This component helps to undertake a cash flow analysis; allows an assessment of the household, the business, client’s knowledge and insights as well as identification of the risks involved. The business analysis looks at the profitable micro-enterprises and conducts a demand/need analysis.
It is determined if the business has the capacity to absorb the loan advanced and generate enough returns for the client to be able to repay the loan as well meet the other expenses. Hence the capacity to repay is determined.
The Business Analysis component of the Application form consists of the following parts;
- Income Statement – to calculate monthly net savings
- Balance Sheet – to assess the financial position of client
- Monthly gross profit analysis sheet
- Household personal asset sheet
- Ratio analysis – generating ratios to assess the financial strength of the client’s business
- Seasonality effect – to assess annual results
These are filled out by the Loan officers by acquiring required data form the client verbally or examining his finances if any are available.