Ratio	Formula	Implication to MFIs
Profitability and Sustainability
Return on Capital Employed	Net operating profit/Total assets-short-term liabilities	Measures the reward of long term capital. The assumption is that the more capital that is used the higher the profit to be achieved before finance charge and taxes.
Return on Asset	Net operating profit/Average assets	Measures how well MFIs uses its total assets to generate returns.
Profit Margin	Net operating profit/Operating revenue	Measure what percentage of operating revenue remains after all financial, loan-loss provision, and operating expenses are paid.
Operating Self Sufficiency	Operating revenue/(Financial expenses + Loan loss provision exp + Operating expenses)	Measure how well MFIs cover cost through operating revenues. In addition to operating expenses, it is recommended that financial expenses and Loan-loss provisions be included in this calculation, as they are normal (significant) cost of operation.
Capital Adequacy	(Tier 1 Cap + Tier 2 Cap)/Risk weighted assets Where: Tier 1 cap = ordinary share + audited rev+ intangible assets Tier 2 cap = unaudited retained earnings+ general prov. for bad debt Risk weighted assets => assigning weight to assets such as customer loan; debenture = 1; govt. debt = 0	Measures the extent to which the MFIs can cover or meet the business risk or shock without going out of business. The Basel minimum requirement now adopted by central banks of many countries is 8%. That is MFIs should be able to cover at least 8% of their risk assets.
Asset and Liquidity Management
Yield on Gross Loan Portfolio	Cash financial revenue from loan portfolio/Average gross loan portfolio	Indicates the gross loan portfolio’s ability to generate cash financial revenue from interest, fees, and commission.
Cost of Fund Ratio	Interest and fee expenses on funding liabilities/Average funding Liabilities	Gives a blended interest rate for MFIs funding liabilities. Funding liabilities include all liabilities used to finance MFI financial assets.
Portfolio Quality
Portfolio at Risk	Portfolio at risk (30 days) plus restructured loans/Total outstanding gross portfolio	This is the outstanding amount of all loans that have one or more installments of principal past due more than 30 days.
Risk Coverage Ratio	Loan loss provisions or reserves /Outstanding balance in arrears over 30 days	Shows the portfolio at risk that is covered by actual loss loans reserves.
Write off Ratio	Value of loan written off/Average gross loan portfolio	Represents the percentage of MFIs’ loans that have been removed from the balance of gross loan portfolio because they are unlikely to be repaid. A high ratio may indicate a problem in the IMFs collection effort.
Efficiency and Productivity
Loan Officer Productivity	Number of active borrowers/Number of loan officers	Measures the average caseload of each loan officer. This is a common ratio, but is difficult to compare among MFIs when their definitions of loan officer vary. MFIs may also substitute the number of loans outstanding as a surrogate for number of active borrowers and the number of financial service officers for loan officers.
Personnel Productivity	Number of active borrowers/Number of Personnel	Measure all overall productivity of total MFI human resources in managing clients who have an outstanding loan balance and are thereby contributing to the financial revenue of the MFI.
Average Disbursement Loan Size	Value of loans disbursed/Total number of loans disbursed during period	Measure the average loan size that is disbursed to clients. MFIs should be careful to distinguish between disbursement loan size and outstanding loan size.
Average Outstanding Loan Size	Gross loan portfolio/Total loans outstanding	Measure that outstanding loan balance by client, which may be significantly less than the average disbursement loan size. It is frequently compared to per capital GDP as a rough proxy for the income level of MFIs clientele.