Top 6 Microfinance In Nepal: Comparative Study [Updated]

August 25, 2021 | Investopaper

In this study, we will take 6 top retail microfinance of Nepal based on their performance in the fiscal year 2077/78. 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 companies include (alphabetically):

1. Chhimek Laghubitta

2. Deprosc Laghubitta

3. Forward Community Laghubitta

4. Jeevan Bikas Laghubitta 

5. Nirdhan Utthan Laghubitta

6. Swabalamban Laghubitta 

Note: Click on the links above to see the individual performance of the microfinance companies in the FY 2077/78

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 183 crores and Rs 169.55 crores. Likewise, Deprosc Laghubitta’s capital stood at Rs 115.62 crores. Jeevan Bikas Laghubitta has a lower capital of Rs 60.84 crores respectively.

The paid-up capital of the microfinance are shown in the table below:

Paid up capital (Rs.’crores’)

Microfinance Companies FY 2077/78 FY 2076/77 FY 2075/76
Chhimek Laghubitta 183 150 118
Nirdhan Utthan Laghubitta 169.55 150 120
Deprosc Laghubitta 115.62 100.54 77.34
Swabalamban Laghubitta 94.3 79.24 62.89
Forward Laghubitta 62.55 50.04 50.04
Jeevan Bikas Laghubitta 60.84 0 0

Note: The above figures are based on the unaudited fourth quarter report of the fiscal year 2077/78, FY 2076/77


Related: Top 5 Non-Life Insurance in Nepal


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.

Chhimek Laghubitta has the highest reserve and surplus of Rs 312.15 crores followed by Nirdhan Utthan Laghubitta with Rs 280.1 crores. On the other hand, Forward Laghubitta has the lowest reserve among these microfinance with Rs 83.31 crores.

The table below presents the reserve and surplus of these microfinance companies:

Reserve and Surplus (Rs.’crores’)

Microfinance Companies FY 2077/78 FY 2076/77 FY 2075/76
Chhimek Laghubitta 312.15 169.45 163.91
Nirdhan Utthan Laghubitta 280.1 185.02 162.21
Swabalamban Laghubitta 174.88 136.25 112.5
Jeevan Bikas Laghubitta 130.94
Deprosc Laghubitta 129.45 83.31 78.28
Forward Laghubitta 126.67 92.43 76.46

Note: The above figures are based on the unaudited fourth quarter report of the fiscal year 2077/78, FY 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 BS, Jeevan Bikas Laghubitta has the borrowing of Rs 9.92 Arba followed by Forward Laghubitta with Rs 8.63 Arba. Swabalamban Laghubitta has the lowest borrowing of Rs 4.61 Arba.

The borrowings by the microfinance companies is shown in the table below:

Borrowings (Rs.’Arba’)

Microfinance Companies FY 2077/78 FY 2076/77 FY 2075/76
Jeevan Bikas Laghubitta 9.92
Forward Laghubitta 8.63 5.95 5
Deprosc Laghubitta 7.78 6.51 6.78
Nirdhan Utthan Laghubitta 6.32 6.95 7.69
Chhimek Laghubitta 6.21 4.07 4.48
Swabalamban Laghubitta 4.61 4.76 5.8

Note: The above figures are based on the unaudited fourth quarter report of the fiscal year 2077/78, FY 2076/77.


Related: Merger/Acquisition Of Microfinance Companies In Nepal


Deposits

Retail Microfinance also collect deposits from its members similar to other BFIs. Until end of Ashad 2078 BS, Chhimek Laghubitta has collected such deposits of Rs 22.43 Arba. Nirdhan Utthan Laghubitta is second with Rs 15.81 Arba deposit collection. On the other hand, Deprosc Laghubitta has the lowest deposits of Rs 6.54 Arba.

The table below shows the deposits by the microfinance companies.

Deposits (Rs.’Arba’)

Microfinance Companies FY 2077/78 FY 2076/77 FY 2075/76
Chhimek Laghubitta 22.43 18.67 15.39
Nirdhan Utthan Laghubitta 15.81 13.34 11.05
Swabalamban Laghubitta 10.62 9.29 7.49
Jeevan Bikas Laghubitta 8.09
Forward Laghubitta 6.65 5.61 4.62
Deprosc Laghubitta 6.54 4.94 3.82

Note: The above figures are based on the unaudited fourth quarter report of the fiscal year 2077/78, FY 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, Chhimek Laghubitta is ahead of others with Rs 25.1 Arba. Similarly, Nirdhan Utthan Laghubitta has floated total loans of Rs 24.07 Arba. Deprosc Laghubitta, on the other hand, has the lowest loans of Rs 15.23 crores.

The loans and advances provided by these microfinance is presented in the table below:

Loans & Advances (Rs.’Arba’)

Microfinance Companies FY 2077/78 FY 2076/77 FY 2075/76
Chhimek Laghubitta 25.1 19.37 19.76
Nirdhan Utthan Laghubitta 24.07 20.15 19.64
Jeevan Bikas Laghubitta 20.45
Swabalamban Laghubitta 17.33 15.21 14.4
Forward Laghubitta 15.56 11.68 10.07
Deprosc Laghubitta 15.23 11.55 11.97

Note: The above figures are based on the unaudited fourth quarter report of the fiscal year 2077/78, FY 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 2077/78, Nirdhan Utthan Laghubitta generated highest net interest income of Rs 214.33 crores followed by Chhimek Laghubitta with Rs 206.51 crores. Forward Community Laghubitta has earned a net interest income of Rs 127.41 crores.

The table below shows the net interest income earned by the microfinance companies.

Net Interest Income (Rs.’crores’)

Microfinance Companies FY 2077/78 FY 2076/77 FY 2075/76
Nirdhan Utthan Laghubitta 214.33 149.32 157.93
Chhimek Laghubitta 206.51 175.38 172.35
Swabalamban Laghubitta 145.13 125.48 106.57
Jeevan Bikas Laghubitta 141.67
Deprosc Laghubitta 137.03 95.97 91.61
Forward Laghubitta 127.41 73.52 75.07

Note: The above figures are based on the unaudited fourth quarter report of the fiscal year 2077/78, FY 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 2077/78, Chhimek Laghubitta earned an operating profit of Rs 132.20 crores followed by Rs 90.29 crores for Forward Laghubitta. Nirdhan Utthan Laghubitta generated an operating loss of Rs 280.31 crores due to the huge provision for the possible losses.

The operating profit earned by these microfinance is also presented in the table below:

Operating Profit (Rs.’crores’)

Microfinance Companies FY 2077/78 FY 2076/77 FY 2075/76
Chhimek Laghubitta 132.2 87.07 142.79
Forward Laghubitta 90.29 39.45 47.69
Swabalamban Laghubitta 84.17 56.54 66.29
Deprosc Laghubitta 76.81 -72.14 53.79
Jeevan Bikas Laghubitta 38.37
Nirdhan Utthan Laghubitta -280.38 44.71 114.62

Note: The above figures are based on the unaudited fourth quarter report of the fiscal year 2077/78, FY 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 microfinance companies, Chhimek Laghubitta earned Rs 121.56 crores in net profit which is the highest profit among the microfinance companies. Nirdhan Utthan Laghubitta is second in terms of net profit earning Rs 91.91 crores. Forward Laghubitta reported a lowest profit of Rs 57.46 crores.

The table below presents the net profit earned by these microfinance.

Net Profit (Rs.’crores’)

Microfinance Companies FY 2077/78 FY 2076/77 FY 2075/76
Chhimek Laghubitta 121.56 64.92 92.07
Nirdhan Utthan Laghubitta 91.91 28.43 73.95
Deprosc Laghubitta 71.37 27.5 43.02
Jeevan Bikas Laghubitta 68.95
Swabalamban Laghubitta 61.94 35.62 42.25
Forward Laghubitta 57.46 25.11 30.14

Note: The above figures are based on the unaudited fourth quarter report of the fiscal year 2077/78, FY 2076/77.


You May Also Like: Net Profit of Commercial Banks in Nepal [With Ranking]


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 microfinance companies (MFIs), Jeevan Bikas Laghubitta has the lowest NPL of 0.61 percent followed by Chhimek Laghubitta with 0.63 percent. Swabalamban Laghubitta has the highest NPL of 4.38 percent.

The non-performing loans (NPL) of these microfinance is shown in the table below:

Non Performing Loans, NPL (%)

Microfinance Companies FY 2077/78 FY 2076/77 FY 2075/76
Jeevan Bikas Laghubitta 0.61
Chhimek Laghubitta 0.63 0.45 0.28
Deprosc Laghubitta 0.92 2.47 0.84
Forward Laghubitta 3.67 4.67 0.47
Nirdhan Utthan Laghubitta 4.11 1.83 1.17
Swabalamban Laghubitta 4.38 1.99 0.77

Note: The above figures are based on the unaudited fourth quarter report of the fiscal year 2077/78, FY 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 lenders. Lower cost of funds is favorable 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.

Deprosc Laghubitta has the lowest cost of funds of 6.27 percent followed by Nirdhan Utthan Laghubitta with 6.74 percent. Swabalamban Laghubitta has the highest cost of funds of 7.26 percent.

The cost of funds of these microfinance companies is shown in the table below:

Cost of Funds (%)

Microfinance Companies FY 2077/78 FY 2076/77 FY 2075/76
Deprosc Laghubitta 6.27 9.93 10.08
Nirdhan Utthan Laghubitta 6.74 8.55 8.7
Chhimek Laghubitta 6.91 9.71 9.76
Forward Laghubitta 7.06 10.01 9.83
Jeevan Bikas Laghubitta 7.24
Swabalamban Laghubitta 7.26 9.47 9.44

Note: The above figures are based on the unaudited fourth quarter report of the fiscal year 2077/78, FY 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 these microfinance companies, Jeevan Bikas Laghubitta has an EPS of Rs 113.34. Likewise, Forward Laghubitta is second with Rs 91.87 EPS. Nirdhan Utthan Laghubitta has the lowest EPS of Rs 54.22.

Similarly, Jeevan Bikas Laghubitta also leads in per share networth with Rs 315.22 followed by Forward Laghubitta with Rs 302.52 crores.

The Earnings Per Share (EPS) and networth per share is presented in the table below:

Microfinance Companies Earnings Per Share, EPS (Rs.) Networth Per Share ( Rs.)
Jeevan Bikas Laghubitta 113.34 315.22
Forward Laghubitta 91.87 302.52
Chhimek Laghubitta 66.43 231.85
Swabalamban Laghubitta 65.69 285.46
Deprosc Laghubitta 61.73 211.96
Nirdhan Utthan Laghubitta 54.22 265.25

Note: The above figures are based on the unaudited fourth quarter report of the fiscal year 2077/78.


Also Read: Earnings Per Share (EPS) Of Commercial Banks In Nepal


Share Price & P/E Ratio

At Ashad’s end 2078 BS, Forward Laghubitta has the highest share price of Rs 2770. On the other hand, Swabalamban Laghubitta has the lowest P/E ratio of Rs 25.25. The table below shows the share price along with the P/E ratio of these companies.

Microfinance Companies Market Price Per Share (Rs.)  P/E Ratio
Forward Laghubitta 2,770 30.15
Chhimek Laghubitta 1,884 28.36
Deprosc Laghubitta 1,686 27.31
Swabalamban Laghubitta 1,659 25.25
Nirdhan Utthan Laghubitta 1,600 29.51
Jeevan Bikas Laghubitta

Note: The above figures are based on the unaudited fourth quarter report of the fiscal year 2077/78.

The share price, as well as the P/E ratio, is based on the data of Ashad end, 2078 BS. At current, the numbers may vary. 


Related: P/E Ratio Of Commercial Banks Of Nepal


Top Microfinance Companies In Nepal: Comparative Study

The comparative study is also summarized in the table below:

Financial Indicators Chhimek Laghubitta Deprosc Laghubitta Forward Laghubitta Jeevan Bikas Laghubitta Nirdhan Utthan Laghubitta Swabalamban Laghubitta
Paid up capital (Rs.’crores’) 183 115.62 62.55 60.84 169.55 94.3
Reserve and Surplus (Rs.’crores’) 312.15 129.45 126.67 130.94 280.1 174.88
Borrowings (Rs.’Arba’) 6.21 7.78 8.63 9.92 6.32 4.61
Deposits (Rs.’Arba’) 22.43 6.54 6.65 8.09 15.81 10.62
Loans & Advances (Rs.’Arba’) 25.1 15.23 15.56 20.45 24.07 17.33
Net Interest Income (Rs.’crores’) 206.51 137.03 127.41 141.67 214.33 145.13
Operating Profit (Rs.’crores’) 132.2 76.81 90.29 38.37 -280.38 84.17
Net Profit (Rs.’crores’) 121.56 71.37 57.46 68.95 91.91 61.94
Non Performing Loans, NPL (%) 0.63 0.92 3.67 0.61 4.11 4.38
Cost of Funds (%) 6.91 6.27 7.06 7.24 6.74 7.26
Earnings Per Share, EPS (Rs.) 66.43 61.73 91.87 113.34 54.22 65.69
Networth Per Share ( Rs.) 231.85 211.96 302.52 315.22 265.25 285.46
Market Price Per Share (Rs.) [Ashad end, 2078 BS] 1,884 1,686 2,770 1,600 1,659
P/E Ratio 28.36 27.31 30.15 29.51 25.25

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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3 thoughts on “Top 6 Microfinance In Nepal: Comparative Study [Updated]

  • February 11, 2020 at 2:38 pm
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    The 5 MFIs are grouped as top MFIs on the basis of their institutional profitability and capital. How about their program impact on their clients? Should we evaluate an MFI just based on its profitability?

    Reply
  • September 24, 2020 at 5:55 am
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    The information are highly useful to public at large. However, the contents neither can be stores nor printed. It is worthless without the retrieval system. It is suggested to make an arrangement for the both facilities.

    Reply
  • January 24, 2021 at 5:07 pm
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    I agree with ML shrestha it need to be upgrade by ML mention section as well as upgrade from latest data too

    Reply

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