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Financial Management and Analysis of Projects :
7. Knowledge Management :
7.10. Appraisal Checklist: Financial Institution
7.10.1.6. Prepare Financial Projections for Ongoing FI Operation
7.10.1.6.1.
Determine the FI's operating objectives for at least 2 completed
fiscal years prior to the start of project implementation and the
extent of their fulfillment, and reasons for any shortcomings.
7.10.1.6.2. Examine and determine
the feasibility of, and acceptability to ADB of, the FI's operating
objectives for the period of project implementation and its forecast
for the next 2 following years.
7.10.1.6.3. Review the portfolio of
performing and nonperforming loans, paying specific attention to
adverse commentaries (if any) by the external auditors.
7.10.1.6.4. Review the actual ongoing
performance and past statistics relating to recoveries, bad debts,
and provisions, particularly the adequacy of the latter.
7.10.1.6.5. Review the status and
performance of equity participations and the realism (realisability,
earning capacity) of the related entries in the FI's financial statements.
7.10.1.6.6. Review the adequacy of
the FI's interest rate spreads to meet all obligations.
7.10.1.6.7. Examine for reasonableness
and profitability the FI's proposed term lending program using ADB
loan proceeds and other resources.
7.10.1.6.8. Examine the FI's proposed
equity participation program using ADB loan proceeds and other resources.
7.10.1.6.9. Measure the resilience,
earning capacity, and security of the FI's past, ongoing and proposed
short-term lending program and its actual and proposed sources of
funding.
7.10.1.6.10. Examine the continuing feasibility/profitability
of the FI's current and proposed leasing program and its actual
and proposed sources of funds.
7.10.1.6.11. In consultation with the Project
Officer and counterparts, as appropriate, determine if it will be
necessary to revalue assets periodically through ADB loan period
and thereafter to reflect the impact of severe inflation, prepare
a forecast of the impact on lending operations.
7.10.1.6.12. In consultation with the Project
Officer and counterparts, as appropriate, prepare the FI's operating
costs with and without the project for at least 2 completed fiscal
years prior to the start of project implementation, for the period
of ADB loan disbursement, and for at least 2 years of operation
and incorporate impacts of inflation forecasts.
7.10.1.6.13. Review the FI's status and performance
of schedules of interest payments due to lenders.
7.10.1.6.14. Review the FI's status and performance
of loan repayments to lenders.
7.10.1.6.15. Examine the reliability of the system
of liquidity (cash) management and determine the number of occasions
when cash reserves were depleted to dangerous levels in the most
recent 2 years without available recourse.
7.10.1.6.16. Compile the following financial statements
for at least 2 completed fiscal years prior to the start of loan
signing, forecasts for the period of loan disbursement, and forecasts
for at least 3 years thereafter.
- Balance
Sheet
- Income
Statement
- Cash
Flow Statement (In cases where the FI has not prepared cash flow
statements in the past, it may be difficult to prepare these retrospectively.
In these cases, while the financial analyst has discretion to
waive the requirement for historical cash flow statements, forecast
cash flow statements are still required)
- Capital
Adequacy Analysis
- Portfolio
of Investments at year-end
-
Schedule of Nonperforming Assets showing:
- Nonperforming
not rescheduled
- Nonperforming
rescheduled but not performing
-
Nonperforming Equity investments, and
- Nonperforming
Lleases
- Analysis
of Income and Earnings showing percentage of average assets by
categories
- Losses
experienced by sector/activities
- Credit
risk management
- Liquidity
and Interest Rate Sensitivity Management
- Provisions
for Losses, Write-offs, and Recoveries
- Schedule
of Collateral and Securities
7.10.1.6.17.
Review VaR records and prepare a chart showing significant at-risk
dates and amounts at risk in the 2 years prior to appraisal.
7.10.1.6.18. On the basis of generated data above,
compile appropriate financial performance indicators. Discuss proposed
indicators with Project Officer and counterparts, explaining logic
of selection and methods of calculation
7.10.1.6.19. With Project Officer, explain in
detail to counterparts the method of compilation and the forecast
results of all financial statements at all appropriate levels of
concerned institutions and managements with the objective of reaching
agreement on the Project Cost Table, the Financing Plan, the financial
projections, interest spreads, and lending conditions proposed.
7.10.1.6.20. With the Project Officer, meet with
cofinanciers at mutually agreed locations (if possible in the presence
of counterparts) to explain the method of compilation and the forecast
results of all financial statements at all appropriate levels of
concerned institutions and managements with the objective of reaching
agreement on the Project Cost Table, Financing Plan, the financial
projections and interest spreads, and lending conditions proposed.
7.10.1.6.21. Draft the section of the Aide Memoire
relating to all financial aspects of the project and discuss with
Project Officer. Make any agreed amendments for presentation of
complete Aide Memoire to counterparts at appropriate levels of authority.
7.10.1.6.22. Draft paragraphs for inclusion in
the financial section of the RRP, and prepare financial appendixes
to attach to the RRP. Review with the Project Officer.
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7.10.1.5. Definition of Project Cost Requirements | Next
7.11. Undertaking Sensitivity and Risk Analyses |
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