59 microfinance terms, explained

Members with at least one loan outstanding.

The yearly meeting where members approve accounts, elect officials and set dividend and interest rates.

Controls to detect and report money laundering: transaction monitoring, suspicious transaction reports and record keeping.

The amount that was due but hasn't been paid. Unlike PAR, it counts only the missed amounts, not the whole loan balance.

Gross loan portfolio divided by active borrowers; often compared to GNI per capita to gauge depth of outreach.

Core capital as a share of risk-weighted assets — the buffer that absorbs losses before depositors' money is at risk.

An informal savings and investment group, common in Kenya, where members pool contributions and lend or invest together.

An asset pledged to secure a loan, such as a vehicle logbook, title deed or household goods.

How much of what was scheduled to be collected in a period actually was, often including past arrears.

Operating expense divided by the average number of active borrowers — a measure of efficiency.

A licensed company that collects borrowers' repayment history and supplies credit reports to lenders.

How many days the oldest unpaid instalment of a loan is overdue. Drives PAR buckets and provisioning classes.

Interest charged only on what is still owed, so each payment reduces future interest.

In SACCOs, the maximum loan as a multiple of a member's deposits — commonly 3×.

Paying out an approved loan to the member — in cash, to their savings or wallet, by bank transfer or by mobile money.

A share of the SACCO's surplus paid on members' share capital, at a rate approved at the AGM.

The true annual cost of a loan including fees and the interest method, so products can be compared fairly. Many regulators require it to be disclosed.

Like OSS, but adjusted for subsidies and inflation — whether the institution could survive without donor support.

Interest charged on the original loan amount for the whole term, even as the balance falls. Looks cheaper than it is.

Time after disbursement before the first repayment is due. Interest may or may not accrue during it, depending on the product.

The total outstanding principal of all loans that haven't been written off, including those in arrears.

Lending to members organised in small groups who meet regularly and often guarantee each other's loans.

A person — in SACCOs usually another member pledging their deposits — who agrees to repay if the borrower can't.

A unique reference sent with a transaction so that repeating the same request never posts it twice. In the Zung API this is client_ref.

A return paid on members' non-withdrawable deposits at year end, separate from dividends on shares.

An arrangement where group members are collectively responsible for each other's repayments, replacing physical collateral with social pressure.

Verifying a member's identity and background before opening accounts, with documents such as a national ID or passport.

Liquid assets as a share of short-term liabilities such as savings. Regulators set a minimum so withdrawals can be met.

An expense set aside for expected loan losses, calculated by applying a rate to loans in each days-past-due class.

The cumulative balance of provisions on the balance sheet, reduced by write-offs.

Active borrowers per loan officer. Too high and follow-up suffers; too low and costs rise.

Changing a loan's terms — a longer term, a grace period or a new schedule — usually because the member can't pay as agreed. Restructured loans should…

An organisation providing small loans and often savings and insurance to people and businesses underserved by banks.

Money stored and sent through a mobile phone account, such as M-Pesa, MTN MoMo or Airtel Money.

A profit-sharing partnership: depositors provide capital and the institution manages it, splitting profit by an agreed ratio. Losses fall on the capi…

A cost-plus sale: the institution buys an asset and sells it to the member at a disclosed markup, paid in instalments — used instead of an interest-b…

A loan whose payments are 90 or more days overdue, or where repayment is otherwise doubtful.

Whether operating income covers operating costs, loan loss provisions and financial costs. Above 100% means the institution covers its costs.

Portfolio at risk over 30 days — the most widely used measure of microfinance loan quality. Below 5% is generally considered healthy.

Portfolio at risk over 90 days. Loans this late are usually classified as non-performing.

The M-Pesa business number members pay into. With a Paybill they also enter an account number, which identifies their loan or savings account.

Someone with a prominent public role, or their close relatives and associates, who needs enhanced due diligence.

The outstanding principal of all loans with any payment overdue by more than a set number of days, as a share of the gross loan portfolio. The whole …

Interest and fees earned on loans as a share of the average gross loan portfolio.

The agreed split of investment pool profit between depositors and the institution, for example 60:40.

A benevolent loan with no profit or interest; the borrower repays only the principal.

Money collected on a loan after it was written off.

The list of instalments for a loan: due dates and how each splits between principal, interest and fees.

Amounts actually received as a share of amounts that fell due in a period. A high repayment rate can still hide a bad portfolio, so read it next to P…

Savings and Credit Cooperative Organisation — a member-owned cooperative that takes savings and lends to its members.

Members' ownership stake in a SACCO. Unlike deposits it usually can't be withdrawn, only transferred, and earns dividends.

A member's instruction to move a fixed amount on a schedule, for example from savings to a loan on each due date.

An M-Pesa prompt sent to the member's phone asking them to enter their PIN to approve a payment — no need to type the Paybill and account number.

Branch staff who take deposits and repayments and pay withdrawals in cash, working from a till.

The cash drawer assigned to a teller for a day, balanced at close against recorded transactions.

Menu codes like *123# that work on any phone without internet — the main digital channel for members without smartphones.

The branch's main cash store; tellers draw float from it in the morning and return cash at close.

A self-managed group of 15–30 people who save together and take small loans from their pooled savings, sharing out the fund in cycles.

Removing a loan judged uncollectable from the balance sheet, charged against the loan loss reserve. Collection efforts can continue; any later paymen…