Business Page November 18th, 2001

On The Line - IPED



On The Line - Annual Report

Since its establishment in 1995, the Institute of Private Enterprise Development (IPED) has developed into the country's leading Micro-finance organisation. It has promoted growth and development through the provision of business guidance, technical assistance and non-traditional credit facilities to small and medium sized entrepreneurs and groups. IPED's policy is to support and encourage the development and growth of all other economic activities designed to improve the social and economic welfare of Guyanese.

This week's Business Page examines the performance and achievements of the Company as recorded in its fifteenth Annual Report for the year ended December 31, 2000.

The highlights of the year are as follows:

                                                            2000                           1999                    Change (%)

Loans financed                                     5455                            5057                               7.9

Value of loans financed                        G$739.7 Mn                G$770.7 Mn                  -4.0

No. of jobs created                              9000                            9022                             -0.24

Contribution to GDP                            1.38%                          1.8%                             -0.42

The growth in the number of loans disbursed was 7.9% over 1999 but the value of the loans was 4% lower than in the previous year. Average value per loan in 2000 was $135,600 compared with $152,400 in 1999 while the average number of jobs per loan remained at 2. The administrative cost per loan increased by 6% from $13,990 in 1999 to $14,811 in 2000 despite the increase in the number of loans.

Job creation continues to be a major focus of IPED and the projects and businesses it has funded has helped to create and sustain employment for a considerable number of persons. According to the Annual Report the jobs created as a result of loans in 2000 numbered "over 9000". Indeed job-creation is a key performance indicator used by IPED although the term "jobs created/sustained" is really quite confusing and does invite more careful analysis.

Since its inception, IPED has disbursed 25,556 loans with 27% going to men, 46% to women and 27% jointly to men and women. Interestingly since 1996 women's access to IPED's Micro Loan facility has far outweighed that granted to men and is steadily climbing.

According to the Report, IPED's clients' contribution to GDP at current market prices in 2000 was 1.38%, down from 1.8% in the previous year. Given the increase in the number of loans and the performance of the national economy this is a bit surprising but ambiguity in the language may be responsible for this.

Financial Highlights

                               		2000		1999		%
					G$Mn		G$Mn 		Growth 
Interest income 				172.3		205.1	 	-16
Investment Income 				55.6		36.4		 53
Other Income 				24.4		17.1	     	 42
Total Income 				252.3		258.6		-2.4
Expenditure				162.3		178.5	     	-9.1
Net surplus of income over expenditure 		 90.0		80.0		12.5

Average interest earned on loans was 20% compared with 24.3% in the previous year. Interest expense on the other hand averaged 4% making it by far the highest interest spread among all financial houses in Guyana. By comparison, NBS which also enjoys tax free exemptions, average interest earned is 10.8% while interest paid is 8%.

Notwithstanding the larger net interest income, NBS pays out 32% of NII in staff costs compared with 18% at IPED. While NBS discloses information to allow for the cost per employee to be computed, this is not possible for IPED.


Operating expense is made up of interest of $22.7Mn paid on total loans outstanding, salaries and allowances of $38Mn while the provision for doubtful debts fell from $78.1Mn to $47.5Mn. The second largest expenditure item shown in the financial statement is other expenses of $40.8Mn for which no information is provided.

In spite of the decline in income, the Company achieved a net surplus of income after expenses of $90M, a 12.5% increase over 1999. However, income generated from earning assets fell from 14.8% in 1999 to 10.9% in 2000. The return on the Institute's assets remained stable at 5.5%.

Other operating income to total assets showed a small increase of 1.2%. The share of interest income used up in staff cost increased by 12%.

The income and expenditure account indicates that only interest on PL 480 loans is recognised in the financial statements despite the fact that the IDB loans attract a commission of 1% and the EIB loan, interest at the rate of 2%.


The increase in the number of loans by 2426 since 1995, the continuing poor performance of the economy and the increase in the value of its loan portfolio has increased the risk associated with IPED's operations. In apparent recognition of this, the Chairman in his report stated that "the Institute has cautiously made a decision to create progressive allocation for risk coverage".

However, while the non-performing loans increased from $69Mn in 1999 to $86Mn in 2000 the provision for bad debts fell from $116Mn in 1999 to $64Mn in 2000. Loan provision as a percentage of total loans fell from 12% in 1999 to 7% in 2000 which is difficult to understand in the current economic climate. Perhaps this might have been clearer had the financial statements disclosed the movement of the loan loss provision where there seems to be an unexplained difference of $100Mn.

Like the New Building Society, IPED is an extremely liquid company with liquid assets of $708Mn out of total current assets of $1.5Bn. $217Mn are in cash and bank balances, while $331Mn is held as a short term investment. Despite the significance of this amount no details are given of the investment except to say that it "represents monies held for repayment of loans". Loans payable during 2001 amount to $183Mn.

Related Party Relationships

One of the comments usually made about the IPED's accounts is the close relationship which it has through common directorships with Demerara Distillers Limited and Demerara Bank Limited. Accounting Standards require that since a related party relationship could have an effect on the financial position and operating results of the reporting enterprise, then transactions between related parties should be disclosed. Indeed, the operating results and financial position of an enterprise may be affected by a related party relationship even if transactions do not take place between them since the mere existence of a relationship may be sufficient to affect the transactions of the reporting enterprise with other parties.


IPED continues to justify the accolade as a leading micro-finance organisation in the English speaking Caribbean. Indeed the Prince of Wales Youth Trust chose IPED to manage its Guyana Youth Business Trust and IPED continues to expand both geographically and in the range of its products which now include training, accounting and managerial and technological services to institutions and organisations.

The Annual Report, though late, continues to be full of useful statistical information which some of the more established organisations in the country do not disclose. The Report is aided by graphs and charts although the numerous examples of confusion between its and it's is regrettable.