Top 5 Microfinance of Nepal: Comparative Study
August 24, 2020 | Investopaper
In this study, we will take 5 top retail microfinance of Nepal based on their performance in the fiscal year 2076/77. We have selected the microfinance companies on the basis of the volume of business they have generated. Here, we have chosen only those microfinance listed in Nepal Stock Exchange. The microfinance include (based on the current paid-up capital):
5. Forward Community Laghubitta
Note: Click on the links above to see the individual performance in the FY 2076/77
Here, we will try to make the financial comparison of these microfinance companies based on the following indicators.
Paid Up Capital
Paid-Up Capital is the amount of money which the shareholders have put in the company. Higher capital signifies strong financial condition as it can be useful for shock absorption during any unexpected setbacks and downturn.
Among these microfinance, Chhimek Laghubitta and Nirdhan Utthan Laghubitta have a paid-up capital of Rs 150 crores. Likewise, Deprosc Laghubitta’s capital stood at Rs 100.54 crores. Swabalamban Laghubitta and Forward Laghubitta have a lower capital of Rs 79.24 crores and Rs 50.04 crores respectively.
The paid-up capital of the five microfinance are shown in the table below:
| Rank | Microfinance | FY 2076/77 | FY 2075/76 | Percent Change |
| 1 | Chhimek Laghubitta | 150 | 118 | 27.12 |
| 2 | Nirdhan Utthan Laghubitta | 150 | 120 | 25 |
| 3 | Deprosc Laghubitta | 100.54 | 77.34 | 30 |
| 4 | Swabalamban Laghubitta | 79.24 | 62.89 | 26 |
| 5 | Forward Community Laghubitta | 50.04 | 50.04 | 0 |
Note: The above figures are based on the unaudited fourth quarter report of the fiscal year 2076/77.
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Reserve & Surplus
Reserve and Surplus is the amount accumulated from the profit of the company since its inception. It includes reserve kept for specific purposes and the retained earnings not distributed to the shareholders. Higher reserve and surplus indicates greater financial strength of the company.
Nirdhan Utthan Laghubitta has the highest reserve and surplus of Rs 18.02 crores followed by Chhimek Laghubitta with Rs 169.45 crores. On the other hand, Deprosc Laghubitta has the lowest reserve among the five with Rs 83.31 crores.
The table below presents the reserve and surplus of the five microfinance companies:
| Rank | Microfinance | FY 2076/77 | FY 2075/76 | Percent Change |
| 1 | Nirdhan Utthan Laghubitta | 185.02 | 162.21 | 14.06 |
| 2 | Chhimek Laghubitta | 169.45 | 163.91 | 3.38 |
| 3 | Swabalamban Laghubitta | 136.25 | 112.5 | 21.11 |
| 4 | Forward Community Laghubitta | 92.43 | 76.46 | 20.89 |
| 5 | Deprosc Laghubitta | 83.31 | 78.28 | 6.43 |
Note: The above figures are based on the unaudited fourth quarter report of the fiscal year 2076/77.
Related: Comparative Study of 4 Wholesale Microfinance in Nepal
Borrowings
Microfinance companies generally borrow funds from commercial/development banks and provide them to the economically deprived people. Until Ashad end 2077, Nirdhan Utthan Laghubitta has the borrowing of Rs 6.95 Arba followed by Deprosc Laghubitta with Rs 6.51 Arba. Chhimek Laghubitta has the lowest borrowing of Rs 4.07 Arba.
The borrowings by the five microfinance companies is shown in the table below:
| Rank | Microfinance | FY 2076/77 | FY 2075/76 | Percent Change |
| 1 | Nirdhan Utthan Laghubitta | 6.95 | 7.69 | -9.62 |
| 2 | Deprosc Laghubitta | 6.51 | 6.78 | -3.98 |
| 3 | Forward Community Laghubitta | 5.95 | 5 | 19.00 |
| 4 | Swabalamban Laghubitta | 4.76 | 5.8 | -17.93 |
| 5 | Chhimek Laghubitta | 4.07 | 4.48 | -9.15 |
Note: The above figures are based on the unaudited fourth quarter report of the fiscal year 2076/77.
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Deposits
Retail Microfinance also collect deposits from its members similar to other BFIs. Until end of Ashad 2077, Chhimek Laghubitta has collected such deposits of Rs 18.67 Arba. Nirdhan Utthan Laghubitta is second with Rs 13.34 Arba deposit collection. On the other hand, Deprosc Laghubitta has the lowest deposits of Rs 4.94 Arba.
The table below shows the deposits by the five microfinance companies.
| Rank | Microfinance | FY 2076/77 | FY 2075/76 | Percent Change |
| 1 | Chhimek Laghubitta | 18.67 | 15.39 | 21.31 |
| 2 | Nirdhan Utthan Laghubitta | 13.34 | 11.05 | 20.72 |
| 3 | Swabalamban Laghubitta | 9.29 | 7.49 | 24.03 |
| 4 | Forward Community Laghubitta | 5.61 | 4.62 | 21.43 |
| 5 | Deprosc Laghubitta | 4.94 | 3.82 | 29.32 |
Note: The above figures are based on the unaudited fourth quarter report of the fiscal year 2076/77.
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Loans & Advances
The major objective of the microfinance companies is to provide funds to the low income people. With or without collateral, these companies float loans to those people deprived of financial support. Based on the total loans and advances, Nirdhan Utthan Laghubitta is ahead of others with Rs 20.15 Arba. Similarly, Chhimek Laghubitta has floated total loans of Rs 19.37 Arba. Deprosc Laghubitta, on the other hand, has the lowest loans of Rs 11.55 crores.
The loans and advances provided by these microfinance is presented in the table below:
| Rank | Microfinance | FY 2076/77 | FY 2075/76 | Percent Change |
| 1 | Nirdhan Utthan Laghubitta | 20.15 | 19.64 | 2.60 |
| 2 | Chhimek Laghubitta | 19.37 | 19.76 | -1.97 |
| 3 | Swabalamban Laghubitta | 15.21 | 14.4 | 5.63 |
| 4 | Forward Community Laghubitta | 11.68 | 10.07 | 15.99 |
| 5 | Deprosc Laghubitta | 11.55 | 11.97 | -3.51 |
Note: The above figures are based on the unaudited fourth quarter report of the fiscal year 2076/77.
Also Read: Deposits And Loans Of Commercial Banks In Nepal
Net Interest Income
The major source of income for the microfinance companies is the net interest income. It is the difference between the interest income from loans and interest expenses on deposits and borrowings. In the fiscal year 2076/77, Chhimek Laghubitta generated highest net interest income of Rs 175.38 crores followed by Nirdhan Utthan Laghubitta with RS 149.32 crores. Forward Community Laghubitta has earned a net interest income of Rs 73.52 crores.
The table below shows the net interest income earned by the five microfinance companies.
| Rank | Microfinance | FY 2076/77 | FY 2075/76 | Percent Change |
| 1 | Chhimek Laghubitta | 175.38 | 172.35 | 1.76 |
| 2 | Nirdhan Utthan Laghubitta | 149.32 | 157.93 | -5.45 |
| 3 | Swabalamban Laghubitta | 125.48 | 106.57 | 17.74 |
| 4 | Deprosc Laghubitta | 95.97 | 91.61 | 4.76 |
| 5 | Forward Community Laghubitta | 73.52 | 75.07 | -2.06 |
Note: The above figures are based on the unaudited fourth quarter report of the fiscal year 2076/77.
Operating Profit
Operating Profit is the profit from the business operation before the deduction of interest, writeback, bonus and taxes. In the fiscal year 2076/77, all the five companies have reported substantial drop in operating profit. Chhimek Laghubitta earned an operating profit of Rs 87.07 crores followed by Rs 56.54 crores for Swabalamban Laghubitta. Deprosc Laghubitta generated an operating loss of Rs 72.14 crores due to the huge provision for the possible losses.
The operating profit earned by these microfinance is also presented in the table below:
| Rank | Microfinance | FY 2076/77 | FY 2075/76 | Percent Change |
| 1 | Chhimek Laghubitta | 87.07 | 142.79 | -39.02 |
| 2 | Swabalamban Laghubitta | 56.54 | 66.29 | -14.71 |
| 3 | Nirdhan Utthan Laghubitta | 44.71 | 114.62 | -60.99 |
| 4 | Forward Community Laghubitta | 39.45 | 47.69 | -17.28 |
| 5 | Deprosc Laghubitta | -72.14 | 53.79 | -234.11 |
Note: The above figures are based on the unaudited fourth quarter report of the fiscal year 2076/77.
Net Profit
Net Profit is the bottom-line that any investors looks upon. How much did the company earn this year? Higher net profit translates into higher dividend to the investors.
Among these five microfinance, Chhimek Laghubitta earned Rs 64.92 crores in net profit which is the highest profit among the microfinance companies. However, the profit dropped by almost 30 percent from the previous year. Swabalamban Laghubitta is second interms of net profit earning Rs 35.62 crores. Forward Laghubitta reported a lowest profit of Rs 25.11 crores.
The table below presents the net profit earned by these five microfinance.
| Rank | Microfinance | FY 2076/77 | FY 2075/76 | Percent Change |
| 1 | Chhimek Laghubitta | 64.92 | 92.07 | -29.49 |
| 2 | Swabalamban Laghubitta | 35.62 | 42.25 | -15.69 |
| 3 | Nirdhan Utthan Laghubitta | 28.43 | 73.95 | -61.56 |
| 4 | Deprosc Laghubitta | 27.5 | 43.02 | -36.08 |
| 5 | Forward Community Laghubitta | 25.11 | 30.14 | -16.69 |
Note: The above figures are based on the unaudited fourth quarter report of the fiscal year 2076/77.
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Non-Performing Loans (NPL)
Non-Performing Loans (NPL) refers to those loans in which the borrowers has not paid the scheduled payments of principal and interest. Lower NPL reflects the higher quality of lending. On the other hand, higher NPL is not favourable to the banking institution.
Among these five microfinance companies (MFIs), Chhimek Laghubitta has the lowest NPL of 0.45 percent followed by Nirdhan Utthan Laghubitta with 1.83 percent. Forward Community Laghubitta has the highest NPL of 4.67 percent.
The non-performing loans (NPL) of the microfinance is shown in the table below:
| Rank | Microfinance | FY 2076/77 | FY 2075/76 | Percent Change |
| 1 | Chhimek Laghubitta | 0.45 % | 0.28 % | 60.71 |
| 2 | Nirdhan Utthan Laghubitta | 1.83 % | 1.17 % | 56.41 |
| 3 | Swabalamban Laghubitta | 1.99 % | 0.77 % | 158.44 |
| 4 | Deprosc Laghubitta | 2.47 % | 0.84 % | 194.05 |
| 5 | Forward Community Laghubitta | 4.67 % | 0.47 % | 893.62 |
Note: The above figures are based on the unaudited fourth quarter report of the fiscal year 2076/77.
Cost Of Funds
Cost of Funds is the interest rate that the BFIs pay for the use of funds from the depositors or lendors. Lower cost of funds is favourable as it increases the margin. BFIs with lower cost of funds can also float the loans at lower rate thereby securing loyal and trustworthy borrowers.
Nirdhan Utthan Laghubitta has the lowest cost of funds of 8.55 percent followed by Swabalamban Laghubitta with 9.47 percent. Forward Community Laghubitta has the highest cost of funds of 10.01 percent.
The cost of funds of the five microfinance companies is shown in the table below:
| Rank | Microfinance | FY 2076/77 | FY 2075/76 | Percent Change |
| 1 | Nirdhan Utthan Laghubitta | 8.55 | 8.7 | -1.72 |
| 2 | Swabalamban Laghubitta | 9.47 | 9.44 | 0.32 |
| 3 | Chhimek Laghubitta | 9.71 | 9.76 | -0.51 |
| 4 | Deprosc Laghubitta | 9.93 | 10.08 | -1.49 |
| 5 | Forward Community Laghubitta | 10.01 | 9.83 | 1.83 |
Note: The above figures are based on the unaudited fourth quarter report of the fiscal year 2076/77.
Earnings Per Share (EPS) & Net-Worth Per Share
Earnings Per Share (EPS) and per share net-worth are the important indicators for any investors. As higher EPS will result in higher dividend to the shareholders, investors tend to value companies more with greater EPS.
Among the five microfinance companies, Forward Community Laghubitta has an EPS of Rs 50.18. Likewise, Swabalamban Laghubitta is second with Rs 44.95 EPS. Nirdhan Utthan Laghubitta has the lowest EPS of Rs 18.96 due to drastic fall in net profit from the previous year.
Similarly, Forward Laghubitta also leads in per share networth with Rs 284.7 followed by Swabalamban Laghubitta with Rs 271.95 crores.
The Earnings Per Share (EPS) and networth per share is presented in the table below:
| Rank | Microfinance | Earnings Per Share, EPS(Rs.) | Networth Per Share ( Rs.) |
| 1 | Forward Community Laghubitta | 50.18 | 284.7 |
| 2 | Swabalamban Laghubitta | 44.95 | 271.95 |
| 3 | Chhimek Laghubitta | 43.28 | 212.97 |
| 4 | Deprosc Laghubitta | 27.35 | 182.86 |
| 5 | Nirdhan Utthan Laghubitta | 18.96 | 223.35 |
Note: The above figures are based on the unaudited fourth quarter report of the fiscal year 2076/77.
Also Read: Earnings Per Share (EPS) Of Commercial Banks In Nepal
Share Price & P/E Ratio
At Ashad end 2077, Forward Laghubitta has the highest share price of Rs 1651. On the other hand, Chhimek Laghubitta has the lowest P/E ratio of Rs 25.18. The table below shows the share price along with the P/E ratio of these companies.
| Rank | Microfinance | Market Price Per Share (Rs.) | P/E Ratio |
| 1 | Chhimek Laghubitta | 1090 | 25.18 |
| 2 | Swabalamban Laghubitta | 1233 | 27.43 |
| 3 | Deprosc Laghubitta | 866 | 31.66 |
| 4 | Forward Community Laghubitta | 1651 | 32.90 |
| 5 | Nirdhan Utthan Laghubitta | 1015 | 53.53 |
Note: The above figures are based on the unaudited fourth quarter report of the fiscal year 2076/77.
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.
Related: P/E Ratio Of Commercial Banks Of Nepal
Top 5 Microfinance of Nepal: Comparative Study
The comparative study is also summarized in the table below:
| Headings | Chhimek Laghubitta | Deprosc Laghubitta | Swabalamban Laghubitta | Nirdhan Utthan Laghubitta | Forward Community Laghubitta |
| Paid up capital(Rs.’crores’) | 150 | 100.54 | 79.24 | 150 | 50.04 |
| Reserve and Surplus(Rs.’ crores’) | 169.45 | 83.31 | 136.25 | 185.02 | 92.43 |
| Borrowings (Rs.’Arba’) | 4.07 | 6.51 | 4.76 | 6.95 | 5.95 |
| Deposits(Rs.’Arba’) | 18.67 | 4.94 | 9.29 | 13.34 | 5.61 |
| Loans & Advances(Rs.’Arba’) | 19.37 | 11.55 | 15.21 | 20.15 | 11.68 |
| Net Interest Income(Rs.’crores’) | 175.38 | 95.97 | 125.48 | 149.32 | 73.52 |
| Operating Profit (Rs. “crores’) | 87.07 | -72.14 | 56.54 | 44.71 | 39.45 |
| Net Profit(Rs.’crores’) | 64.92 | 27.5 | 35.62 | 28.43 | 25.11 |
| Non Performing Loans, NPL(%) | 0.45 | 2.47 | 1.99 | 1.83 | 4.67 |
| Cost of Funds (%) | 9.71 | 9.93 | 9.47 | 8.55 | 10.01 |
| Earnings Per Share, EPS(Rs.) | 43.28 | 27.35 | 44.95 | 18.96 | 50.18 |
| Networth Per Share ( Rs.) | 212.97 | 182.86 | 271.95 | 223.35 | 284.7 |
| Market Price Per Share (Rs.) [Ashad end, 2077] | 1090 | 866 | 1233 | 1015 | 1651 |
| P/E Ratio | 25.18 | 31.66 | 27.43 | 53.53 | 32.90 |
Note:
The above figures are based on the un-audited quarterly report 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.
Depending on the several indicators which microfinance among the five do you prefer? Feel free to share your views in the comment section.
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