Glossary of Terms - All Terms

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Acquired Immune Deficiency Syndrome - (AIDS ) Acquired Immune Deficiency Syndrome. A collection of specific illnesses and conditions which occur because the body's immune system has been damaged by HIV.

Active clients per staff member - The overall Productivity of the MFI's staff in terms of managing clients, including borrowers, voluntary savers and other clients.

Actuary - Someone professionally trained in the technical aspects of Insurance and related fields, particularly in the mathematics of Insurance (the calculation of premiums, reserves and other values). An Actuary uses complex mathematical methods, often with the aid of computers, to analyze past loss data and other statistics and develop systems for determining future premiums.

Adverse Selection - Tendency of persons with a higher-than-average chance of loss to seek Insurance at standard (average) rates, which, if not controlled by underwriting, results in higher-than-expected loss levels.

Aging summary of loans in arrears - Overview providing detailed information on the number of loans in arrears as well as the period they are overdue, i.e. it specifies the number of loans > 1 day in arrears, > 14 days in arrears, > 30 days in arrears, > 60 days in arrears and > 90 days in arrears. If analysed over time it can depict whether clients are facing more repayment problems.

AIDS - Acquired Immune Deficiency Syndrome

Antiretroviral Therapy - (ART) Treatment with drugs that inhibit the ability of retroviruses (such as HIV) to multiply in the body. The antiretroviral therapy recommended for HIV infection is referred to as highly active antiretroviral therapy (HAART), which uses a combination of medications to attack HIV at different points in its life cycle.

ART - Antiretroviral Therapy

Attendance rate group meetings - number of members attending group meeting / total number of group members.

Average outstanding loan size - Gives the average loan balance per borrower and is equal to gross loan portfolio / number of active borrowers with loans outstanding.

Average savings balance per saver - Savings / number of savers. (It might be good to check how many savings accounts are de facto dormant and to exclude them from analysis.)

BDS - Business Development Services

Beneficiary - The person or financial instrument (for example, a trust fund), named in the Policy as the recipient of Insurance money in the event of the occurrence of an Insured event.

Benefits - The amount payable by the Insurance company to a claimant, assignee or Beneficiary under each coverage.

Borrowers per loan officer - Measures the average caseload of each loan officer, as an indicator for productivity. It equals number of borrowers / number of loan officers.

Borrowers per staff member - The overall Productivity of MFIs staff in terms of its lending business. Borrowers per staff member equals number of borrowers / number of staff.

Broker - A sales and service representative who handles Insurance for clients, generally selling Insurance of various kinds and for several companies. Brokers resemble agents, except for the fact that, in a legal sense, brokers represent the party seeking Insurance rather than the Insurance company.

Capital Adequacy - Capital adequacy standards require MFIs to have both a minimum nominal amount of capital to provide for financial sustainability and an adequate amount of capital to cover the risk of losses. This is especially important for organisations collecting savings.

CD4-count - HIV weakens the body's defence system by attacking CD4 cells, which strengthen the immune system of the body. When a person's body has lost so many CD4 cells that it can no longer fight diseases, the person is said to have AIDS .

Claim - A request for payment of a loss that may come under the terms of an Insurance contract.

Claim turnaround time - Average days from the submission of an Insurance Claim to payment of that claim.

Claims ratio - A ratio indicating whether the claims are in line with expectation, i.e. as determined when calculating the risk premium. If actuarial analysis have been adequate the claims ratio should be around 100%. Definition = claims paid out during a period / risk Premium received for that period.

Claims rejection rate - Number of claims rejected in a period / total number of claims received during that period.

Co-payment - Mechanism, used by insurers to share risk with policyholders and reduce moral hazard, which establishes a formula for dividing the payment of losses between the Insurer and the policyholder. For example, a Co-payment arrangement might require a policyholder to pay 30% of all losses while the Insurer covers the remainder.

Cost per active client - Indicator for efficiency measuring the costs of maintaining an active client (saver, borrower, Insurance client etc). Cost per active client is equal to operating expenses / average number of active clients.

Cost per borrower - Indicator for efficiency, equalling operating expenses / average number of borrowers.

Cost per saver - Indicator for efficiency, equalling operating expenses / average number of savers.

Covariant risk - A risk, or combination of risks, that affects a large number of the Insured items/people at the same, for example an earthquake, or a major flood.

Coverage - The scope of protection provided under a contract of insurance, and any of several risks covered by a policy.

Credibility theory - A branch of actuarial science that tests the validity of data.

Credit Life Insurance - Insurance Coverage that repays the outstanding balance on loans in default due to death of the borrower. Occasionally, partial or complete Disability Coverage is also included.

Debt to Equity Ratio - Measures the overall leverage of an institution and how much cushion it has to absorb losses after liabilities are paid.

Deductible - Mechanism, used by insurers to share risk with policyholders and reduce moral hazard, which establishes an amount or percentage, which a policyholder agrees to pay, per claim, or Insured event, toward the total amount of an Insured loss.

Disability - Physical or mental condition that prevents a person from performing one or more occupational duties temporarily (short-term), permanently (long-term), and / or totally (total disability).

Disability Benefit - A feature added to some life Insurance policies providing for waiver of premium, and sometimes payment of monthly or lump sum income, if the policyholder becomes temporarily, totally and / or permanently disabled.

Drop-out - A client not returning to the MFI within a standard period of time. It includes voluntary and forced dropout, i.e. clients that choose to leave versus clients that are expelled due to e.g. bad repayment behaviour.

Drop-out rate - Measures the proportion of clients not continuing to access services during the period. Different formulas are used. Two examples are the SEEP formula = (Active Clients at the beginning of the period + new clients - Active Clients at the end of the period) / Active Clients at the beginning of the period. The CGAP formula = 1 - (Number of Repeat Loans during period / Number of Repaid Loans during period). It is important to have one similar time horizon to allow for comparisons across time.

Drop-out rate adjusted for resting - The Drop-out rates can be adjusted for clients resting. The formulas are then: (Active Clients at the beginning of the period + New Clients + Number of Repeat Clients that returned after resting to the program - Active Clients at the end of the period) / Active Clients at the beginning of the period. The CGAP formula = 1 - (Number of Repeat Loans within x days since last repayment during analysed period / Number of Repaid Loans during period).

EB - Employee Benefits

ELISA test - This test is usually the first one used to detect infection with HIV. If antibodies to HIV are present (positive), the test is usually repeated to confirm the diagnosis. If ELISA is negative, other tests are not usually needed. This test has a low chance of having a false result after the first few weeks that a person is infected.

ELISA test - Enzyme-Linked Immunosorbent Assay test

Exclusions (or exceptions) - Specific conditions or circumstances listed in the Policy for which the Policy will not provide benefit payments.

Experience - The record of claims made or paid within a specified time period.

Experience Rating - The process of determining the Premium rate for a group risk, wholly or partially on the basis of that group's experience.

Experience Refund - Amount returned by an Insurer to a group policyholder when the financial Experience of a particular group (or class to which the group belongs) has been more favourable than anticipated

Fraud - Intentional perversion of truth in order to induce another to pART with something of value.

HAART - Highly Active Antiretroviral Therapy, a term used to describe anti-HIV combination therapy with three or more drugs.

Health Insurance - Coverage that provides Benefits as a result of sickness or injury. Policies include Insurance for losses from accident, medical expense, disability, or accidental death and dismemberment.

HIV - Human immunodeficiency virus, the virus that causes AIDS . There are two variants: HIV negative1, and HIV negative2. HIV negative1 is by far the most common worldwide.

HIV - Human Immunodeficiency Virus

HIV+ - HIV Positive

Incidence - The number of new cases of a diseases or condition in a specific population over a given period of time. The Incidence rate is determined by dividing the number of new cases by the susceptible population.

Insurance - A risk management system under which individuals, businesses, and other organizations or entities, in exchange for payment of a sum of money (a premium), offers an opportunity to share the risk of possible financial loss through guaranteed compensation for losses resulting from certain perils under specified conditions.

Insured - The policyholder - the individual(s), businesses, other organizations or entities protected by an Insurance Policy in case of a loss or claim.

Insurer - The party to the Insurance contract who promises to pay losses or benefits.

KAP - Knowledge Attitude Practice (or Perception)

Lapse - The termination or discontinuance of an Insurance Policy measured by non-payment of a premium. Causes can be too late payment of premium, dissatisfaction with product, product no longer relevant, and death.

Lapse Rate - The percentage of policyholders ending their insurance. Lapse rate = Policyholders whose Insurance lapsed during period of time / Average number of policyholders during period. For comparisons over time it is important to take the same time period.

Law of Large Numbers - Concept that the greater the number of exposures (for example, lives insured), the more closely will actual results approach the results expected from an infinite number of exposures. Thus, the larger the number of people in the Insured risk pool, the more stable the likely results of risk event occurrences.

Liquidity - The availability of sufficient funds to meet deposit withdrawals and other financial commitments as they fall due.

Loan Loss Ratio - The loan loss ratio provides an indication of the volume of loan losses in a period relative to the average portfolio outstanding. The loan loss ratio reflects only the amounts written off in a period. Loan Loss Ratio = Amount written off during a period / 1/2 (portfolio outstanding at the beginning of the period + portfolio outstanding at the end of the period).

MFI - Micro Finance Institution

MIS - Management Information System

Moral Hazard - Hazard arising from any non-physical, personal characteristic of a risk that increases the possibility of loss or may intensify the severity of loss for instance bad habits or low integrity. An example might include failing to properly care for an Insured goat because it is insured, thereby increasing the chance it will die of disease.

Morbidity - Sickness; the state of being affected by disease.

Mortality - Death. The Mortality rate is the rate of death in a given population.

NGO - Non Governmental Organisation

Operating Expense Ratio - Highlights personnel and administrative expenses relative to the loan portfolio. It is the most commonly used efficiency indicator, which is defined by operating expenses during the period / average gross loan portfolio.

Operational Self Sufficiency - A ratio measuring how well an MFI can cover its costs through operating revenues. Operational self-sufficiency = Financial Revenue / (Financial Expense + Net Loan Loss Provision Expense + Operating Expense).

Outsourcing - The practice of subcontracting work to outside individuals or firms. Many Insurance activities are effectively and efficiently outsourced, such as sales and service, actuarial evaluation, and even some risk (to reinsurance).

PAR - Portfolio at Risk

PEP - Post Exposure Prophylaxis

PLWHA - People Living With HIV and AIDS

PMTCT - Prevention of Mother to Child Transmission

Policy - The printed document issued to the policyholder by the company stating the terms and conditions of the Insurance contract.

Policy Term - The period for which an Insurance Policy provides coverage.

Portfolio at Risk - The principal balance of loans outstanding that have one or more instalments of principal past due by one or more days as indication for quality of the portfolio. Definition = outstanding balance loans > 1 day overdue / gross loan portfolio. The PAR can also be determined for loans > 30 days overdue.

Portfolio to assets - An indicator measuring the MFI's allocation of assets to its lending activity. It indicates management's ability to allocate resources to the MFI's primary and most profitable activity - making microloans. It is equal to the gross loan portfolio / assets.

Post-Exposure Prophylaxis - (PEP) Administration of anti-HIV drugs within 72 hours of a high-risk exposure, including unprotected sex, needle sharing, or occupational needle stick injury, to help prevent development of HIV infection

Premium - The sum paid by a policyholder to keep an Insurance Policy in force. The Premium = risk Premium + operational costs + profit margin or surplus + investment income.

Prevalence - (Prevalence Rate) The number of individuals with a condition in a specific population. The Prevalence rate is determined by dividing the number of people with the condition by the total population.

Productivity - The amount of output produced per staff member. Indicators include: active clients per staff member, borrowers per loan officer, borrowers per staff member and savers per staff member.

Prophylaxis - Taking a drug to prevent an illness. Primary Prophylaxis is the use of drugs to prevent a first occurrence of illness. Secondary Prophylaxis is the use of drugs to prevent re-occurrence of illness.

Reinsurance - A form of Insurance that Insurance companies buy for their own protection. One or more Insurance companies assumes all or pART of a risk undertaken by another Insurance company.

Resting Period - Period between repayment of loan and disbursement of subsequent loan.

Retention rate - Percentage of clients that have maintained their relationship with the MFI during the period. It is a measurement of client satisfaction and relevancy of services. It is equal to 100% - Drop-out rate.

Risk Appetite - The level of risk that an MFI is willing to accept in pursuit of value and its mission.

Risk Control - A technique or strategy to reduce risks.

Risk Function - The risk function within the MFI is responsible for identifying, assessing and monitoring risk within the MFI, and for determining appropriate risk controls as well as the roles and responsibilities required in the business units to implement risk management.

Risk Management - Systematic process for the identification and evaluation of pure loss exposures faced by an organization or individual, and for the selection and implementation of the most appropriate techniques and strategies for treating such exposures.

Risk Pooling - Spreading of losses incurred by a few over a larger group, so that in the process, each individual group members' losses are limited to the average loss (Premium payments) rather than the potentially larger actual loss that might be sustained by an individual. Risk pooling effectively disperses losses incurred by a few over a larger group.

Risk Premium - The portion of the Premium that is used to fund claims and is equal to the expected claims.

Risk Tolerance - The acceptable levels of variation relative to the achievement of objectives, and are often best measured in the same units as the related objectives.

Savers per Staff Member - Number of savers / number of staff.

Screening (or Underwriting) - The process by which Insurance applicants are filtered, also known as underwriting. For example, applicants may be required to sign a declaration of health asserting their good health. High-risk individuals may be excluded or charged more.

Settlement - Payment of the Benefits specified in an Insurance policy.

Solvency - The availability of cash over longer term to meet financial commitments as they fall due.

STD - Sexually Transmitted Disease

TB - Tuberculosis

Term Insurance - A plan of Insurance that covers the Insured for only a certain period of time (term), not for his or her entire life. The Policy pays death Benefits only if the Insured dies during the term.

Underwriting (or Screening) - Process of selecting risks for Insurance and determining in what amounts and on what terms the Insurance company will accept the risk.

VCT - Voluntary Counselling and Testing

Viral Load - A group of tests that measure the amount of HIV in the blood. The two most commonly used viral load methods are PCR and bDNA.

Waiting Period - The length of time an Insurance client must wait before their Insurance becomes effective.

Write-off Ratio - The percentage of the MFI's loans that has been removed from the balance of the gross loan portfolio because they are unlikely to be repaid. Definition Write-off Ratio = Value of Loans Written Off / Average Gross Loan Portfolio.