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   USER 'S GUIDE 

     

Asian Credit Union Benchmarking Service
User’s Guide

TABLE OF CONTENTS

NOTICE
This Guide is intended as a reference tool to assist users to understand and apply the information provided in the Benchmarking Service in assessing and improving performance.

The information in this document is general in nature and is not a substitute for your own business judgment or the advice of your own professional advisors.  While the Asian Confederation of Credit Unions has made good faith efforts in preparing the Guide, ACCU makes no representation, warranty or condition, express or implied.

How the Benchmarking Service Can Help You?
The Benchmarking Service (the “Service”) has been designed to assist credit unions identify areas of risk or opportunity in the credit union’s operation by providing a concise snapshot of key financial measures based on the World Council of Credit Unions’ PEARLS methodology (Protection, Effective financial structure, Asset quality, Rates of return and cost, Liquidity and Signs of growth)

Benchmarking is the process of comparing various key performance ratios of the credit union with its own historical trends, PEARLS goals, and with the results of peer groups and top performers.  Continuous benchmarking to achieve best practices will help to ensure the ongoing sustainability and soundness of the credit union.


Using the information provide by the Service, the Board of Directors and management of a credit union can develop strategies that will appropriately target the credit union’s resources to improve areas of the operation.

Opportunities for Improvement
The Service makes it easy to identify opportunities for improvement by providing information concerning:

·        Trends;

·        Comparisons to PEARLS targets;

·        Identification of areas where results that are below PEARLS goals;

·        Comparison to other performers in the peer group.

This User’s Guide has been designed to assist you to understand and effectively use the Service.

Access to the Benchmarking Service
The User’s Guide for the Benchmarking Service and the available on ACCU’s website at: www.aaccu.coop/net.

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How to use the Service?
Overview
The Benchmarking Service, which is available to all Asian credit unions union, is based on information submitted by each credit union. It is comprised of key financial measures that are presented under the PEARLS framework. 

The Service provides information in two parts. The first part is data which relates to your credit union and is only available to persons authorized by your credit union:

·        The credit union’s name, address, number of members, bond, etc.

·        Other qualitative information such as:

o       Membership Profile e.g. urban and rural

o       Market segmentation e.g. gender and age groupings

o       Core business e.g. members’ use of the credit union services

o       Board and Committee names and their positions

o       Senior Management names and their positions

·        Balance Sheet trends including the current quarter, the previous quarter and annually for the last three years. 

·        Income Statement information over the same periods as above.  Income statement information is calculated on an annualized.

·        PEARLS ratios over the last same periods

·        PEARLS ratios for the peer group

The second part of the data includes key PEARLS ratios for all credit unions participating in the Service including:

·        Balance Sheet of current and previous year

·        Income Statement or Profit and Loss Statement of current and previous year

·        Membership current and previous year

The information can be sorted in various ways.
 

Registration
To register the Benchmarking Service do the following:

  1. Go the ACCU’s website at : www.aaccu.coop/net.
  1. “Double Click” on the icon Asian Credit Union Benchmarking Service  
  1. The Benchmarking Service screen appears and the Login will then be displayed.
  1. You will be asked to register : CLICK HERE TO REGISTER
  1. The MEMBER REGISTER appears on the screen

“Welcome to the ACCU”S Benchmark services! Please complete the following questionnaire to open the ACCU”S Benchmark services partner account. By opening this account, you will benefit from a wide range of Partner advantages. Upon receiving this questionnaire, we will email you a link to activate your partnership  immediately.”

Please key in your personal information and the profile of your credit union. You are required to fill up information with “red asterisk” to complete registration.

  1. After filling out all the required information, click MEMBER REGISTER NOW!
  1. If you missed filling important information, the serviced will ask you “please enter a valid title.” Go through once again to the registration to make sure that all the information with red asterisks has been filled-up.
  1. After successful registration, the Main of Benchmarking Service page appears on the screen. If you have already register,

 

  1. If you are registered, just enter your Login Name and Password to go to the Main of Benchmarking Service.


Start a New Benchmarking Service
The following are the steps you need to follow to start a new benchmarking.

Step 1: Start Benchmarking
Fill in the required information based on your balance sheet and income statement for the current year and the previous year. The sheet for data input has already been classified according to PEARLS.  On the right hand side of the page is the link to Chart of Accounts. You may refer to this chart. Some countries use different titles though the nature of account is same.  Make sure you fill out the required information. The service would compute all the ratios of the PEARLS provided the information is inputted.

Once you have completed the data input, click START BENCHMARKING

Step 2: Confirm Benchmarking
This page will show you the PEARLS rating of your credit union. The following information would be displayed in this page:

PEARLS Indicators

Goals

Your Credit Union Ratio

 Points

 

 

 

 

Click “Save to my History” to enter your credit union into the main benchmarking system.

Step 3: Save to my History

In this page the following screen will appear:

PEARLS Indicators

Goals

Your Credit Union Ratio

 Points

Interpretation & Diagnosis

Strategies to be followed to attain the goal

 

 

 

 

 

 

This page provides a more concrete analysis of the problem areas in your credit union and offer recommendation on the strategies to be followed to attain the goal. The strategies are input in preparing the action plan for your credit union.

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Developing Action Plans to improve Performance
This section describes steps on how the information provided by the Service might be used by a credit union to identify areas of improvement.  

Step 1 – Identify Areas for Improvement
Identify areas where the credit unions falls below PEARLS targets or where there has been deterioration in a PEARLS ratio since the last reporting period.

Step 2 – Determine the causes for poor or deteriorating performance
The following are examples of the types of questions that might be asked for ratio R8, gross margin:

·        Why is the ratio below PEARLS targets?

·        What is the reason for the decrease in financial margin if any?

·        Is this trend expected to continue?

·        Is the decrease related to a particular type asset?

·        Are interest rates competitive when compared to other credit unions?

·        How does our gross margin compare with the peer group?

The foregoing questions are only a small sample of the many questions that may be asked to focus further investigation. Any decisions regarding possible problem identification or strategy development should be deferred until sufficient investigation and analysis has taken place. 

Step 3 – Developing an Action Plan
Once the underlying causes of poor performance have been identified, an action plan should be developed.  These strategies should be cost effective and appropriate to the type of credit union and its mission and vision.  The plan should be developed within the larger context of the business strategy selected for the credit union. 

A report should be prepared that details the analysis and outlines management’s action plan or recommends improvement strategies for Board approval, whichever is appropriate. Please be guided by the “Strategies to be followed to attain the goal” as suggested to by the benchmarking service.

Sample action plans for strategy development are contained below.

Step 4 – Monitor Progress
After an appropriate time following implementation, results of the action plan or strategy should be monitored and the adequacy of strategies evaluated.

If progress is not satisfactory, action plans or strategies should be revised to ensure success.

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Sample Actions Plans
This section highlights the main focus of each of the PEARLS components and provides strategies that can be used to improve the financial performance ratios provided by the Service.  A summary of the PEARLS ratios with detailed definitions and calculations is contained in Appendix 2.  

Protection
Adequacy of allowances for loan losses and allowances for investment losses are vital to safeguarding the interest of depositors and share holders.  Moreover, accounting standards also requires sufficient allowances for probable losses on assets be recognized in the balance sheet to reflect the true financial position of the credit union.  Solvency is also evaluated.

Action Plans

Where the ratios fall below the stated target, or where there has been material deterioration in the ratio, the credit union should consider implementing the most appropriate action steps below:

Ratio

Action Plan Options

P1, P2, P3

·        Make appropriate accounting entries to meet the goal

P4

·        Review credit management policies and procedures to ensure practices are adequate

·        Provide training to lending officers

P5

·        Review collection policies and procedures to ensure that practices are adequate

·        Provide training to collection staff

P6

·        Increase equity and capital

·        Reduce dividends

·        Same as with P4 and P5

Effective Balance Sheet Structure
The financial structure of the credit union is the single most important factor in determining growth potential, earnings capacity, and overall financial strength.  The PEARLS system measures assets, liabilities and capital, and recommends an “ideal” structure for credit unions.

Action Plans

Where the ratios fall below the stated target, or where there has been material deterioration in the ratio, the credit union should consider implementing the most appropriate action steps below:

Ratio

Action Plan Options

E1

·        Review loan products and pricing and compare to competition and member needs

·        Implement a sales culture

·        Develop and implement a loan marketing campaign

E2

·        Related to E1

E3, E4

·        Review asset/liability management policy and practices

·        Conduct cost/benefit analysis of current investments

E5

·        Review deposit products and pricing and compare to competition and member needs

·        Develop savings mobilization strategy

E6

·        Review asset/liability management policy and practices

·        Conduct cost/benefit analysis of current borrowings

E7

·        Review asset/liability management policy and practices

E8

·        Increase capital

·        Increase net income

·        Reduce dividends

·        Limit asset growth

E9

·        Refer strategies for P4, P5, P6 and E8

Asset Quality
PEARLS focuses on the collectability and income producing capacity of the credit union’s asset portfolio.

Action Plans

Where the ratios fall below the stated target, or where there has been material deterioration in the ratio, the credit union should consider implementing the most appropriate action steps below:

Ratio

Action Plan Options

A1

·        Refer to strategies for P4 and P5

A2

·        Refer to strategies for E3 and E4

A3

·        Refer to strategies for E3, E4 and P6

Rates of Return
PEARLS focuses on the essential components of net earnings to help

calculate investment yields and evaluate operating expenses.

Action Plans

Where the ratios fall below the stated target, or where there has been material deterioration in the ratio, the credit union should consider implementing the most appropriate action steps below:

Ratio

Action Plan Options

R1

·        Review loan products and pricing strategies in the context of credit risk and competition

·        Review asset/liability management policy and practices

·        Conduct analysis of financial, operating and provisioning expenses for efficiency and effectiveness

R2, R3, R4

·        Review investment policy and procedures for adequacy

·        Review asset/liability management policy and practices

R5, R6

·        Review deposit products and pricing strategies in the context of member needs and competition

·        Review asset/liability management policy and practices

 

R7

·        Review dividend policy and cost of insurance premiums

R8

·        Refer to strategies for R1 to R6

·        Review adequacy of other income and fees

·        Evaluate the efficiency of expenses in generating revenues

R9

·        Evaluate the efficiency of expenses in generating revenues

R10

·        Refer to strategies for P1 and P2

R11

·        Evaluate internal control policies and practices

·        Identify sources other than internal controls and develop strategies to minimize reoccurrence

R12

·        Refer to strategies for R1 to R11

Liquidity
For safety and soundness of the credit union operation, cash needed for withdrawals of deposits should be maintained at appropriate level.

Action Plans

Where the ratios fall below the stated target, or where there has been material deterioration in the ratio, the credit union should consider implementing the most appropriate action steps below:

Ratio

Action Plan Options

L1, L2, L3

·        Review liquidity management policies and procedures to ensure practices are adequate

·        Review asset/liability management policy and practices

Signs of Growth

 Maintaining asset values through strong, accelerated growth of assets, accompanied by sustained profitability. 

Action Plans

Where growth ratios fall below the stated target, or where there has been material deterioration in the ratio, the credit union should review its strategic plan and develop strategies in the following areas:

·        major priorities and business objectives

·        financial targets and supportive action plans

·        an operational budget

·        marketing and product plans

·        savings mobilization

·        adequacy of institutional capital

Growth should be monitored to ensure it occurs at an appropriate rate that can be successfully managed by the credit union using the resources currently available, or providing sufficient time to acquire additional needed resources.  In addition, awareness should be maintained with respect to the impact of money laundering activities as a source of growth.

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Managing Your Benchmarking Account

Edit Profile
Click the “Edit Profile” to update your personal and credit union information. Click “Edit Member” after updating the information.

My Community
Click the “My Community” to view ratings of credit unions in different countries. Click “Please select country”. It would give you the list of countries of partner credit unions in   benchmarking service. Select the country and click “Go”. The list of credit unions will appear on the screen. The names are withheld in this site. We consider the information as confidential. Numbers are assigned for the partner credit union. You have to remember your assigned number which will appear when you first register in the site.

PEARLS Rating
When you click the “PEARLS Rating,” the PEARLS indicators would be displayed on the screen. If you click each indicator, it would show you the list of credit unions in different countries and their ranking in that particular indicator.

Feedback
Your comments are important to us. If you have any suggestions or comments regarding the Benchmarking Service or the User’s Guide, please contact ACCU at www.aaccu.net/coop.  As always, your feedback is valued and appreciated.

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