Comparative Study of 4 Wholesale Microfinance in Nepal

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.

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

1. First Laghubitta Bittiya Sanstha Limited

2. RMDC Laghubitta Bittiya Sanstha Limited

3. RSDC Laghubitta Bittiya Sanstha Limited

4. Sana Kisan Bikas Laghubitta Bittiya Sanstha Limited

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 third-quarter report of the fiscal year 2076/77. The financial comparision 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.

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

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

Total	337.17	100

Reserves and Surplus

The total reserves and surplus accumulated by the 4 wholesale microfinance is at Rs. 373.95 crores. Sana Kisan Bikas Laghubitta leads in reserves and surplus with RS. 186.14 crores which is 49.78 percent of the total reserve of the wholesale microfinance. RMDC also covers 41.78 percent of the total reserve with Rs. 156.22 crores. First Microfinance Laghubitta and RSDC Laghubitta have Rs. 19.38 crores and Rs. 12.21 crores in reserves and surplus.

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

Microfinance	Reserve and Surplus(Rs.’ crores’)	Percent
Sanakisan	186.14	49.78
RMDC	156.22	41.78
First	19.38	5.18
RSDC	12.21	3.27

Total	373.95	100.00

Borrowings

The total borrowings by these 4 wholesale microfinance stand at Rs. 36.18 Arba. Out of the total, 54.70 percent is borrowed by Sanakisan Bikas Laghubitta with the amount of Rs. 19.79 Arba. RMDC Laghubitta is second with Rs. 7.72 Arba borrowed amount. First and RSDC Laghubitta has borrowings of Rs. 5.68 Arba and Rs. 2.99 Arba which is 15.702 percent and 8.26 percent of the total borrowings respectively.

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

Microfinance	Borrowings (Rs.’Arba’)	Percent
Sanakisan	19.79	54.70
RMDC	7.72	21.34
First	5.68	15.70
RSDC	2.99	8.26

Total	36.18	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. 39.19 Arba in total until the third quarter of F.Y. 2076/77. Sana Kisan Laghubitta has floated 56.44 percent of the total loans with loans and advances of Rs. 22.12 Arba. RMDC and First Microfinance have provided 21.41 percent and 14.21 percent of total loans which amounts to Rs. 8.39 Arba and Rs. 5.57 Arba respectively. RSDC Laghubitta has loans and advances of Rs. 3.11 Arba only.

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

Microfinance	Loans & Advances(Rs.’Arba’)	Percent
Sanakisan	22.12	56.44
RMDC	8.39	21.41
First	5.57	14.21
RSDC	3.11	7.94

Total	39.19	100.00

Net Interest Income

With the floating of loans, the four wholesale microfinance companies have earned Rs. 127.49 crores as the net interest income. In the nine months of FY 2076/77, Sana Kisan Laghubitta has the highest net interest income of Rs. 79.51 crores followed by RMDC Laghubitta with Rs. 24.49 crores. First and RSDC Laghubitta have earned Rs. 13.87 crores and Rs. 9.62 crores as net interest income in the 9 months period.

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

Microfinance	Net Interest Income(Rs.’crores’)	Percent
Sanakisan	79.51	62.37
RMDC	24.49	19.21
First	13.87	10.88
RSDC	9.62	7.55

Total	127.49	100.00

Operating Profit

The wholesale microfinance listed in Nepse have generated an operating profit of 111.43 crores until the third quarter of the fiscal year 2076/77. Sana Kisan Laghubitta is ahead of others with Rs. 65.51 crores operating profit. This is almost 59 percent of the total operating profit of the four microfinance. RMDC, First and RSDC Laghubitta have earned Rs. 23.81 crores, Rs. 13.73 crores and Rs. 8.38 crores of operating profit in the nine months of current fiscal year.

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

Microfinance	Operaing Profit (Rs. “crores’)	Percent
Sanakisan	65.51	58.79
RMDC	23.81	21.37
First	13.73	12.32
RSDC	8.38	7.52

Total	111.43	100.00

Net Profit

Sana Kisan Bikas Laghubitta has made 59.80 percent of the total net profit of 4 microfinance which is Rs.72.76 crores. Out of the total profit, Sanakisan Laghubitta made a profit of Rs. 43.51 crores, followed by Rs. 15.14 crores of RMDC Laghubitta. First Laghubitta and RSDC have made a net profit of Rs. 8.67 crores and Rs. 5.44 crores in the first nine months of FY 2076/77.

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

Microfinance	Net Profit(Rs.’crores’)	Percent
Sanakisan	43.51	59.80
RMDC	15.14	20.81
First	8.67	11.92
RSDC	5.44	7.48

Total	72.76	100.00

Non-Performing Loans (NPL) & Cost of Funds

First Microfinance and RMDC Laghubitta have the lowest NPL of zero and 0.0083 percent respectively. Likewise, RSDC and Sana Kisan Laghubitta’s NPL stand at 0.16 percent and 0.65 percent respectively.

Similarly, Sana Kisan Laghubitta has the lowest cost of funds of 5.85 percent. RMDC has a 9.36 percent cost of funds. Likewise, First and RSDC have a higher cost of funds of 10.62 percent and 10.52 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 (%)
Sanakisan	0.65	5.85
RMDC	0.0083	9.36
First	0	10.62
RSDC	0.16	10.52

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

In terms of Earnings Per Share (EPS), Sana Kisan Laghubitta excels over others with Rs. 58 followed by RMDC Laghubitta with Rs. 22.45. Similarly, First Microfinance and RSDC Laghubitta have EPS of Rs. 14.43 and Rs. 10.80 respectively.

Likewise, RMDC and Sana Kisan Laghubitta have a per share net worth of Rs. 286.10 and Rs. 273.70 respectively. First and RSDC have a lower per-share net-worth of Rs. 124.21 and Rs. 118.18.

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.)
Sanakisan	58	286.1
RMDC	22.45	273.7
First	14.43	124.21
RSDC	10.8	118.18

Market Price Per Share And P/E Ratio

Sana Kisan Laghubitta has the highest share price of Rs. 990 and lowest P/E ratio of 17.07. Likewise, RMDC Laghubitta is trading at Rs. 590 with the P/E ratio of 26.28.

Similarly, First Microfinance and RSDC Laghubitta have the share price of Rs. 415 and Rs. 441 with the P/E ratio of 28.76 and 40.83 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
Sanakisan	990	17.07
RMDC	590	26.28
First	415	28.76
RSDC	441	40.83

* Note: The share price is based on the end of Chaitra 2076. 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	Sanakisan	RMDC	First	RSDC
Paid up capital(Rs.’crores’)	100.02	89.93	80.07	67.15
Reserve and Surplus(Rs.’ crores’)	186.14	156.22	19.38	12.21
Borrowings (Rs.’Arba’)	19.79	7.72	5.68	2.99
Loans & Advances(Rs.’Arba’)	22.12	8.39	5.57	3.11
Net Interest Income(Rs.’crores’)	79.51	24.49	13.87	9.62
Operaing Profit (Rs. “crores’)	65.51	23.81	13.73	8.38
Net Profit(Rs.’crores’)	43.51	15.14	8.67	5.44
Non Performing Loans, NPL(%)	0.65	0.0083	0	0.16
Cost of Funds (%)	5.85	9.36	10.62	10.52
Earnings Per Share, EPS(Rs.)	58	22.45	14.43	10.8
Networth Per Share ( Rs.)	286.1	273.7	124.21	118.18
Market Price Per Share (Rs.) [Chaitra end, 2076]	990	590	415	441
P/E Ratio	17.07	26.28	28.76	40.83

Note: The share price, as well as the P/E ratio, is based on the data of Chaitra end, 2076. At current, the numbers may vary.

Note:

The study is based on the unaudited third-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.