Are Small Farmer Co-operatives Ltd. (SFCLs) Viable Microfinance Organisations? A Comprehensive Financial Analysis of 33 SFCLs

This paper states that Small Farmer Co-operatives Ltd (SFCLs) are efficient financial intermediaries with very low operating costs. They can also cover operating costs and maintain value of capital with internally generated income. 

Specifically, the paper reviews the financial sustainability of co-operative MFIs in Nepal, which are known as SFCLs. Through a comprehensive financial analysis, results demonstrate that profitable microfinance business and outreach to the poor are not merely fantasy, but can be a reality.

With a sample of 33 SFCLs evenly distributed, some with predominantly female membership, the paper uses financial and operational self-sufficiency ratios, as well as some other well-known financial indicators to challenge and validate earlier findings during the second half of 1999. It follows-up on the overall development path of SFCLs after completion of 1999/2000 fiscal year, confirming the findings of the first study.

Finally it concludes that the financial year 1999/2000 under review was an unprecedented year with a very strong performance for the SFCLs studied as all major financial figures and ratios improved substantially, thus have achieved full financial self-sufficiency during the year 1999/2000 and less dependent on external funds. It stresses the need to build on these achievements.