, all a program's credit-related training to prepare borrowers to
receive microenterprise loans) typically range between $4,000 and a little
over $6,000 per loan.
Operational Cost Rates are another measure of a credit program's efficiency
we track in MicroTest by dividing the operating expenses of a credit program
by the average outstanding loan portfolio for the year. As such, it is a
measure which includes resources expended both in making new loans and in
managing outstanding loans made in previous years. The resulting number
represents the cost the organization incurs to make and manage $1 in its
loan portfolio. For example, an operational cost rate of 1.1 means that the
organization spends $1.10 to manage each dollar in its loan portfolio. So,
the larger a program's average outstanding portfolio, the lower its
operational cost rate is likely to be.
MicroTest programs fall into two main camps with respect to this measure:
those which are primarily credit-led programs and those which are
training-led and also offer microloans to some of their customers or clients
who have gone through core training. Training-led programs--and it sounds to
me from your question that the program you are concerned with may fit into
this camp--tend to have much less lending activity because their clientele
is generally different from that of most credit-led program, and we argue
ought not be evaluated without taking into consideration the often extensive
work they do preparing people for self-employment, including screening out
those who are not ready for it, much less a loan. So, we tend to see
Operational Cost Rates from about 0.5 for some of the larger credit-led
microlenders to about 2.3 for the average training-led program.
Hope that's helpful to you.
By the way, MicroTest is coming out with a comprehensive review of two years
of performance data on the microenterprise field (based on 56
MicroTest-participating agencies), which will talk about these issues in
greater depth, along with other categories of performance. The report will
be available from www.fieldus.org in the next month or so.
thanks,
Jerry Black
MicroTest Manager
The Aspen Institute
-----Original Message-----
From: Janie MIller [mailto:JMMILLER@ci.duluth.mn.us]
Sent: Wednesday, August 07, 2002 10:28 AM
To: COMMUNITYDEVELOPMENTBANKING-L@cornell.edu
Subject: Micro enterprise loan/admin charges
Hello
I'm a new subscriber to this list serv and have a question I'm hoping you
can help me with. The City of Duluth, Minnesota has funded a
microenterprise loan program through a local nonprofit agency for many
years. This agency has a loan portfolio of approximately 40 loans ranging
in value from $500 to $20,000. We are looking for national averages on the
cost of adminstering such a program, such as average amount of admin, as a
percentage of loans, a flat rate, or any other method that others are using.
Thanks for the information!
Janie Miller
Financial Analyst
City of Duluth, MInnesota
107 City Hall
Duluth, MN 55802
phone 218/723-3406
fax 218-723-3768
email JMMiller@ci.duluth.mn.us
This post transferred from the cdb-l mailing list
The information I have, from a group of about 46 microenterprise lenders
participating in MicroTest, is that average costs per loan (which represents
a program's average cost to disburse a microloan, and includes, in addition
to the administrative costs associated with processing and monitoring its
loans, all a program's credit-related training to prepare borrowers to
receive microenterprise loans) typically range between $4,000 and a little
over $6,000 per loan.
Operational Cost Rates are another measure of a credit program's efficiency
we track in MicroTest by dividing the operating expenses of a credit program
by the average outstanding loan portfolio for the year. As such, it is a
measure which includes resources expended both in making new loans and in
managing outstanding loans made in previous years. The resulting number
represents the cost the organization incurs to make and manage $1 in its
loan portfolio. For example, an operational cost rate of 1.1 means that the
organization spends $1.10 to manage each dollar in its loan portfolio. So,
the larger a program's average outstanding portfolio, the lower its
operational cost rate is likely to be.
MicroTest programs fall into two main camps with respect to this measure:
those which are primarily credit-led programs and those which are
training-led and also offer microloans to some of their customers or clients
who have gone through core training. Training-led programs--and it sounds to
me from your question that the program you are concerned with may fit into
this camp--tend to have much less lending activity because their clientele
is generally different from that of most credit-led program, and we argue
ought not be evaluated without taking into consideration the often extensive
work they do preparing people for self-employment, including screening out
those who are not ready for it, much less a loan. So, we tend to see
Operational Cost Rates from about 0.5 for some of the larger credit-led
microlenders to about 2.3 for the average training-led program.
Hope that's helpful to you.
By the way, MicroTest is coming out with a comprehensive review of two years
of performance data on the microenterprise field (based on 56
MicroTest-participating agencies), which will talk about these issues in
greater depth, along with other categories of performance. The report will
be available from www.fieldus.org in the next month or so.
thanks,
Jerry Black
MicroTest Manager
The Aspen Institute
-----Original Message-----
From: Janie MIller [mailto:JMMILLER@ci.duluth.mn.us]
Sent: Wednesday, August 07, 2002 10:28 AM
To: COMMUNITYDEVELOPMENTBANKING-L@cornell.edu
Subject: Micro enterprise loan/admin charges
Hello
I'm a new subscriber to this list serv and have a question I'm hoping you
can help me with. The City of Duluth, Minnesota has funded a
microenterprise loan program through a local nonprofit agency for many
years. This agency has a loan portfolio of approximately 40 loans ranging
in value from $500 to $20,000. We are looking for national averages on the
cost of adminstering such a program, such as average amount of admin, as a
percentage of loans, a flat rate, or any other method that others are using.
Thanks for the information!
Janie Miller
Financial Analyst
City of Duluth, MInnesota
107 City Hall
Duluth, MN 55802
phone 218/723-3406
fax 218-723-3768
email JMMiller@ci.duluth.mn.us
This post transferred from the cdb-l mailing list