Regulatory Alerts2012-04-14
Added · Updated
Instruction No. 004 on Performance Indicators for Savings and Credit Cooperatives and Microfinance Institutions
The Central Bank of Congo establishes mandatory performance indicators for Savings and Credit Cooperatives and Microfinance Institutions to assess operational efficiency, profitability, and balance sheet management. The regulation defines specific ratios for portfolio quality, operational efficiency, profitability, and balance sheet management, including thresholds such as a non-performing portfolio limit of less than 5% and an operational self-sufficiency ratio greater than 119.2%. These indicators and their calculation methods are detailed in the instruction's annex and became effective on January 1, 2013.
INSTRUCTION NO. 004 TO SAVINGS AND CREDIT COOPERATIVES AND MICROFINANCE INSTITUTIONS REGARDING PERFORMANCE INDICATORS
The Central Bank of Congo,
Having regard to Law No. 005/2002 of May 7, 2002, relating to the establishment, organization, and functioning of the Central Bank of Congo, specifically Article 6;
Having regard to Law No. 003/2002 of February 2, 2002, relating to the activity and control of credit institutions, specifically Article 34;
Having regard to Law No. 002/2002 of February 2, 2002, laying down provisions applicable to Savings and Credit Cooperatives, specifically Article 66;
Having regard to Instruction No. 1 to Microfinance Institutions, specifically Articles 45 to 46;
Decrees the performance indicators applicable to Savings and Credit Cooperatives and Microfinance Institutions, hereinafter referred to as "regulated entities".
Article 1 This Instruction aims to establish the performance indicators to be respected in the management of regulated institutions.
Article 2 Regulated entities must ensure compliance with the performance indicators set out in this Instruction to determine the efficiency and viability of their activities.
Article 3 The indicators covered by this Instruction concern:
- Portfolio quality;
- Efficiency and productivity;
- Profitability and sustainability;
- Balance sheet management.
Article 4 Portfolio quality indicators provide information on the percentage of non-performing assets that erode the institution's revenues and have a negative impact on its cash flow situation. The ratios to be respected are of two types, namely:
- Risk Portfolio;
- Loan write-off ratio.
Article 5 Efficiency and productivity indicators measure the microfinance institution's ability to control its operational costs. The ratios to be respected are of two types, namely:
- Operational efficiency;
- Number of borrowers per credit agent.
Article 6 Profitability and sustainability indicators measure the regulated entity's ability to cover its operating expenses with its revenues to maintain its activities and ensure future growth. The ratios to be respected are of four types, namely:
- Return on equity;
- Return on assets;
- Portfolio yield;
- Operational self-sufficiency.
Article 7 Balance sheet management indicators focus on the degree of adequacy of major items in the statement of financial position relative to the net balance sheet total excluding subsidies. The ratios to be respected are of three types, namely:
- Idle cash ratio;
- Credit outstanding ratio;
- Fixed assets ratio.
Article 8 The calculation method for the aforementioned indicators is set out in the annex, which forms an integral part of this Instruction.
Article 9 This Instruction enters into force on January 1, 2013.
Done in Kinshasa, on April 14, 2012
J-C. MASANGU MULONGO Governor
CALCULATION METHOD FOR PERFORMANCE INDICATORS
| INDICATORS | RATIOS | FORMULAS | NORMS |
|---|---|---|---|
| Quality Indicators | |||
| Risk Portfolio | Outstanding principal of credits with at least one late repayment | Gross loan portfolio amount | < 5 % |
| Loan write-off ratio | Amount of credits written off as losses during the period | Average gross credit portfolio amount for the period | < 2 % |
| Efficiency and Productivity Indicators | |||
| Operational Efficiency | Amount of operating expenses for the period | Average gross credit portfolio amount for the period | Between 13 and 21 % |
| Number of borrowers per credit agent | Number of active borrowers | Number of credit agents | > 130 |
| Profitability Indicators | |||
| Return on Equity | Operating result excluding subsidies | Average equity amount for the period | > 15 % |
| Return on Assets | Operating result excluding subsidies | Average asset amount for the period | > 3 % |
| Portfolio Yield | Amount of interest and commissions received during the period | Average gross credit outstanding | > 15 % |
| Operational Self-Sufficiency | Total amount of operating revenues (excluding exceptional revenues) | Total amount of operating expenses (excluding exceptional expenses) | > 119.2 % |
| Balance Sheet Management Indicator | |||
| Idle Cash Ratio | Available funds | Total asset amount for the period | < 20 % |
| Credit Outstanding Ratio | Gross credit portfolio amount for the period | Total assets for the period | > 70 % |
| Fixed Assets Ratio | Net amount of fixed assets | Total assets for the period | < 10 % |
ANNEX x 100 x 100 x 100 x 100 x 100 x 100 x 100 x 100 x 100 x 100 x 100
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