Comparative Study Of 4 Wholesale Microfinance In Nepal

August 16, 2020 | Investopaper

Microfinance companies are the Class ‘D’ financial institutions that provide financial support to the unemployed or low-income groups who have no access to financial services. In Nepal, Microfinance companies are divided into wholesale or retail microfinance. Wholesale microfinance provides loans to the institutions that provide individual loans to the people deprived of financial support. Retail microfinance takes funds from banks or wholesale microfinance and provides loans to low-income people.

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In the case of Nepal, there are only 4 wholesale microfinance companies which include:

1. First Microfinance Laghubitta Bittiya Sanstha Limited

2. RMDC Laghubitta Bittiya Sanstha Limited

3. RSDC Laghubitta Bittiya Sanstha Limited

4. Sana Kisan Bikas Laghubitta Bittiya Sanstha Limited

[Click on the link of the respective company to view the reports].

As per the regulator (Nepal Rastra Bank), the wholesale microfinance is required to meet the minimum paid-up capital of Rs. 60 crores. All the 4 microfinance have met the requirements set by the Central Bank.

The comparative study of these 4 microfinance companies is done based on the unaudited fourth-quarter report of the fiscal year 2076/77. The financial comparison will be based on the following indicators:

Paid-up Capital

All the 4 microfinance have the paid-up capital above Rs. 60 crores. The total paid-up capital of wholesale microfinance stands at Rs. 337.17 crores. Sana Kisan Laghubitta has the highest capital with Rs. 100.02 crores occupying 29.66 percent of the total capital. RMDC Laghubitta is second in capital size with Rs. 89.93 crores. First Laghubitta and RSDC Laghubitta have Rs.80.07 crores and Rs. 67.15 crores respectively.

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The paid-up capital of the four wholesale microfinance of Nepal is shown in the table below:

Microfinance	Paid up capital(Rs.’crores’)	Percent
First Microfinance	80.07	23.75
RMDC Laghubitta	89.93	26.67
RSDC Laghubitta	67.15	19.92
Sana Kisan Bikas Laghubitta	100.02	29.66

Total	337.17	100.00

Reserves and Surplus

The total reserves and surplus accumulated by the 4 wholesale microfinance is at Rs. 406.85 crores. Sana Kisan Bikas Laghubitta leads in reserves and surplus with Rs 197.41 crores which is 48.52 percent of the total reserve of the wholesale microfinance. RMDC also covers 41.78 percent of the total reserve with Rs. 169.99 crores. First Microfinance Laghubitta and RSDC Laghubitta have Rs. 24.79 crores and Rs. 14.66 crores in reserves and surplus.

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The table below shows the total reserve and surplus of the four wholesale microfinance:

Microfinance	Reserve and Surplus(Rs.’ crores’)	Percent
First Microfinance	24.79	6.09
RMDC Laghubitta	169.99	41.78
RSDC Laghubitta	14.66	3.60
Sana Kisan Bikas Laghubitta	197.41	48.52

Total	406.85	100.00

Borrowings

The total borrowings by these 4 wholesale microfinance stand at Rs. 34.35 Arba. Out of the total, 56.56 percent is borrowed by Sanakisan Bikas Laghubitta with the amount of Rs. 19.43 Arba. RMDC Laghubitta is second with Rs. 7.07 Arba borrowed amount. First and RSDC Laghubitta have borrowings of Rs. 5.24 Arba and Rs. 2.61 Arba which is 15.25 percent and 7.60 percent of the total borrowings respectively.

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The borrowings by the four wholesale microfinance is presented in the table below:

Microfinance	Borrowings (Rs.’Arba’)	Percent
First Microfinance	5.24	15.25
RMDC Laghubitta	7.07	20.58
RSDC Laghubitta	2.61	7.60
Sana Kisan Bikas Laghubitta	19.43	56.56

Total	34.35	100.00

Loans and Advances

The main objective of microfinance is to float the loans to the deprived sector. Wholesale microfinance have provided total loans and advances of Rs. 37.84 Arba in total until the end of Ashad, 2077. Sana Kisan Laghubitta has floated 56.47 percent of the total with loans and advances of Rs. 21.37 Arba. RMDC and First Microfinance have provided 21.33 percent and 14.64 percent of total loans which amounts to Rs. 8.07 Arba and Rs. 5.54 Arba respectively. RSDC Laghubitta has loans and advances of Rs. 2.86 Arba only.

The table below shows the total loans and advances of the four wholesale microfinance:

Microfinance	Loans & Advances(Rs.’Arba’)	Percent
First Microfinance	5.54	14.64
RMDC Laghubitta	8.07	21.33
RSDC Laghubitta	2.86	7.56
Sana Kisan Bikas Laghubitta	21.37	56.47

Total	37.84	100.00

Net Interest Income

With the floating of loans, the four wholesale microfinance companies have earned Rs. 194.28 crores as the net interest income. In the FY 2076/77, Sana Kisan Laghubitta has the highest net interest income of Rs. 111.62 crores followed by RMDC Laghubitta with Rs. 46.03 crores. First and RSDC Laghubitta have earned Rs. 22.42 crores and Rs. 14.21 crores as net interest income during this period.

The net interest income earned by the four wholesale microfinance is presented in the table below:

Microfinance	Net Interest Income(Rs.’crores’)	Percent
First Microfinance	22.42	11.54
RMDC Laghubitta	46.03	23.69
RSDC Laghubitta	14.21	7.31
Sana Kisan Bikas Laghubitta	111.62	57.45

Total	194.28	100.00

Operating Profit

The wholesale microfinance listed in Nepse have generated an operating profit of 159.69 crores in the fiscal year 2076/77. Sana Kisan Laghubitta is ahead of others with Rs. 82.16 crores operating profit. This is almost 51.50 percent of the total operating profit of the four microfinance. RMDC, First and RSDC Laghubitta have earned Rs. 45.22 crores, Rs. 21.8 crores and Rs. 10.51 crores of operating profit.

The operating profit generated by the four wholesale microfinance is shown in the table below:

Microfinance	Operating Profit (Rs. “crores’)	Percent
First Microfinance	21.8	13.65
RMDC Laghubitta	45.22	28.32
RSDC Laghubitta	10.51	6.58
Sana Kisan Bikas Laghubitta	82.16	51.45

Total	159.69	100.00

Net Profit

Sana Kisan Bikas Laghubitta has earned 52.12 percent of the total net profit of 4 microfinance which is Rs.105.19 crores. Out of the total profit, Sanakisan Laghubitta made a profit of Rs. 54.82 crores, followed by Rs. 28.51 crores of RMDC Laghubitta. First Laghubitta and RSDC have made a net profit of Rs. 13.97 crores and Rs. 7.89 crores in the FY 2076/77.

The table below presents the net profit earned by the four wholesale microfinance:

Microfinance	Net Profit(Rs.’crores’)	Percent
First Microfinance	13.97	13.28
RMDC Laghubitta	28.51	27.10
RSDC Laghubitta	7.89	7.50
Sana Kisan Bikas Laghubitta	54.82	52.12

Total	105.19	100.00

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Non-Performing Loans (NPL) & Cost of Funds

First Microfinance and RMDC Laghubitta have the lowest NPL of zero percent. Likewise, RSDC and Sana Kisan Laghubitta’s NPL stand at 0.29 percent and 0.68 percent respectively.

Similarly, Sana Kisan Laghubitta has the lowest cost of funds of 5.66 percent. RMDC has a 7.95 percent cost of funds. Likewise, First and RSDC have a higher cost of funds of 10.07 percent and 10.23 percent respectively.

The NPL and cost of funds of the four wholesale microfinance are presented in the table below:

Microfinance	Non Performing Loans, NPL(%)	Cost of Funds (%)
First Microfinance	0	10.07
RMDC Laghubitta	0	7.95
RSDC Laghubitta	0.29	10.23
Sana Kisan Bikas Laghubitta	0.68	5.66

Earnings Per Share (EPS) & Net-worth Per Share

In terms of Earnings Per Share (EPS), Sana Kisan Laghubitta excels over others with Rs. 54.81 followed by RMDC Laghubitta with Rs. 31.71. Similarly, First Microfinance and RSDC Laghubitta have EPS of Rs. 17.45 and Rs. 11.75 respectively.

Likewise, Sana Kisan Laghubitta and RMDC Laghubitta have a per share net worth of Rs. 297.37 and Rs. 289.03 respectively. First and RSDC have a lower per-share net-worth of Rs. 130.96 and Rs. 121.84.

The table below shows the EPS and net-worth per share of the four wholesale microfinance:

Microfinance	Earnings Per Share, EPS(Rs.)	Networth Per Share ( Rs.)
First Microfinance	17.45	130.96
RMDC Laghubitta	31.71	289.03
RSDC Laghubitta	11.75	121.84
Sana Kisan Bikas Laghubitta	54.81	297.37

Market Price Per Share And P/E Ratio

Sana Kisan Laghubitta has the highest share price of Rs. 1301 with P/E ratio of 23.74. Likewise, RMDC Laghubitta is trading at Rs. 701 with the P/E ratio of 22.11.

Similarly, First Microfinance and RSDC Laghubitta have the share price of Rs. 555 and Rs. 542 with the P/E ratio of 31.81 and 46.13 respectively.

The current market price and the respective P/E ratio of the four microfinance is presented in the table below:

Microfinance	Market Price Per Share (Rs.)	P/E Ratio
First Microfinance	555	31.81
RMDC Laghubitta	701	22.11
RSDC Laghubitta	542	46.13
Sana Kisan Bikas Laghubitta	1301	23.74

Note: The share price is based on the end of Ashad, 2077. At current, the prices may vary along with the P/E ratio.

Comparative Performance: Wholesale Microfinance in Nepal

The summarized version of the study is presented in the table below:

Headings	First Microfinance	RMDC Laghubitta	RSDC Laghubitta	Sana Kisan Bikas Laghubitta
Paid up capital(Rs.’crores’)	80.07	89.93	67.15	100.02
Reserve and Surplus(Rs.’ crores’)	24.79	169.99	14.66	197.41
Borrowings (Rs.’Arba’)	5.24	7.07	2.61	19.43
Loans & Advances(Rs.’Arba’)	5.54	8.07	2.86	21.37
Net Interest Income(Rs.’crores’)	22.42	46.03	14.21	111.62
Operating Profit (Rs. “crores’)	21.8	45.22	10.51	82.16
Net Profit(Rs.’crores’)	13.97	28.51	7.89	54.82
Non Performing Loans, NPL(%)	0	0	0.29	0.68
Cost of Funds (%)	10.07	7.95	10.23	5.66
Earnings Per Share, EPS(Rs.)	17.45	31.71	11.75	54.81
Networth Per Share ( Rs.)	130.96	289.03	121.84	297.37
Market Price Per Share (Rs.) [Ashad end, 2077]	555	701	542	1301
P/E Ratio	31.81	22.11	46.13	23.74

Note: The share price, as well as the P/E ratio, is based on the data of Ashad end, 2077. At current, the numbers may vary.

Note:

The study is based on the unaudited fourth-quarter report of FY 2076/77 published by the respective company. Investors are advised to take other things into consideration along with this report while making investment decisions. The numbers may vary after the final audit.

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