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.

Related: List of ‘D’ Class Microfinance Companies In Nepal

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.

Also Read: Merger/Acquisition Of Microfinance Companies In Nepal

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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2 thoughts on “Comparative Study Of 4 Wholesale Microfinance In Nepal

  • October 30, 2020 at 12:41 pm
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    how to calculate P/E ratio

    Reply

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