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1. Explain the concept of operational self-sufficiency from the standpoint of any business. Why is this especially important in determining the health of a business?

2. A Ugandan microfinance institution is structured as an NGO. It receives $60,000 in grants each year, gets roughly $10,000 in volunteered services, and earns $50,000 in interest payments and $10,000 in fees from its customers. It currently does not rely on debt financing for its loan portfolio. Its total operating expenses are $40,000 and it has earmarked $10,000 for its loan-loss provision.

a. Is this NGO operationally self-sufficient?

b. Is it likely to be financially self-sufficient?

c. What risks does this NGO face by having its funding structured as it is?

d. Assume that the current market cost of capital in Uganda is 10 percent annually. What is the FSS?

e. Do you think this market interest rate correctly reflects the lending rate for the NGO?

f. How might you be able to obtain a more correct measurement?

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M92756120

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