Glossary of Standard Financial Terms, Ratios and Adjustments for Microfinance

Publication Date: 2002
Published by: Small Enterprise Education and Promotion (SEEP) Network
Document Type: Other

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Can there be standard definitions and calculation methods for financial indicators used to analyse MFI performance?

As a first step towards the goal of standard definitions of the most common microfinance indicators, three Washington-based development agencies (the Inter-American Development Bank, USAID, CGAP) and the three rating agencies specialising in microfinance (MicroRate, M-CRIL, Planet Rating) formed a group to explore whether they could agree on such common definitions for themselves. The Asian Development Bank participated as an observer. This "roundtable" has now produced this draft set of definitions

The purpose of the glossary is only to provide standard default definitions and calculation methods for some of the financial indicators most commonly used to analyse MFI performance, so that whenever these terms are used, the reader will know that they are defined in conformity with the glossary, unless some alternative definition or calculation method is explicitly described
After a brief preliminary discussion of a few general reporting and calculation issues, the main body of this document is divided into three sections

• Financial, accounting, and operational terms;
• Common financial ratios;
• Common adjustments that analysts use on MFI financial statements;
• Sections on ratios and adjustments include some non-normative discussion of their interpretation and use.