action track for impact metrics. why the metrics a goal set - touching 1 billion lives by 2020 set...
TRANSCRIPT
Action Track forImpact Metrics
Why the Metrics
• A goal set - touching 1 billion lives by 2020
• Set up 5 action tracks to deliver by 2015
• The 5th Action Track – “Impact Metrics”
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What our customers say...
3Ps delivered ... People
3Ps delivered ... Planet
3Ps delivered ... Profit
• Identify and validate impact metrics of small businesses
• Discuss and agree on a globally replicable metrics
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Objectives
• Framework for Sustainable Development Indicators– Available Indicators
– Proposed Framework for Sustainability Indicators of Bank Finance
• Indicator Validation – The Methodology– Data Collection Method
– Method of Data Analysis
• Analysis of the Findings– Validation of Financial, Economic, Environmental, Social
and Market Development Indicators
– Validation of Effectiveness Indicators of BRAC Bank
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Expected Outcomes
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Available Indicatorsfor Sustainable Development
Literature/Study/ Dimension Covered
National/Local
Framework provided
Indicator suggested
Remarks
Hutchins and Sutherland (2008)
All All Yes No Some very limited indicators suggested
Labuschagn et al (2004)
All All Yes No Review of the available framework and a framework suggested
Omann & Spangenberg (2002)
All All No Yes Emphasis is given to social dimensions(both objective and subjective indicators)
Bossel (1999) All All No No Importance of indicators were emphasized along with their desirable characteristics
Bohringer and Jochem (2007)
All All No No All of the tools reviewed and most of them were criticized
Sepinskins et al (2006)
Banking Sector The importance of balance between profit and sustainability discussed
Lindlein (2008) All Mainly banking sector
No Yes Benefit of incorporating social dimension emphasized
Porteous (2005) Issue of double bottom line discussedUNESCO-SCOPE, 2006
All All No Yes
GIIN(IRIS Framework)
All All (applicable for social and development
sector)
Yes Yes Too much indicators with less focus. It is not very much suitable for financial or banking sector
• Focused on macro economy, rather than organizational level
• Differential framework, not concrete indicators
• Importance on Development sector, not Financial sector
• Unmanageable number of indicators
• Social dimension of sustainability less emphasized
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Available Indicatorsfor Sustainable Development
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Sl. No Financial Indicators
Specific Measurement indicators
Index/Formula
1Loan repayment
rate
Loan Recovery Ordering
Intensity of difficulty in repayment
Ordering of loan recovery: Full repayment (1), Partial repayment (2), and No repayment (3)
Intensity of difficulty ordered: Never (1); Rarely (2), Occasional (3), and Frequently (4).
2 Accumulation of assets
Growth rate of total assets
Average asset per firm
Change in total assets in 2010 as percentage of value of base year (year of first loan taken from BRAC Bank).
Total assets divided by number of firms Both the indicators are measured at cost.
3 value of all assets Growth rate of total assets
Average asset per firm
Change in total assets in 2010 as percentage of value of base year (year of first loan taken from BRAC Bank).
Total assets divided by number of firms Both the indicators are measured at market
price.
Proposed Framework(Matrix – Financial Indicators)
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Sl. No
Financial Indicators Specific Measurement indicators
Index/Formula
4Utilization of resources
Growth rate of fixed assets
Growth rate of total assets
Ratio of fixed assets and total assets
Sales-fixed assets ratio
Change in fixed assets as percentage of base year (year of first loan from BRAC Bank)
Change in total assets as percentage of base year (year of first loan from BRAC Bank)
Fixed assets divided by total assets Sales volume divided by fixed assets
5 Long run earning potential
Growth in sales • Change in sales as % of base sales
6 Profitability Absolute profit per month
Rate of return Return on assets Growth rate of profit
Reported profit per month Rate of return: Profit as percentage of sales Return on assets: Profit as percentage of
total assets Change in annual profit from the base year
(year of first loan taken from BRAC Bank)
Proposed Framework(Matrix – Financial Indicators)
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Sl. No
Financial Indicators Specific Measurement indicators
Index/Formula
7 Financial structure Debt-equity ratio BRAC Bank credit-
assets ratio Credit-assets ratio
Total debt as percentage of total equity Credit from BRAC Bank as percentage of
total assets or capital Total credit as percentage of total assets
8 Financial impact of BRAC Bank credit
Business expansion Increase in profit
Growth in business expansion due to BRAC Bank credit, as perceived by borrowers;
Increase in profit due to BRAC Bank credit as perceived by borrowers
Proposed Framework(Matrix – Financial Indicators)
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Sl. No
Economic Indicators
Specific Measurement indicators
Index/Formula
1
Employment
Creation
Full time employment – outside family
Number of male full- time employees created.
Number of female full-time employees created
part time employment – outside
Number of male part-time employees created.
Number of female part-time employees created
Full time employment – family
Number of male full-time employees created for the family
Number of female full-time employees created for the family
part time employment – family
Number of male part-time employees created for the family
Number of female part-time employees created for the family
Perceived impact of credit on employment
Percentage of employment created due to BRAC Bank credit as perceived by borrowers
Proposed Framework(Matrix – Economic Indicators)
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Sl. No
Economic Indicators Specific Measurement indicators
Index/Formula
2 Generation of savings Incremental savings due to BRAC Bank credit
Percentage change in savings due to BRAC Bank credit as perceived by the borrowers
3 Income enhancement Incremental income
Incremental profit
Percentage change in income as perceived by the borrowers
Percentage change in profit as perceived by borrowers
4 Business expansion Expansion in size Growth in total assets
Percentage change in business expansion as perceived by the borrowers
Change in total assets as percentage of base year (year of first loan from BRAC Bank)
5 Creation of competitive environment or business
Number of new similar business enterprises developed.
Percentage of similar business developed
Number of new similar business firms emerged in the market
Percentage of similar business firms developed as perceived by borrowers
Proposed Framework(Matrix – Economic Indicators)
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Sl. No
Economic Indicators Specific Measurement indicators
Index/Formula
6 Development of backward linkage enterprises
Expansion in size of the backward linkage enterprises
Percentage change in backward linkage enterprises started as perceived by the borrowers
7 Development of forward linkage enterprises
Expansion in size of the forward linkage enterprises
Percentage change in forward linkage enterprises started as perceived by the borrowers
8 Value chain development
Number of firms Percentage of firms for which company or dealer carry the products as of total firms
Proposed Framework(Matrix – Economic Indicators)
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Sl. No
Environmental Indicators
Specific Measurement indicators
Index/Formula
1 Environment friendly enterprises
The ratio of environment friendly enterprises to total enterprises
Percentage of environment free enterprises as of total enterprises reported by the borrowers
2 Discouragement of business using chemical
The ratio of the enterprises which do not use chemical in their business to total enterprises
Percentage of the enterprises which do not use chemical as of total enterprises reported by the borrowers
3 Discouragement of business creating health hazard
The ratio of the enterprises which do not create health hazard to total enterprises
Percentage of the enterprises which do not create health hazard as of total enterprises reported by the borrowers
4 Discouragement of using polythene bag
The ratio of the enterprises which do not use polythene bag to total enterprises
Percentage of the enterprises which do not use polythene bag as of total enterprises reported by the borrowers
Proposed Framework(Matrix – Environmental Indicators)
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Sl. No
Social Indicators
Specific Measurement indicators
Index/Formula
1 Women empowerment
Women employment due to BRAC Bank credit, outside family
Women employment from the family
Participation in business decision
Number of women employment created outside the family
Number of women employment created from the family
Ordering of perception of the borrowers (1 always, 2 occasional, 3 never)
2 Use of child labour
Lesser employment of child labour
Number of child labour employed
3 Education of children
Financing of child education
Family Literacy rate
Percentage of ease in financing child education, as perceived by borrowers
Percentage change in family literacy rate from the base year (year of first loan of BRAC Bank)
4 Interaction in the community
Enhancement in community interaction
Number of enterprises with greater participation in the community
Percentage of borrowers involved in social and professional organizations
Perceived increase in interaction with neighbors Percentage of borrowers involved in social activities
Proposed Framework(Matrix – Social Indicators)
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Proposed Framework
• Primary data on SME borrowers of BRAC Bank
• Randomly selected 21 SME unit offices (5%), and 25 enterprises for each
• Secondary data collected from SME Banking of BRAC Bank
• Some information collected from loan application forms
• Conducted survey on all the selected samples
• Conducted interviews on all the selected samples
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Indicator Validation(Data Collection Method)
• Technique used –
• Propensity Score Matching
• For some indicators “Mean or proportional differences test” were used
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Indicator Validation(Data Analysis Method)
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Analysis of the Findings
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Analysis of the Findings
Sl. No.
Financial Indicators
Variable
Repeat Borrower
s(Treated)
New Borrowers(Control)
Difference
t-statDiff. as
% of Control
3Long Run profitability
Growth Rate Sales (%) 82 41 41 3.19 98
Sales (US Dollar) 15,800 8,960 6,840 4.43 76
4 Profitability
Profit (USD) 811 633 18 1.81 3
Growth rate of Profit (%)
54 31 23 2.68 75
ROA (%) 29 38 -9 -4.69 -23
Rate of Return on Sales (%)
7.8 10.8 -3 -6.38 -27
5Financial Structure
Total Capital (USD) 35,039 26,257 8,782 4.1 33
Total Debt (USD) 10,474 7,942 2,532 3.68 32
Equity Capital (USD) 24,498 18,306 6,192 3.45 34
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Analysis of the Findings
Sl. No
Economic indicators(Perceptions)
Repeat Borrowers
New Borrowers
Difference
t-statPercentage
change
2Generation of savings (%)
75.95 72.24 3.70 0.37 -
3 Income enhancement (%) 52.21 30.88 21.34 6.60 69.12
4 Business expansion (%) 71.71 35.03 36.68 8.84 104.70
5Creation of competitive environment or business (%)
74.68 71.51 3.17 0.49 -
Sl. No
Economic indicators
Specific measurement
indicators
Repeat Borrower
s
New Borrowers
Difference
t-stat
% of change
over control
(N=134) (N=286)
1 Employment creation
Number of full time male employees
2.26 1.62 0.64 3.27 40
Number of full time female employees
0.31 0.29 0.02 0.23 -
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Analysis of the Findings
Sl. No.
Environmental Indicators Specific Measurement indicators % (n)
1 Environment Friendly Enterprises
The ratio of environment friendly enterprises to total enterprises
84.19(442)
2 Discouragement of use of chemical
The ratio of the enterprises which do not use chemical in their business to total enterprises
98.67(518)
3 Discouragement of creating health hazard
The ratio of the enterprises which do not create health hazard to total enterprises
94.29(495)
4 Discouragement of use of poly bag
The ratio of the enterprises which do not use polythene bag to total enterprises
89.90(472)
Sl.
No
Environmental Impact criteria No. (%)
1 Affecting Environment 53 10.10
2 Creating Health Hazard 30 5.71
Total 83 15.81
3 Number of Enterprises not affecting Health & Environment 442 84.19
Total observation(n) 525 100%
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Analysis of the Findings
Sl. No
Social indicators Repeat Borrowers
New Borrowers
Difference t-stat % -age of change
(N=134) (N=286)1 Use of child labor
(Number) 0.09 0.04 0.05 1.57 14.20
2 Education of children(%-age increase in expenditure)
51.88 28.52 23.35 4.30 81.89
3 Health (%-age increase in expenditure)
45.99 26.33 19.66 6.81 74.69
4 Television (%-age increase in expenditure)
15.64 6.53 9.11 4.04 139.46
• Three indicators – backward linkage, forward linkage and expansion of similar business.
• Borrowers are asked to respond to three statements since borrowing from BRAC Bank.
• Based on the perceptions of the borrowers, the growth rate of these three indicators are estimated below.
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Analysis of the Findings
Sl. No
Market development indicators(Perceptions)
Growth rate (%)
1 Backward linkage 167
2 Forward linkage 128
3 Expansion of similar business 99
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Analysis of the Findings(Summary)
Nature of Indicators
Name of Indicatorswith +ive Impacts (All Significant)
Name of Indicators with - ive Impacts
Financial Accumulation of Assets, Utilization of Resources, Long run Profitability, Profitability, and Financial Structure
-
Economic Full-time Male, Income Enhancement, and Business Expansion
-
Environmental Environment Friendly Enterprises, Discouragement of Use of Chemical, Discouragement of Creating Health Hazard, Discouragement of Use of Poly Bag
-
Social Education of Children, Health Expenditure, and Television
Use of Child Labor (Not Significant)
Market Development
Backward Linkage, Forward linkage, and Expansion of Similar business
-
• Until this study, impact of SME Credit on enterprise level has not been carried out.
• BRAC Bank SME credit program has positive impact on the borrowers by and large.
• Bank may influence environment positively through appropriate lending policy, strongly discouraging financing enterprises that directly affect environment.
• Indicators are found to be comprehensive
• The indicators have proven to be valid - significantly differentiate performance of repeat borrowers (participants) from the new borrowers (control).
• Possible to reduce number of indicators through factor analysis and developing some indices which may involve more time for estimation.
• We believe that the metrics are replicable.
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Conclusion
• Can we arrive at a globally accepted single index?
• To measure impact by the member banks
• To use as a criteria to include other banks in the alliance
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Next Steps & Discussion
Thank You
The Final Report will be available after June 1, 2011, upon mailing to <Syed Mahbubur Rahman>[email protected]
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