Against stringent steps especially on permanent clients because harsh measures may cause them to shift to competitors (Van Horn 1995).
2.2 Indicators of loan recovery
The following are the measures used to determine loan recovery.
Repayment rate measures the amount of payment received with respect to the amount due. Portfolio quality ratios; involves the arrears rate portfolio risk and the ratio delinquent borrowers. The arrears ratio rate shows how much of the loans have become due and has not been received. Portfolio rate refers to the outstanding balance of all loans that have an amount due.
Delinquent borrowers determine the number of borrowers who are delinquent relative to the volume of delinquent loans. Profitability ratio measures on micro finance institutions net income in relation to the structure of its balance sheet. This helps investors and managers determine whether they are earning an adequate return on funds invested in the micro finance institutions. Productivity and efficiency ratios provide the information about the rate at which micro finance institutions generate revenue to cover their expenses. Productivity ratio focuses on the productivity officers because they are primary generators of revenue. The ratio includes; Number of active borrowers per credit officer (performing assets).
Total amount disbursed in the period per credit officer.
Portfolio outstanding per credit officer (Non performing assets)
Efficiency ratios measure the cost of providing loans to generate revenue; these are referred to as operating costs and should include neither financing costs nor loan loss provisions.
Scale and depth of outreach, Microfinance institutions collect data on their clients base both the scale of their activities (number of clients served with types of instruments) and the depth of outreach (type of client reached and their level of poverty).
Outreach indicators include; number of active borrowers, total balance of outstanding loans average outstanding, real annual average growth rate of loans outstanding during the past years loan size, average minimum and maximum, average disbursed loan size, average outstanding
