this model than the other two. Thus, the time from group formation to first loan disbursal can be as little as a few davs to a few weeks.

# **Program Performance**

This section reviews program performance as measured by sustainability and outreach. Sustainability is measured by the program's arrears rate, its cost per unit outputs, and the size of the subsidy required to sustain operations. Outreach is measured by the volume of annual lending and savings activities (scope) and the population it serves (depth of market penetration).

_Sustefinability._ PHBK Table 21 experienced early Arrears Rates for PHBK Program problems with high arrears. However. Fiscal Year recent repayment 1990/91 1991/92 1992/93 1993/94 1994/95 1995/96 performance has been Number of credits 17.2 21.1 29.0 19.9 11.5 12.9 sound. Information on ovcrduc percent of the share of the PHBK number of credits portfolio at risk was not outstanding available. However, the Volume of payments 5.0 14.2 13.3 16.5 8.7 5.7 program's ratio of overdue percent of program's raho of volume of loans number of credits outstandinga _ overdue to number of credits outstanding41 a/ Overdue payment is defined as a paymen **t** hat is one day late or more. climbed sharply over the two years from fiscal 1990/91 (April 1990 to March 1991) to fiscal 1992/93. By the end of fiscal 1992/93, loans in arrears accounted for 29 percent of outstanding loans. This figure has since declined, and stood at 13 percent in 1995/96 (Table 21 ).42 The volume of late payments as a share of the volume of outstanding loans rose from fiscal 1990/91 to 1993/94 and then declined. This rate was 5.7 percent in fiscal 1995/96. Data do not allow for a calculation of the program's annual default rate. However, program organizers report the cumulative default rate as being below 2.8 percent.<sup>43</sup> Further. their figures show this rate declining slightly over the last two years. The program's arrears rate and default rate would likely be judged sound by international microcredit standards.<sup>4 4</sup> 41 Where credits overdue is defined as credits whose payments are one day late or more.

- n Actual annual arrears rates may be below the figures presented here because many participating banks do not write off loans. Thus, current annual arrears rates reflect some bad debts incurred in previous years.

- 43 In the absence of data on default rates, the maximum possible cumulative default rate is assumed to be the inverse of the cumulative repayment rate. In fact, the cumulative default rate will be below this figure since at least some of the loans for which repayments are currently late vill eventually be repaid. The cumulative repayment rate is defined as: total cumulative repayments / (cumulative repayments +cumulative arrears).

- **44** For example, the Committee of Donor Agencies for Small Enterprise Development (1995) set as an acceptable standard for microenterprise lending, that 10 percent or less of total loans should have late payments of 30 days or more. and lenders should have annual losses from defaults of 4 percent or less of outstanding loan volume. PHBK's arrears rate is slightly above the 10 percent level but includes loans in arrears by one day or more. The program's default rate is likely below 4 percent.

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