The ACCION CAMEL - Technical Note

This paper describes the ACCION CAMEL, a tool to gather and evaluate data on the performance of microfinance institutions (MFIs). CAMEL is an acronym for five measurements of a financial institution: Capital adequacy, Asset quality, Management, Earnings, and Liquidity management.

Based on the conceptual framework of the original CAMEL, which was created initially to measure the financial and managerial soundness of U.S. commercial lending institutions, the ACCION CAMEL analyzes and rates 21 key indicators - eight quantitative and thirteen qualitative. An MFI is required to gather the following information for a CAMEL examination:

• Financial statements;
• Budgets and cash flow projections;
• Portfolio aging schedules;
• Funding sources;
• Information about the board of directors;
• Operations and staffing;
• Macroeconomic information.

Indicators include:

• Capital adequacy - leverage, ability to raise equity;
• Asset quality - portfolio at risk, productivity of long-term assets;
• Management - governance, information technology system;
• Earnings - ROE/A, interest rate policy;
• Liquidity management - liability structure, cash flow projections.

[Author's abstract]