A Comprehensive Q1 80/81 Analysis Reveals the Financial Frontiers of Nepal's Microfinance Sector

Microfinance companies, designated as 'D' classified banks and authorized by the Nepal Rastra Bank (NRB), are instrumental in catering to the financial needs of individuals and small businesses that lack access to conventional banking services. These entities play a crucial role in providing micro-credit and various financial facilities to underprivileged individuals with limited or no capital.

The initial quarterly reports for 53 out of 55 microfinance companies have been disclosed, with Samaj Laghubitta Bittiya Sanstha Limited (SAMAJ) and Shrijanshil Laghubitta Bittiya Sanstha Limited (SHLB) being the exceptions as the companies haven't yet published their reports. Leveraging the available data from the first-quarter reports, a comprehensive analysis can be conducted to assess the performance, financial position, growth trajectory, and other key indicators of these microfinance institutions.

However, the sheer volume of reports can be overwhelming and time-consuming to sift through. To streamline the process for investors, Sharesansar has meticulously curated a selection of the most crucial metrics. This focused approach enables investors to delve into a comparative analysis of each company against its peers, providing a concise yet comprehensive overview of their investment viability.

In this article, we aim to shed light on the essential metrics that will empower investors with insights into the relative strengths and weaknesses of these microfinance companies. 

Below is a compiled table presenting the data of all 55 microfinance companies, offering a consolidated view for investors to assess and navigate the intricate landscape of microfinance investments. Among 55 microfinance companies, 3 companies are segregated into wholesale companies while others are segregated into national, regional, etc.

Net Profit:

During the review period, Microfinance Sector profit declined by 66.63% compared to the previous year.

Sana Kisan Bikas Laghubitta Bittiya Sanstha Limited (SKBBL) has reported the highest net profit in this quarter with a total of Rs. 30.14 Crores. SKBBL is closely trailed by Chhimek Laghubitta Bittiya Sanstha Limited (CBBL) with a profit of Rs. 22.12 Crores. Jeevan Bikas Laghubitta Bittiya Sanstha Limited (JBLB) has secured the third position with a net profit of Rs. 12.05 crores.

Capital:

In terms of share capital, Sana Kisan Laghubitta Bittiya Sanstha Limited (SKBBL) has the highest capital of Rs. 333.16 crores, followed by Chhimek Laghubitta Bittiya Sanstha Limited (CBBL) with Rs. 283.54 crores.

Meanwhile, BPW Laghubitta Bittiya Sanstha Limited (BPW) has the lowest paid-up capital of Rs. 3 Crores.

Reserve and surplus:

The total reserve and surplus of all microfinance companies are at Rs 28.39 Arba where the industry average of Rs 44.55 Crores.

In terms of total reserves and surplus, Sana Kisan Laghubitta Bittiya Sanstha Limited (SKBBL) has maintained its lead with a reserve and surplus of Rs 5.62 Arba, Jeevan Bikas Laghubitta Bittiya Sanstha Limited (JBLB) has maintained the second position with Rs 2.18 Arba reserve and surplus fund and Swabalamban Laghubitta Bittiya Sanstha Limited (SWBBL) is in the third position with a reserve and surplus of Rs 1.81 Arba.

Deposits from Customers:

On average, microfinance companies have collected Rs 1.65 Kharba as a deposit. Only 6 companies are above the average deposit collection.

As of the first quarter of FY 2080/81, Chhimek Laghubitta Bittiya Sanstha Limited (CBBL) stands on top with total deposits worth Rs 31.04 Arba, and Nirdhan Utthan Laghubitta Bittiya Sanstha Limited (NUBL) has the second-highest deposits of Rs 19.01 arba. Similarly, the bank is followed by Swabalamban Laghubitta Bittiya Sanstha Limited (SWBBL) with a collected deposit of Rs 13.03 arba respectively. BPW Laghubitta Bittiya Sanstha Limited (BPW) has the lowest deposit collection of Rs. 5 Crores. 

Borrowings:

Microfinance companies have Rs 4.5 Arba as borrowings on average. Only 13 companies are above the average deposit collection.

Sana Kisan Laghubitta Bittiya Sanstha Limited (SKBBL) stands on top with total borrowings worth Rs 19.30 Arba, and NIC Asia Laghubitta Bittiya Sanstha Limited (NICLBSL) has the second-highest deposits of Rs 13.38 Arba. 

Loans and Advances:

As per the reports, Chhimek Laghubitta Bittiya Sanstha Limited (CBBL) has disbursed the highest amount of loan of Rs. 31.82 Arba.  Jeevan Bikas Laghubitta Bittiya Sanstha Limited (JBLB) reports loans to its customers worth Rs. 23.72 Arba.

Till this quarter of the fiscal year, a total of Rs. 3.78 Kharba of loan has been disbursed by all the microfinance combined.

Net Interest Income:

Net interest income is the difference between the revenue a bank earns from its interest-bearing assets and the expenses of its interest-bearing liabilities. High Net Interest Income indicates the investment efficiency of any financial company.

Chhimek Laghubitta Bittiya Sanstha Limited (CBBL) has a net interest income of Rs. 72.84 crore which is the highest among all microfinance companies. Sana Kisan Laghubitta Bittiya Sanstha Limited (SKBBL) comes in the second position with a net interest income of Rs. 51.65 crores.

Impairment Charges:

A total of Rs 1.94 Arba of amount has been shown in an impairment charge for a loan and other losses.

Chhimek Laghubitta Bittiya Sanstha Limited (CBBL) has the highest impairment charge for a loan and other losses with Rs 38.81 Crores followed by Forward Microfinance Laghubitta Bittiya Sanstha Limited (FOWAD) with a total of Rs. 30.50 Arba. In the same vein, has a negative impairment charge for a loan and other losses of Rs. 3 lakhs.

Major indicators:

Non-Performing Loan (NPL):

In terms of non-performing loans, Sana Kisan Laghubitta Bittiya Sanstha Limited (SKBBL) has reported the lowest NPL of 0.81% followed by RSDC Laghubitta Bittiya Sanstha Limited (RSDC) with an NPL of 1.49%.

The highest NPL is reported by Manakamana Smart Laghubitta Bittiya Sanstha Limited (MKLB) with an NPL of 35.80%.

Earnings per share:

BPW Laghubitta Bittiya Sanstha Limited (BPW) became the company to serve investors with the highest annualized EPS of Rs 89.18 per share. Nesdo Sambridha Laghubitta Bittiya Sanstha Limited (NESDO) has the second-highest EPS of Rs 41.84 per share. Jeevan Bikas Laghubitta Bittiya Sanstha Limited (JBLB) is in the third position with an annualized EPS of Rs 40.78 per share.

Conversely, Upakar Laghubitta Bittiya Sanstha Limited (ULBSL) stays at the bottom with a negative Earning of Rs. 127.18 per share.

Net worth per share:

The highest net worth per share among these microfinance companies is Rs 489.04 which belongs to Aatmanirbhar Laghubitta Bittiya Sanstha Limited (ANLB). Nesdo Sambridha Laghubitta Bittiya Sanstha Limited (NESDO) is in the second position with Rs 381.43.

Jalpa Samudayik Laghubitta Bittiya Sanstha Limited (JALPA) has the third-highest net worth per share as of Q1 of FY 2080/81 i.e. Rs 289.26. Aviyan Laghubitta Bittiya Sanstha Limited (AVYAN) has the lowest net worth of Rs 99.60 per share.

The industry average net worth stands around Rs 182.86 per share. 19 companies have a net worth more than the industry average.

P/E Ratio:

BPW Laghubitta Bittiya Sanstha Limited (BPW) has the lowest PE ratio of 9.92 times. It is followed by Sana Kisan Laghubitta Bittiya Sanstha Limited (SKBBL) with a PE ratio of 24.04 times.

(The PE ratios are not the recent ratios but rather the ratios for quarter-end. Please look at the current market price to calculate the recent P/E ratio).

Capital Adequacy Ratio (CAR):

In terms of the Capital Adequacy ratio (CAR), First Microfinance Laghubitta Bittiya Sanstha Limited (FMDBL) seems to have reported the highest CAR of 23.74%. This is followed by Nesdo Sambridha Laghubitta Bittiya Sanstha Limited (NESDO) with a CAR of 23.12%. CAR is the ratio of a company’s capital concerning its risk-weighted assets and current liabilities.

The summary of the microfinance industry report for Q1 of FY 2080/81: