A STUDY ON

FINANCIAL PERFORMANCE ANALYSIS

OF
SWABALAMBAN LAGHUBITTA BITTIYA SANSTHA LIMITED

A Proposal for Project Work

Submitted By:

Aasha Shrestha
T.U. Regd. No. : 7-2-751-168-2019
Symbol no :707510003
Group : Finance
Divya Gyan College
Putalisadak ,Kathmandu

Submitted To:

The Faculty of Management

Tribhuvan University
Kathmandu

In Partial Fulfillment of the Requirement of Degree of

BACHELOR OF BUSINESS STUDIES (BBS)

Kathmandu ,Nepal
July 2024
 2

CONTENTS
1) Background of the study
2) Organization profile
3) Statement of the problem
4) Objectives of the study
5) Rationale of the study
6) Literature review
7) Research methodology
8) Limitation of the study
9) Organization of the study
10) References
1.Background of the study

Microfinance emerged as a formalized movement in the mid-20th century, gaining prominence

primarily through initiatives like Grameen Bank, founded by Dr. Muhammad Yunus in
Bangladesh in 1976. Yunus's pioneering approach involved providing small, collateral-free loans
to impoverished women in rural areas, empowering them to start small businesses and improve
their economic status. This model demonstrated that financial services tailored to the needs of
low-income individuals could effectively alleviate poverty and foster economic development at
the grassroots level. Inspired by Grameen Bank's success, other microfinance institutions and
initiatives began to emerge globally during the 1980s and 1990s, expanding the reach and impact
of microfinance. By the early 2000s, microfinance gained international recognition for its role in
promoting financial inclusion and empowering marginalized communities. However, the
movement has also faced challenges, including concerns about commercialization, high interest
rates, and the need to balance financial sustainability with social impact. Despite these
challenges, microfinance continues to evolve, with ongoing innovations and debates shaping its
future as a tool for sustainable development worldwide.

Microfinance in Nepal began to gain traction in the early 1990s, driven by efforts to alleviate
poverty and promote economic empowerment in rural and underserved areas. The formal
introduction of microfinance institutions (MFIs) in Nepal can be traced back to organizations
like the Rural Development Bank (RDB) and the Small Farmers Development Programme
(SFDP) in the 1980s. These initiatives laid the groundwork for microfinance by providing small
loans and financial services to rural communities. One significant milestone was the
establishment of the Small Farmers Development Bank (SFDB) in 1993, which focused on
providing microfinance services to small farmers and rural entrepreneurs. This marked a formal
recognition of microfinance as a tool for poverty reduction and agricultural development in
Nepal.

The microfinance sector in Nepal expanded rapidly throughout the 1990s and 2000s, with the
establishment of numerous MFIs, cooperatives, and non-governmental organizations (NGOs)
dedicated to providing financial services to low-income individuals and marginalized
communities. These institutions played a crucial role in extending credit to rural households,
promoting savings habits, and supporting micro-enterprises. Today, microfinance plays a vital
role in Nepal's financial ecosystem, contributing to financial inclusion, livelihood enhancement,
and socio-economic development across the country. The sector continues to evolve, with
ongoing efforts to expand access to financial services, improve the sustainability of MFIs, and
address the diverse financial needs of Nepal's population. As of January 2023,Nepal has 64
microfinance institutions (MFIs) which are classified as D class financial institutions and are
regulated by the Nepal rastra bank.

2.Organization profile

Swabalamban laghubitta bittiya sanstha limited (SWBBL) is a microfinance financial institution

which is established with the mission of delivering sustainable microfinance services at the
doorstep of the deprived sector target societies. SWBBL was registred with the company
registrar’s office as a limited company under the companies act ,2053 on October 5,2001 (ashwin
19,2058) and obtained alicense from Nepal rastra bank ,the central bank of Nepal on January
3,2002(paush 19,2058) to operate the financial activities under development bank act ,2052.

The microfinance program currently implemented by SWBBL goes more than 28 years back
when a group of development practitioners established an NGO named centre for help
development (CSD) in 1991 with the aim of helping the poor people to enhance socio-economic
status through the capacity building and empowerment .started in 1993 ,a microfinance program
entitled self help banking (SBP) became a land mark program in supporting deprived women at
the grassroots level through the provision of microcredit and savings facilitiesbased on group
guarantee. With the aim to provide the poor women with the more sustainable microfinance and
enhance the credibility of the institution CSD took the initiative to promote SWBBL together
with the renowned commercial banks –nepal investment babk limited ,Himalayan bank limited,
nabil bank limited as well as individual promoters committed for poverty reduction.
SWBBL formally started its operation on January 14 ,2002 (magh1, 2058 B.S.). at the time of
establishment ,its registered (central office ) was in jankpur dhanusha, eastern region of the
country. Later, according to the decision made on march 10, 2014 ,by the company registrar’s
office is shifted to Kathmandu ,Nepal .SWBBL has changed its name to swabalamban laghubitta
bittiya sanstha limited as of bank and financial institution act, 2073. Previously ,it was
swabalamban laghubitta bikas bank limited ,as on january6,2006( magh 10, 2062) under the
companies act,2005 (2062) and reobtained license from Nepal rastra bank under bank and
financial institutions act, 2006 (2063).

The primary objective of the SWBBL is to provide the disadvantaged section of the rural poor
with easy access to credit, which will help them to uplift their socio-economic status and make
the full use of their existing skills and resources. The specific objectives include:

 Providing credit support to low income people for promoting various income raising
activities by mobilizing local capital, indigenous skills and labor.
 Raising production and productivity of poor communities by utilizing their skills and
resources.
 Providing the poor people with capital to encourage them to undertake productive
enterprises.
 Mobilizing rural savings and strengthening credit delivery system to help increase
productive assets of the poor people.

3.Statement of the Problem

Financial performance analysis involves evaluating how well a company generates revenues and
manages its assets, liabilities, and overall profitability over a specific period. Key components of
financial performance analysis include examining the income statement to assess revenue
growth, gross profit margins, operating expenses, and net profit. The balance sheet is analyzed to
understand the company's liquidity position through current assets and liabilities, as well as its
leverage and financial stability through long-term debt and equity ratios. Cash flow analysis
focuses on the sources and uses of cash to evaluate the company's ability to meet its short-term
obligations and fund its operations. Comparative analysis against industry benchmarks and
historical data helps identify trends and potential areas for improvement or concern. Effective
financial performance analysis provides stakeholders, including investors, lenders, and
management, with valuable insights to make informed decisions and drive strategic initiatives
aimed at enhancing profitability and sustainable growth.. The study has aimed to find out the
answers to following questions:

 Are the Return on Assets, Return on Equity, and Earnings Per Share of 2075/76 and
2079/80 significantly different from one another?

 In comparison to other years, how is the company's financial performance in 2079/80?

 How is the condition of loans and advance and deposit compared with previous years?

4.Objectives of the study

Objectives are the goal or outcome of that the study wants to achieve. The objectives are always
clear ,precise and easy to achieve. The objectives of the study are as follows:

 To review the company’s return on equity, return on assets and earnings per share

 To analyze the financial performance of the company

 To assess the company’s loan and advance and deposit condition

5.Rationale of the study

The study of financial performance analysis in microfinance institutions (MFIs) serves multiple
critical purposes in both academic research and practical application. Firstly, it provides valuable
insights into how effectively MFIs are fulfilling their social mission of financial inclusion and
poverty alleviation. By analyzing metrics such as profitability, operational efficiency, and
outreach, researchers and stakeholders can assess the impact of microfinance on the lives of low-
income individuals and communities. Secondly, financial performance analysis helps identify
risks inherent in microfinance operations, such as credit risk from lending to vulnerable
populations and operational risks associated with managing decentralized networks.

Understanding these risks allows for better risk management strategies to ensure the
sustainability and resilience of MFIs. Thirdly, policymakers and regulators rely on financial
analysis to design appropriate regulations and policies that foster a stable and inclusive
microfinance sector while protecting clients' interests. Moreover, investors and donors use
financial performance analysis to make informed decisions about funding MFIs, thereby
supporting their growth and enabling them to expand their services to more underserved
populations. Overall, studying the financial performance of MFIs contributes to advancing both
theoretical understanding and practical strategies for enhancing the impact, sustainability, and
outreach of microfinance initiatives worldwide.

This study covers the financial performance analysis of SWBBL. This study is useful for the companies to
identify the strength and weakness of the respective companies. The significance of the study are as
follow:

 It is important for the lenders ,creditors and customers of the bank.

 It is useful for the concerned company to formulate plans and policies on the basis of
study’s findings and recommendation.

 It is useful for companies to make investment and funding decisions.

 This study may serve as the guideline for future researchers and students.

6.Literature review
Literature review is the integral part of the research. In this, relevant literature on financial
performance analysis such as books , research studies , journals, articles and websites have been
reviewed. it is the search and evaluation of the available literature in the given subject or
topic.this is the most important part of this report which helps to find out the path of the research
work. It compromises the review of the books previous studies reviewed, article review and
review of policy documents.

Karki and Singh (2018) conducted a comprehensive analysis of the financial performance of
Swabalamban Laghubitta Bittiya Sanstha Ltd., examining various financial ratios such as
profitability, liquidity, and solvency over a five-year period. Their study highlighted the
institution's strong profitability ratios, indicating effective management and operational
efficiency. However, the authors pointed out challenges in liquidity management, which could
potentially hinder future growth. The study concluded with recommendations for improving
liquidity and risk management practices to sustain long-term growth.

Gurung and Sharma (2019) explored the role of Swabalamban Laghubitta Bittiya Sanstha Ltd. in
promoting rural development in Nepal. The study analyzed the financial performance of the
institution and its impact on the socio-economic status of its clients. The authors found that the
institution's strong financial performance enabled it to provide essential financial services to
underserved rural communities, leading to significant improvements in household income and
employment opportunities. The study emphasized the importance of maintaining financial health
to achieve sustainable rural development.

7.Research methodology

Research methodology refers to the different techniques and tools used to make study significant
and efficient. It includes research design, population and sample, nature and sources of data,
procedures and tools for data analysis.

7.1 Research design

It is the procedure that a researchers will follow in order to collect and examine data im order to
meet the study’s goals. It is on descriptive research design with secondary data which are
available through the annual report published by the concerned bank.

7.2 Nature and sources of data

The sources of data are the place or materials from which the data are found or extracted. There
are two sources of data .i.e. primary data and secondary data .the study is based on the secondary
sources of data . the necessary data are collected from the financial reports of SWBBL websites ,
reports, journals and articles.

7.3 Population and sample

There are 57 microfinance in Nepal which will be the population of the study. Swabalamban
laghubitta bittiya sanstha limited (SWBBL) is the sample of the study from 20 microfinance in
Nepal.

7.4 Methods for Data Analysis

For analysis of data following tools are used:

Financial tools

Financial tools encompass a broad spectrum of instruments and resources essential for analyzing,
managing, and optimizing financial activities across different sectors and purposes. These tools
are indispensable in both corporate finance and personal financial management, offering
capabilities that range from basic accounting and budgeting to advanced investment analysis and
risk management.

a) Earning per share (EPS)

b) Return on assets (ROA)
c) Return on equity (ROE)

Statistical tools

Statistical tools refer to a variety of methods, software, and techniques used to analyze and
interpret data in order to uncover patterns, relationships, and trends. These tools are fundamental
in both academic research and practical applications across various fields including business,
economics, social sciences, healthcare, and engineering.
 1. Mean
2. Standard deviation
3. Coefficient of variation (C.V)

8.Limitation of the Study

Every research study has its own limitations .some of the limitations of the study are;
1) This study used secondary data .so, validity of findings depend upon reliability of those
data.
2) This study is confined to only one organization i.e.SWBBL
3) Limited and certains data analysis tools are only used for study.
4) Time limitation during preparation of report
5) The study will only cover the period of 5 years i.e. ( 2018/19- 2022/23)

9.Organization of the Study

The report is divided into three main chapters .They are : introduction ,data presentation and
analysis and summary and conclusions.

Chapter I: Introduction
This chapter covers the study background , organization profile, objectives of study , rationale of
study, literature review, research methodology and limitation of study.

Chapter II: data presentation and Analysis

This chapter contains the main body of the study which is presentations of data in tables ,
figures, diagram etc , analysis of data and findings of data.

Chapter III: Summary and Conclusions

This is the last chapter of report which contains the thorough summary of the study and
conclusions of the major findings
10.References

Karki, M., & Singh, D. (2018). Financial Performance Analysis of Microfinance Institutions in
Nepal: A Case Study of Sabalamban Laghubitta Bittiya Sanstha Ltd. *International Journal of
Microfinance and Banking*, 7(2), 120-134.

Gurung, S., & Sharma, P. (2019). Impact of Microfinance on Rural Development: A Study of
Sabalamban Laghubitta Bittiya Sanstha Ltd. *Journal of Rural Development Studies*, 15(1), 85-
101.

https://www.swbbl.com.np/