KEY PERFORMANCE INDICATORS FOR DEVELOPMENT

Transcription

KEY PERFORMANCE INDICATORSFOR DEVELOPMENT FINANCEINSTITUTIONSA COMPLETE USER’SPACKAGEAssociation of Development Financing Institutionsin Asia and the Pacific2nd Floor, Skyland Plaza Bldg., Sen. Gil Puyat Avenue1200 Makati City, PhilippinesTel nos.: (63‐2) 816‐1672 / 843‐0932 / 844‐9090Fax no.: (63‐2) 817‐6498Email: inquiries@adfiap.orgWebsite: http://www.adfiap.orgASSOCIATION OF DEVELOPMENT FINANCING INSTITUTIONSIN ASIA AND THE PACIFIC

ADFIAP MEMBERS(as of April 2011)What is ADFIAP?ADFIAP is the focal point of all development banks and otherfinancial institutions engaged in the financing of development in theAsia‐Pacific region. Its mission is to advance sustainabledevelopment through its members. Founded in 1976, ADFIAP hascurrently 120 member‐institutions in 43 countries and territories.The Asian Development Bank is a Special Member of theAssociation. ADFIAP is also a founding member and currently theSecretariat of the World Federation of Development FinancingInstitutions composed of regional associations in Africa, Asia‐Pacific,Latin America and the Middle East. ADFIAP is an NGO inconsultative status with the United Nations’ Economic and SocialCouncil. ADFIAP is headquartered in Manila, Philippines.Statement of Mission“To advance sustainable development by strengthening thedevelopment finance function and institutions, enhancing capacityof members, and advocating development finance innovations.”Statement of Vision“Through the provision of development finance services by itsmembers, ADFIAP envisions a future of lasting economicdevelopment and growth in the region, with its people as theultimate .AgrobankAl-Amanah Islamic Bank of the PhilippinesAmwal Credit UnionAMZ Ventures LimitedAndhra Pradesh State Financial CorporationAntigua and Barbuda Development BankAsaka Bank (Uzbekistan)Asian Development BankBank for Development and Foreign Economic Affairs(Russia)Bank for Investment and Development of VietnamBank Jabar BantenBank KeshavarziBank NagariBank of Bhutan LimitedBank of Industry and MineBank of Khyber (The)Bank of MaharashtraBank of the Cook IslandsBank Pembangunan Malaysia Berhad*Bank Perusahaan Kecil and Sederhana MalaysiaBerhad (SME Bank)Bhutan Development Finance Corporation Ltd.Bhutan National Bank Ltd.Brunei Economic Development Board (The)Business Development Bank of CanadaCapital Bank of MongoliaCentre for SME Growth & Development Finance(India)China Development BankCoalition of Socially Responsible SMEs in AsiaCommonwealth Development AuthorityCredit Guarantee Corporation Malaysia BerhadGuarantee Fund Trust for Micro and Small EnterprisesDevelopment Bank of American SamoaDevelopment Bank of Jamaica, Ltd.Development Bank of Japan, Inc.*Development Bank of KazakhstanDevelopment Bank of Samoa*Development Bank of the Philippines*Development Bank of TurkeyDFCC BankEco-Frontier (Korea)Entrepreneurship Development Institute of IndiaEsquire International Financing, Inc.Eurasian Development BankExport Credit Guarantee Agency of Oman SAOCExport Finance and Insurance CorporationExport-Import Bank of IndiaExport-Import Bank of Malaysia BerhadExport-Import Bank of ThailandFederated States of Micronesia Development BankFiji Development Bank*Fiji National Provident FundFirst Credit and Investment Bank Limited (Pakistan)Global Coalition for Efficient Logistics Asia (Malaysia)Global Procurement Consultants, Ltd.House Building Finance Corporation, Ltd.Housing Development Finance Corporation Bankof Sri Lanka (The)IDBI Bank Ltd.*IFCI Ltd.India SME Technology Services LimitedIndonesia Eximbank (formerly Bank Ekspor)International Bank of Azerbaijan Open Joint StockCompanyInternational Financial Consulting, Ltd. (Canada)IPDC of Bangladesh LimitedJapan Bank for International Cooperation*Japan Economic Research Institute, .124.125.126.127.Japan Finance Corporation, Micro Business andIndividual UnitJohor CorporationKarnataka State Financial CorporationKorea Development Bank*Land Bank of the PhilippinesLanka Orix Leasing Company PLC (Sri Lanka)Lankaputhra Development BankLocal Water Utilities Administration (Philippines)Malaysian Industrial Development Finance Berhad*Microfinance Development Association of MongoliaMicro Finance Development Fund (Mongolia)MNY Consulting Sdn Berhad (Malaysia)Mongolian National Chamber of Commerce andIndustryNational Bank of SamoaNational Bank of UzbekistanNational Development Bank of PalauNational Development Bank, The (PNG)National Housing BankNational Investment Company Pvt. Ltd.National Small Industries Corporation Ltd, (The)Nepal Development Bank LimitedNepal Industrial Development Corporation*NIB Bank Limited (Pakistan)*Niue Development BankOman Development BankOman Housing BankPacific Islands Development Bank (Guam)Pak-Brunei Investment Company Ltd. (Pakistan)Pak-Iran Joint Investment Company Ltd. (Pakistan)Pak-Kuwait Investment Company (Pvt), Ltd.Pak-Oman Investment Company (Pvt), Ltd.Palestine Mortgage & Housing CooperationParsian Farda Investment & Financial CounselorsInstitutePhilippine Export-Import Credit AgencyPhilippine Postal Savings BankPlanters Development Bank (Philippines)Public Development Bank Limited (Nepal)Queen City Development Bank (Philippines)Ratha SereichanRCBC Savings Bank (Philippines)Royal Insurance Corporation of Bhutan Ltd.Rural Development Bank (Cambodia)Sabah Credit Corporation (Malaysia)Sabah Development Bank Berhad (Malaysia)Samoa Housing CorporationSaudi Pak Industrial & Agricultural InvestmentCompany (Pvt), LimitedSeylan Bank (Sri Lanka)SIDBI Venture Capital Ltd.Small & Medium Enterprise Development Bankof ThailandSmall Industries Development Bank of IndiaSME Bank, Ltd.(Pakistan)SME Development Bank of ThailandState Insurance Corporation for the Insurance ofExport-Credit & InvestmentSyndicateBankTekun NasionalTMB Bank Public Company, Ltd.* (Thailand)Tonga Development BankTrade and Development Bank of MongoliaTurkish Republic of Northern Cyprus DevelopmentBankVanuatu Agriculture Development BankVietnam Development BankZarai Taraqiati Bank, Ltd. (Pakistan)

KEY SERVICESE‐LibraryThe ADFIAP e‐Library is a repository of valuable referencematerials on development banking and related topicscompiled over three decades of existence of ADFIAP. The collection documents the writingsand presentations of ADFIAP members about their development work and achievements,their successes as well as their failures.ADFIAP AwardsThe ADFIAP Development Awards, honors members that havecontributed significantly to the development of their nations.Given annually, the Awards consists of both institutional and individual awards.Table of Contents3Foreword5Framework and Road Map9KPI User and Reference Manual35Code of Practice: Governance (Appendix)59DFI’s Performance Evaluation Sheet73Non‐Disclosure AgreementCountry Host ProgramThe ADFIAP Country Host Programme is ADFIAP’s way of assistingchief executive officers and senior officers of member‐banks in theirtravel concerns in cooperation with the local host‐member. This includes arrangingbusiness meetings or appointments and provision of a temporary office/message centerwhile the CEO or senior officer is busy attending to his appointments.ADFIAP EventsADFIAP Events is the Association’s business unit that specializesin organizing and managing specific and demand‐driven activities, in addition to the formaltraining and credentialing courses offered by the Institute of Development Finance (IDF).These activities include conferences, symposia, exhibits and expos, study tours, and on‐the‐job programs.ADFIAP InformADFIAP Information program consist of both print andelectronic publications provided to members on complimentary basis.801

BUSINESS UNITSADFIAP Consulting: Consulting and advisory group.ADFIAP Responsible Citizenship Institute: CSR and outreachunit.Asia‐Pacific Institute of Development Finance: Professionalcareer development, training and credentialing center.INITIATIVESA knowledge forum and business network in support of smalland medium enterprises.Website: http://www.smefi.comPolicies, practices and programs on bank corporate governance.Website: http://www.governance‐asia.comEnvironmental governance standards for internal managementand project finance.Website: http://www.egs‐asia.com279

NOTESFOREWORDThis ADFIAP Key Performance Indicators for Development Finance InstitutionsManual (The Manual) was prepared and developed by the Association withone key objective in mind – to use and adopt this performancemanagement and measurement tool as a standard for development banks.ADFIAP has since been working to develop a performance measurementsystem for DFIs, one that encompasses the main and critical aspects of their“balancing” mission and mandate – operational sustainability anddevelopment impact.There were already many available indicators in terms of measuring a DFI’sfinancial and governance performance but none existed on quantifying itsdevelopment impact, including economic, social and environmentalaspects.Through in-depth research and the mathematical savvy of Dr. CesarSaldaña, ADFIAP’s Adviser on Corporate Governance and RiskManagement, ADFIAP believes it has developed the “holy grail” ofperformance management and measurement system for DFIs that can beadapted and contextualized based on the conditions where a DFI operates.Part I of the Manual starts with the mission and the adoption of goodgovernance practice of a DFI. Part II tackles the impact of the DFI on societyin general by quantifying, on one hand, the benefits of the DFI to the country(development investment) and on the other, the cost (subsidies andfailure/longevity rates) of the DFI to the country. Part III covers the DFI’soperational efficiency and effectiveness by measuring profitability, portfolioquality, capital and liquidity and efficiency and productivity. It also coversbenchmarking over three target sectors, namely, microfinance, SMEs andsocial enterprise. Finally, Part IV deals with the performance of a DFI oneconomic, social and environmental aspects.The manual also comes with a model code of governance practice used bythe Community Development Finance Association (CDFA) of the UnitedKingdom and a KPI performance evaluation sheet.783

NOTESAfter a series of “tests”, using actual and factual data from member-banks,the next step of the development process of this Manual is to produce asoftware that can be integrated into the bank’s existing informationtechnology system for a seamless and real time report generation of the DFI’sperformance.Members as well as interested non-members of ADFIAP that would like to useand adopt this Manual are requested to formally write the Association beingits proprietary developer as well as sign a simple non-disclosure agreementwhich is also part of this Manual.ADFIAP is indebted to the work of Dr. Saldaña in the development of thisManual and wish to acknowledge the use of the code of governancepractice of the UK-based Community Development Finance Association.The ADFIAP SecretariatManila, PhilippinesJuly 2010477

NOTESFrameworkandRoad Map765

to examine or make copies of any listings, files, or other information andcontent of the Manual which come into the Contracting Party’spossession or control. The Contracting Party further acknowledges thatdisclosure of any information regarding the Manual will give rise toirreparable injury to the Author, inadequately compensable in damages.Accordingly, the Contracting Party hereby consents to obtaining by theAuthor of injunctive relief against the breach or threatened breach of theundertakings of the Contracting Party contained herein.3.CONFIDENTIALITYAt the conclusion of the use of the Manual, the Contracting Party shall,and hereby agrees to, return the provided copy of the Manual to theAuthor, erase any information generated therein, whether such be inelectronic, magnetic, printed or other form, except for the printed formsidentified by the Author that are deemed necessary for the supervision,monitoring and evaluation of the process conducted. The ContractingParty further agrees to take such steps as maybe necessary or appropriateto maintain the confidentiality of the Manual during such time as theManual may be evident on the other person’s computer equipment or,otherwise in the control of its employees, in a manner at least secure asthe Contracting Party maintains as it own most confidential informationand data.IN WITNESS WHEROF, the parties have executed this Agreement as of the date firstabove written.6AUTHORCONTRACTING PARTYAuthorized SignatureAuthorized SignaturePrint Name and TitlePrint Name and Title75

DRAFTAUTHOR-CONTRACTING PARTY NON-DISCLOSURE AGREEMENTThis Non-Disclosure Agreement (“Agreement”) is made and effective (date)BETWEEN:AND:The Association of Development Financing Institutions in Asia and thePacific (ADFIAP), the focal point of all development banks and otherfinancial institutions engaged in the financing of development in theAsia-Pacific region, whose headquarters is located at 2F Skyland Plaza,Sen. Gil Puyat Avenue, Makati City, Philippines, hereinafter referred toas “Author”NOW, THEREFORE, in consideration of the mutual promises contained herein, theparties agree as follows:COLLABORATIONIn order to explore the possibility of a future collaboration between theAuthor and the Contracting Party in using the Manual, the Author shallallow the use of its Manual by the Contracting Party solely for theirinstitutional strengthening. The Contracting Party acknowledges that theManual will be used for this sole purpose only and that it acknowledgesthat the Manual is a proprietary product of the Author.2.Mission ofthe DFIAdoption of theCode of PracticePART II: DFI ACTIVITIES FORPRIORITY SECTORSPART IV: INDIRECT COSTS OFDFI: SUBSIDIES & FAILURESPART III: EXTERNAL BENEFITSOF DFI: DEVELOPMENTINVESTMENT7 KPIs for Subsidies & Failure/Longevity Rates of Start-ups8 KPIs for DevelopmentInvestment[ORGANIZATIONS’S NAME] with its offices located at:[COMPLETE ADDRESS] hereinafter referred to as “Contracting Party”WHEREAS the Author has developed a proprietary knowledge and performancemeasurement manual called, “KPIs for DFIs”, hereinafter referred to as“Manual” which the Contracting Party desires to use for their institutionalstrengthening;1.PART I: MISSION OF THE DFIPROPRIETARY RIGHTSAll applicable rights to patents, copyrights, trademarks and trade secretsof the Manual are retained exclusively by the Author, and the ContractingParty shall acquire no rights or interests in the Manual by virtue of the useof this from and to, the specified duration of the Manual’s use. TheContracting Party acknowledges that the confidentiality of the Manual isessential to the organizational work and interest of the Author. TheContracting party hereby agrees not to disclose to any person ororganization whatsoever at any time during or after the specified periodunder this agreement, or to permit any person or organization whatsoever74PART V: INTERNAL KPIs:THE DFI’s EFFICIENCY7 KPIs for Profitability of the DFI5 KPIs for Portfolio Quality44 KPIs for Capital & Liquidity4 KPIs for Efficiency & ProductivityPART VI: BENCHMARKING: KEYPERFORMANCE AREAS6 KPIs over 3 Target Sectors 18 BenchmarksPART VII: SUMMARY OF KEYECONOMIC AND FINANCIALPERFORMANCE INDICATORS FORSUCCESSFUL AND EFFICIENT DFIsPART VIII: ECONOMIC, SOCIAL ANDENVIRONMENT PERFORMANCE4 KPIs for Economic Performance8 KPIs for Environment Performance10 KPIs for Social Performance7

Non-DisclosureAgreement873

Part VI. Benchmarking: Key Performance AreasRatingVery GoodGoodAverageNeeds ImprovementUnsatisfactoryBrief Explanation for the ratingOverall RatingRatingVery GoodGoodAverageNeeds ImprovementUnsatisfactoryBrief Explanation for the ratingKPI for DFI:User’s ReferenceManual729

Part III. External Benefits of DFI: Development InvestmentRatingVery GoodGoodAverageNeeds ImprovementUnsatisfactoryBrief Explanation for the ratingPart IV. Indirect Cost of DFI: Subsidies and FailuresRatingVery GoodGoodAverageNeeds ImprovementUnsatisfactoryBrief Explanation for the ratingPart V. Internal KPIs: The DFIs Efficiency & EffectivesRatingVery GoodGoodAverageNeeds ImprovementUnsatisfactoryBrief Explanation for the rating1071

MANUAL OF KEY PERFORMANCE INDICATORSFOR DEVELOPMENT FINANCE INSTITUTIONSKEY PERFORMANCE INDICATORSFOR DEVELOPMENT FINANCE INSTITUTIONSPERFORMANCE REPORTPART I. MISSION OF THE DFI - THE BASIS OF KPI SYSTEMSDFI: EVALUATOR:Part I. Mission of the DFI - The Basis of KPI SystemsKey Performance Indicators (KPI) are the supporting analytical system forplanning and monitoring actual performance against budgets andbenchmarks of Development Finance Institutions (DFI). To be effectiveindicators, KPIs must be guided by clearly stated Mission, priority sectors,performance targets and goals. The pre-requisites of effective KPIs for DFIsinclude: RatingVery GoodGoodAverageNeeds ImprovementUnsatisfactory Brief Explanation for the ratingA Mission StatementDFI-wide understanding of the mission and its implementation intoprograms for target sectorsInternal KPI for reviewing the results and sustainability of the DFIExternal KPI for reviewing the impact of its DevelopmentInvestments on the Target SectorA. Overall Preparedness of the DFI to Adopt KPIsPart I of the KPI Manual involves questions about the preparedness of theDFI for adoption of a KPI for DFI system 1 . It must be answered first beforeproceeding to KPI in Part II (DFI Activities and Priority Sectors).Part II. DFI Activities for Priorities SectorsRatingVery GoodGoodAverageNeeds ImprovementUnsatisfactoryBrief Explanation for the rating701Modified and revised for use by DFI from Community Development Finance Association, HattonSquare Business Centre, 16/16a Baldwin Gardens, London EC1N 7RJ11

Pre-requisitesfor Adoptionof KPIsQuestions to Testwhether theRequisite Systemsare FunctioningAssessment of the Present Capacityof the DFI to Support a KPI System1. MissionStatementIs there a clearlyarticulated Mission,reflectingsustainable financialservices to targetsectors as the role ofthe DFI? Clarity in Mission Statement reflects2. DFI-wideunderstanding ifthe mission & itsimplementationinto programsfor targetsectorsIs there evidencethat the Mission isunderstood byboard, seniormanagement andstaff? Clear evidence of knowledge and3. An installedand operatingsystem ofreviewingperformancecalled KPIAre there clearlydefined KeyPerformanceIndicators againstwhich progresstowardachievement ismeasured andreviewed? Clearly described performanceDFI’s focus on providing financialservices to target sectors Some clarity in Mission Statementwhich includes reference to financeservice provision but not prioritysectors Mission Statement developed butdoes not reflect financial services totarget sectors No formal Mission Statement at thistimeunderstanding of Mission at all levels Some evidence of knowledge andunderstanding of Mission at variousbut not all levels Partial evidence of knowledge andunderstanding of Mission at somebut not all levels Little or no evidence of knowledgeand understanding of Mission fromamong most staff of the DFIindicators and forward targetsagainst which progress is measuredand reviewed Some indicators against whichprogress is measured, relativelyclearly described and reviewed Only a few indicators but progressusing those indicators are notmeasured and reviewed regularly A few indicators, but notparticularly clearly described andno clear way of measuring progressagainst them1269

Pre-requisitesfor Adoptionof KPIsQuestions to

KEY PERFORMANCE INDICATORS FOR DEVELOPMENT FINANCE . (development investment) and on the other, the cost (subsidies and . software that can be integrated into the bank’s existing information technology system for a seamless