WORKING CAPITAL ANALYSIS OF CHHIMEK LAGHUBITTA

BITTIYA SANSTHA LIMITED

A Project Work Report

By
Nishan Khadka
Prithvi Narayan Campus
TU Reg. No.:7-2-927-337-2021
Campus Roll No: 2308/078
Exam Symbol No.: 700480182

Submitted to

The Faculty of Management

Tribhuvan University
Kathmandu

In Partial Fulfillment of the Requirements for the Degree of

BACHELOR OF BUSINESS STUDIES (BBS)

Pokhara, Nepal
July, 2026
 DECLARATION

I hereby declare that the project work entitled “WORKING CAPITAL ANALYSIS OF
CHHIMEK LAGHUBITTA BITTIYA SANSTHA LIMITED” submitted to the Faculty
of Management, Tribhuvan University, Kathmandu is an original piece of work under the
supervision of Mr. Resham Raj Sharma, faculty member, Prithvi Narayan Campus, Pokhara
and is submitted in partial fulfilment of the requirements for the Degree of Business Studies
(BBS). This project work report has not been submitted to any other university or institution
for the award of any degree or diploma.

……………………….

Nishan Khadka

Date: July, 2026

 SUPERVISOR’S RECOMMENDATION

The project work report entitled “WORKING CAPITAL ANALYSIS OF CHHIMEK

LAGHUBITTA BITTIYA SANSTHA LIMITED” submitted by Nishan Khadka of
Prithvi Narayan Campus, Pokhara is prepared under my supervision as per the procedure
and format requirements laid by the Faculty of Management, Tribhuvan University, as
partial fulfillment of the requirements for the degree of Bachelor of Business Studies
(BBS). I, therefore, recommend the project work report for evaluation.

………………………………

Mr. Resham Raj Sharma

Supervisor

Date: July, 2026

3
 ENDORSEMENT

We hereby endorse the project work report entitled “WORKING CAPITAL

ANALYSIS OF CHHIMEK LAGHUBITTA BITTIYA SANSTHA LIMITED”
submitted by Nishan Khadka of Prithvi Narayan Campus, Pokhara in partial fulfillment
of the requirements for the degree of the Bachelor of Business Studies (BBS) for external
evaluation.

……………………………………. ………………………………….
Associate Prof. Ram Bahadur Thapa Prof. Dr. Hari Prasad Pathak
Chairman, Research Committee Campus Chief
Date: July, 2026 Date: July, 2026

4
 ACKNOWLEDGEMENTS

This is an attempt to present project entitled “WORKING CAPITAL ANALYSIS OF

CHHIMEK LAGHUBITTA BITTIYA SANSTHA LIMITED” prepared for the
partial fulfillment of the requirement for the Degree of Bachelor of Business Studies
(BBS) is an outcome of continuous and immeasurable co-operation and support of
several hands.

I would like to express my heartfelt Gratitude to all for their support. I would like to
extend my sincere thanks to all of them who provided me with information which is vital
to make this report. I would like to extend my gratitude and thanks to Tribhuvan
University for giving me an opportunity to prepare this report, which helped me to
acquire a lot of knowledge on the particular topic.

I extend my deep sense of indebtedness to my academic Supervisor, Mr. Resham Raj

Sharma, for his precious guideline and suggestion thoroughly during the period of this
research. I acknowledge my profound gratitude to the personnel of industry from which I
have been able to receive the data for the cooperation shown and providing necessary
data. Lastly, I would like to thank all those who were involved directly or indirectly, who
helped me in bringing up the project.

Nishan Khadka
Prithvi Narayan Campus
BBS 4th year

5
 TABLE OF CONTENTS

Title...........................................................................................................................................................
Declaration..............................................................................................................................................
Supervisor’s Recommendation...............................................................................................................
Endorsement...........................................................................................................................................
Acknowledgements...................................................................................................................................
Table of Contents....................................................................................................................................
List of Tables.........................................................................................................................................
List of Figures......................................................................................................................................
Abbreviations..........................................................................................................................................
CHAPTER I: INTRODUCTION.........................................................................................................
Background of the Study...........................................................................................................
Profile of Company...................................................................................................................
Objectives of the study..............................................................................................................
Rationale of the study...............................................................................................................
Review of Literature.................................................................................................................
Methods of the Study..............................................................................................................
Limitations of the study..........................................................................................................
CHAPTER II: RESULTS AND ANALYSIS....................................................................................
Data Presentation and Analysis...............................................................................................
CHAPTER III: SUMMARY AND CONCLUSION.........................................................................
Summary.................................................................................................................................
Conclusion..............................................................................................................................
REFERENCES.………………………………………………………………………………....29
APPENDICE – I...................................................................................................................................
Balance Sheet of CLBSL...................................................................................................................
APPENDICE – II.................................................................................................................................

6
 LIST OF TABLES
Table Page
No:
Table 1: Share Composition 2

Table 2: Board of Directors 2

Table 3: Comparison of Balance Sheet 13

Table 4: Comparison of Net Working Capital 15

Table 5: Comparative Profit and Loss Account 16

Table 6: Increment in Net Profit 17

Table 7: Return on Assets (ROA) 19

Table 8: Return on Equity (ROE) 20

Table 9: Net Interest Income to Total Assets 21

Table 10: Staff Expenses to Net Profit 23

Table 11: Earnings Per Share (EPS) 25

7
 LIST OF FIGURES
S. N Page No:

Figure 1: Total Assets 14

Figure 2: Net Working Capital 15

Figure 3: Comparative Net Profit after Tax 18

Figure 4: Return on Assets (ROA) 19

Figure 5: Return on Equity (ROE) 20

Figure 6: Trend line showing Return on Equity 21

Figure 7: Net Interest Earned to Total Assets 22

Figure 8: Trend showing Net Interest Earned to Total Assets 22

Figure 9: Graph showing Staff Expenses to Net Profit 24

Figure 10: Trend Line showing Staff expense to Net Profit 24

Figure 11: Bar Graph showing Earning per share 26

8
 ABBREVIATIONS

BBS Bachelor of Business Studies

CLBSL Chhimek Laghubitta Bittiya Sanstha Limited

EAT Earning after Tax

EPS Earnings Per Share

FY Fiscal Year

NPR Nepalese Rupee

NPAT Net Profit after Tax

ROA Return on Assets

ROE Return on Equity

9
 CHAPTER I: INTRODUCTION

1.1 Background

Working capital, also known as net working capital, is the difference between a
company’s current assets—like cash, accounts receivable/customers’ unpaid bills, and
inventories of raw materials and finished goods—and its current liabilities, such as
accounts payable and debts. It's a commonly used measurement to gauge the short-term
financial health and efficiency of an organization.

Working capital is calculated from the assets and liabilities on a corporate balance sheet,
focusing on immediate debts and the most liquid assets. Calculating working capital
provides insight into a company's short-term liquidity and efficiency. A company with
positive working capital generally has the potential to invest in growth and expansion.
But if current assets do not exceed current liabilities, the company has negative working
capital, and may face difficulties in growth, paying back creditors, or even avoiding
bankruptcy. The amount of working capital needed varies by industry, company size, and
risk profile. Industries with longer production cycles require higher working capital due
to slower inventory turnover. Alternatively, bigger retail companies interacting with
numerous customers daily can generate short-term funds quickly and often need lower
working capital.

Microfinance is the provision of financial services to low-income individuals, small

entrepreneurs, and economically disadvantaged groups who typically lack access to
traditional banking services. These services enable people to engage in productive
economic activities, improve their livelihoods, and promote financial inclusion.

In Nepal, microfinance institutions play a significant role in expanding financial access,

particularly in rural and remote regions. They provide loans for agriculture, livestock
farming, small businesses, cottage industries, and other income-generating activities.
Under the regulation of the Nepal Rastra Bank (NRB), microfinance institutions
contribute to poverty reduction, women's empowerment, financial inclusion, and rural
economic development.

Microfinance is an important tool for promoting inclusive economic growth by providing

financial services to people who are excluded from the formal banking system. Although
it has some limitations, effective regulation, responsible lending, and financial literacy
 2

can enhance its contribution to poverty alleviation and sustainable economic

development.

1.2 Profile of Organization

Chhimek Laghubitta Bittiya Sanstha Limited (CLBSL) is a micro-finance incorporated

in December 2001 and obtained banking license from Nepal Rastra Bank in January
2002. The overarching aim is to improve access to financial services of the poor and
marginalized women members. It strives to promote a culture of saving, encourages
income generation, supports micro-enterprises development and provides social security
services to its member.

The micro-finance has a network of 7 Provincial (Regional) offices and 197 branches
across the country and 1 Head office in Baneshwor, Kathmandu and offers a wide range
of products in lending and deposits.

The Authorized share capital of the company is NPR 3,750,000,000.00 (37,500,000

shares of NPR 100.00 each) and Issued Capital is NPR 3,215,345,868.00 (32,153,458
shares of NPR 100.00 each). The Paid-up share capital is NPR 3,215,345,868.00
(32,153,458 shares of NPR 100.00 each) as on Ashadh end 2082. Shareholding of
Promoters is 51% amounting to NPR 1,639,826,393 with number of shares amounting to
16,398,264 whereas shareholding of public is 49% amounting to NPR 1,575,519,475
with number of shares amounting to 15,755,194.

1.3 Objectives of the Study

The general objective of the study is to analyze the working capital of Chhimek
Laghubitta Bittiya Sanstha Limited and the performance and growth of the institution.

The specific objectives of the study are:

i. To measure the total assets of the microfinance.

ii. To measure the working capital of the microfinance.
iii. To study the profitability and return ratios of microfinance.
iv. To study the existing financial position of Company.
v. To identify the strength and weakness of Company.
 3

1.4 Rationale of the Study

Working capital management is one of the most important aspects of financial

management, as it ensures that an organization has sufficient short-term assets to meet its
short-term obligations while maintaining smooth day-to-day operations. For
microfinance institutions such as Chhimek Laghubitta Bittiya Sanstha Limited, effective
working capital management is essential because they rely heavily on the efficient
management of cash, loans, deposits, and other current assets and liabilities to provide
uninterrupted financial services to low-income households.

The financial sustainability and operational efficiency of a microfinance institution

depend largely on how effectively it manages its working capital. Inadequate working
capital may lead to liquidity problems, whereas excessive working capital may indicate
inefficient utilization of resources. Therefore, analyzing the working capital position of
Chhimek Laghubitta helps assess its liquidity, operational efficiency, and ability to meet
short-term financial obligations.

Furthermore, the Nepalese microfinance sector has experienced significant growth and
increasing regulatory requirements in recent years. In this context, evaluating the
working capital performance of Chhimek Laghubitta provides valuable insights into its
financial health and the effectiveness of its management practices. The findings of this
study will be useful to management, investors, regulators, researchers, and other
stakeholders in understanding the institution's short-term financial performance and
identifying areas for improvement.

Hence, this study is undertaken to analyze the working capital position of Chhimek
Laghubitta Bittiya Sanstha Limited, evaluate its liquidity and operational efficiency
using relevant financial ratios, and provide recommendations for improving its working
capital management.

1.5 Review of Literature

A review of literature is a systematic and critical examination of existing books, research

articles, journals, reports, theses, and other scholarly sources related to a specific
research topic. It helps researchers understand what has already been studied, identify
research gaps, and establish a theoretical and empirical foundation for their own study. It
can be further divided into two parts:
 4

1.5.1 Conceptual Review

Working capital has long been recognized as one of the fundamental concepts in
financial management because it determines an organization's ability to conduct its daily
operations while maintaining adequate liquidity. According to Gitman (2009), working
capital refers to a firm's investment in current assets, including cash, marketable
securities, accounts receivable, and inventories. In contrast, Pandey (2015) defines
working capital as the excess of current assets over current liabilities, commonly referred
to as net working capital. This definition emphasizes the firm's capacity to meet its short-
term obligations from its short-term resources. Brigham and Houston (2019) also argue
that efficient management of current assets and current liabilities is essential for
maintaining operational continuity and achieving financial stability.

The concept of working capital extends beyond the mere difference between current
assets and current liabilities. Smith (1980) argued that working capital management
involves balancing liquidity and profitability, two objectives that often conflict with each
other. Maintaining a high level of current assets improves liquidity and reduces the risk
of financial distress, but it also increases the opportunity cost of idle resources, thereby
reducing profitability. Conversely, maintaining too little working capital may improve
returns but exposes the firm to liquidity risk and operational interruptions. Therefore,
financial managers are expected to determine the optimum level of working capital that
maximizes shareholders' wealth while ensuring uninterrupted operations.

Working capital management refers to the planning and control of current assets and
current liabilities in such a way that the firm maintains sufficient liquidity without
sacrificing profitability. According to Van Horne and Wachowicz (2008), the primary
objective of working capital management is to ensure that the firm possesses adequate
cash to meet its operational requirements and short-term obligations while minimizing
the cost of maintaining current assets. Ross, Westerfield, and Jordan (2019) similarly
state that effective working capital management enables firms to improve cash flow,
reduce financing costs, and enhance operational efficiency through the proper
management of receivables, inventories, cash, and short-term liabilities.

The relationship between working capital management and financial performance has
attracted considerable attention in financial literature. Deloof (2003) found that firms can
improve profitability by efficiently managing the components of working capital,
 5

particularly accounts receivable, inventories, and accounts payable. Likewise, Singh,

Kumar, and Colombage (2017), through a meta-analysis of 46 empirical studies,
concluded that efficient working capital management is significantly associated with
improved profitability and operational performance. Their findings suggest that firms
maintaining an optimal level of working capital generally achieve better financial
outcomes than those with either excessive or insufficient working capital.

Working capital is commonly classified into gross working capital and net working
capital. Gross working capital represents the firm's total investment in current assets,
whereas net working capital is the difference between current assets and current
liabilities. Pandey (2015) notes that gross working capital emphasizes the investment
aspect of current assets, while net working capital reflects the firm's liquidity position.
Both concepts are important because they provide different perspectives for evaluating
short-term financial strength and operational efficiency.

1.5.2 Review of Previous Works

Working capital management is the key area of financial management and plays an
important role in any industry. Few researchers have conducted research on the subject
and its various components.

Smith Keith V. (1973) believes that research which concerns shorter range or working
capital decision making would appear to have been less productive. The inability of
financial managers to plan and control properly the current assets and current liabilities
of their respective firms have been the probable cause of business failure in recent years.
Current assets collectively represent the single largest investment for many firms, while
current liabilities account for a major part of total financing in many instances. This
paper covers eight distinct approaches to working capital management. The first three –
aggregate guidelines, constraints set and cost balancing are partial models; two other
approaches – probability models and portfolio theory, emphasize future uncertainty and
interdependencies while the remaining three approaches -mathematical programming,
multiple goals and financial simulation have a wider systematic focus.

1.5.3 Research Gap

Working capital is important for businesses to keep them from going bankrupt. Even a
company that is making money can go out of business if it does not have enough cash to
 6

cover its expenses. For example, if a company has one million rupees in cash from
retained earnings and uses all of it at once, it may not have enough short-term assets to
pay its short-term debts. Profitability is essential for every business to survive and grow.
For the banking industry as well, it's very important because the survival and growth of
microfinance rely on profitability, and the overall health of the economy is closely
connected to how well microfinance performs. There are various reasons, both inside and
outside the organization, that can influence how much profit a microfinance institution
makes.

Given that our environment is dynamic and ever evolving, the data utilized in the
analysis and thus the outcomes of studies vary considerably. Nonetheless, various
researchers have recognized that certain shared factors affect the profitability of
microfinance. Summarizing findings from multiple studies, increased size, quality assets,
a higher equity capital ratio to assets, and stronger GDP growth have typically been
linked to enhanced profitability. Different cost metrics are typically inversely related to
profits. Increased loan loss reserves, heightened liquidity, and greater dependence on
debt have signaled reduced bank profitability.

In this research various ratios are systematically analyzed and generalized for the latest
data. The ratios are categorized according to nature and area. This study tries to show
depth analysis of profitability by applying and analyzing various statistical and financial
tools.

1.5.4 Financial tools

Financial statements are prepared to have complete information regarding assets, liabilities,

equity, reserves, expenses and profit and loss of an enterprise. Along with the statistical
tools, financial tool like ratio analysis is used in this study. This research includes ratio
analysis as financial tools to measure profitability position by comparing key financial
information obtained from annual report of microfinance. For evaluating the
performance of Chhimek Laghubitta Bittiya Sanstha Limited based on past five years,
the above statistical tools have been applied to these ratios. All the ratios are calculated
in term of percentage and rupees in lakh. The period of reference is 2077/78 to 2081/82.
It contains following ratio analysis tools:

i. Quick Ratio
 7

ii. Return on Total Assets

iii. Acid-Test Ratio
iv. Return on Total Equity Capital
v. Earnings per share
vi. Staff Expenses to Net Income
vii. Interest Income to Total Loan and Advance
viii. Cash Ratio
 8

1.6 Methods of the Study

Research is a careful study of given subject, field or problem undertaken to discover
facts or principle by using various research methodology. Every study should use certain
methodology while collecting data, thus this study also has certain methodology, which
are as follows:

Research Design

Research design is detailed outline of how data is to be collected, which instruments are
employed, how the instruments are used and the deliberate means for examining data
collected. The type of data to be collected and the procedure to be used for this purpose
were decided through this study. Hence research design is the specific method and
procedure, which guides the study and yields ways for doing research. Thus, descriptive
and analytical research will be done so as to maximize reliability of data collected and
minimize biasness of data. This research has got a very precise and definite data
requirement. The research is based on facts and information already available through
financial statement of past five years and these facts and information has to be analyzed
to evaluate them. The data used for this research is of secondary type.

Nature and Source of Data

The data presented for this study are of secondary nature. Secondary data are collected
from annual statement report of Chhimek Laghubitta Bittiya Sanstha Limited of past five
years. Besides annual report, various other sources of data are used for this study such as
website of Chhimek Laghubitta Bittiya Sanstha, different information provided by
Microfinance and various publications dealing with subject matter of study.

Population and Sample

This research aims at analyzing the working capital of Chhimek Laghubitta Bittiya
Sanstha Limited and knowing its ability to generate wealth from the use of the given
resources in the given period of time. Thus, for the study the target population would be
all the microfinances which are under operation in the country but only one microfinance
i.e. Chhimek Laghubitta Bittiya Sanstha Limited has been considered as a sample unit.
Further, only the data covering financial years from 2077/78 to 2081/82 has been taken
into consideration instead of the whole data since its inception.

Data Processing Techniques

 9

Analysis of data is most important part of research. To meet objective of study, various
statistical and financial tools are used to analyze the collected data effectively and
measure different phenomena.

Statistical Tools

Statistical method is the mathematical procedure that helps to analyze and interpret
numerical data secured from groups of individuals or groups of observations from a
single individual. The various statistical tools used in this study to analyze the collected
data are as follows:

ix. Mean
It refers to the average that is used to derive the central tendency of the data in
question. It is determined by adding all the data points in a population and then
dividing by total number of points.

x. Standard Deviation
Standard deviation is a statistical tool used as a measure of the dispersion in a
distribution, equal to the square root of the arithmetic mean of the squares of the
deviations from the arithmetic mean.
It can be calculated as:

S.D. =

xi. Coefficient of variation

It is a standardized measure of dispersion of a profitability distribution. It is often
expressed as a percentage, and is defined as the ratio of the standard deviation to
the mean.

S.D.
C.V. =
Mean(
X)
 10

1.7 Limitations of the study

The findings of the study are subject to various limitations and may not be applicable in
areas other than specified. Despite the effort to collect all the information data for overall
analysis of organization and system, there are still some limitations of the study because
of various reasons and they are as follows:

i. The data used for the study will be historical and it will cover the period of recent
five years.
ii. The concentration of the study will be on statistical, accounting and financial
perspectives.
iii. The truth of the study will be based upon the available data from the company in
the form of annual reports, brochures, and information received with the related
personnel of the company.
iv. The accuracy and correctness of ratio depend upon the reliability of data.
 CHAPTER II: RESULTS AND ANALYSIS

This chapter is the main volume of the report. The data collected are analyzed, tabulated
and presented to draw findings and reach conclusion. This chapter is concerned with
presentation and analysis of the data collected for the overall study of financial results of
CLBSL.

2.1 Data Presentation and Analysis

2.1.1 Comparison of balance sheet

Following table and diagram shows the balance sheet of Chhimek Laghubitta Bittiya
Sanstha Limited for the past five years:

Table 2.1:
Comparison of Balance Sheet (NPR in
thousand)
Particulars 2077/78 2078/79 2079/80 2080/81 2081/82
Assets
Cash and Cash Equivalents 8,021,623 3,005,371 7,725,529 8,366,207 8,540,555
Statutory Balances & Due from 594,518 618,115 956,487 736,453 915,488
Nepal Rastra Bank
Loans and Advances to
24,888,658 33,074,021 32,247,519 35,151,705 40,072,173
Customers
Investment Securities 359,403 481,672 532,341 795,286 686,757
Current Tax Assets 95,227 92,145 1,783
Property and Equipment 260,871 276,859 295,660 285,315 270,555
Goodwill and Intangible Assets 3,699 2,873 3,442 2,702 2,349
Deferred Tax Assets 21,176 29,636 19,233 35,417 59,643
Other Assets 136,808 672,120 859,685 771,959 945,664
Total Assets 34,286,756 38,255,894 42,732,041 46,146,827 51,493,184
Liabilities
Due to Nepal Rastra Bank - - - -
Deposits from Customers 22,439,376 27,019,462 30,716,613 33,727,306 39,428,776
Borrowings 6,217,521 4,773,127 4,553,899 4,301,709 3,023,697
Current Tax Liabilities 44,009 - - - 3,521
Provisions 22,635 61,319 37,282 40,428 40,428
Deferred Tax Liabilities - - - - -
Other Liabilities 492,102 588,378 677,382 733,363 714,633
Total Liabilities 29,215,643 32,442,286 35,985,176 38,802,806 43,211,055
Equity
Share Capital 1,830,000 2,324,100 2,835,402 2,977,172 3,215,346
Share Premium 40,968 40,968 40,968 40,968 40,968
Retained Earnings 1,223,998 1,206,402 1,374,377 1,642,829 2,055,738
Reserves 1,976,146 2,242,138 2,496,120 2,683,052 2,970,976
Total Equity 5,071,112 5,813,608 6,746,867 7,344,021 8,283,028
 12

Total Liabilities and Equity 34,286,755 38,255,894 42,732,043 46,146,827 51,494,083

Source: Annual Report of Chimmek Laghubitta Bittiya Sanstha Limited

The total assets of the microfinance can also be represented in graph. Figure 1 provides a
clear picture of the growth in the total assets of the microfinance:

Total Assets
60,000,000

50,000,000
Amount (NPR in thousand)

40,000,000

30,000,000

20,000,000

10,000,000

0
2077/78 2078/79 2079/80 2080/81 2081/82

Total Assets

Figure 1: Total Assets Source: Table

3

In Figure 1, Fiscal Year is represented in X-axis while Total Assets is represented in Y-

axis respectively.

We can observe that there has been a gradual increase in the total assets of Chhimek
Laghubitta Bittiya Sanstha Limited. The lowest figure of total assets of the microfinance
is in FY 2077/78 amounting to NPR 34,286,756 and the highest figure of total assets
observed is in FY 2081/82 amounting to NPR 51,493,184. There is an overall increase of
50% on the total assets of the microfinance over the last five years. This shows the level
of increase in productivity and performance that Chhimek Laghubitta Bittiya Sanstha
Limited has achieved over the past five years.
 13

Following table and diagram shows the comparison of Working capital of Chhimek
Laghubitta Bittiya Sanstha Limited for the past five years.

Table 1:
Comparison of Net Working Capital (Amount in thousand)NPR
Particulars 2077/78 2078/79 2079/80 2080/81 2081/82
Current Assets
Cash and Cash Equivalents 8,021,623 3,005,371 7,725,529 8,366,207 8,540,555
Statutory Balances & Due from
594,518 618,115 956,487 736,453 915,488
Nepal Rastra Bank
Loans and Advances to
24,888,658 33,074,021 32,247,519 35,151,705 40,072,173
Customers
Investment Securities 359,403 481,672 532,341 795,286 686,757
Current Tax Assets - 95,227 92,145 1,783 -
TOTAL CURRENT ASSETS
33,864,202 37,274,406 41,554,021 45,051,434 50,214,973
(A)
Current Liabilities
Due to Nepal Rastra Bank - - - - -
Deposits from Customers 22,439,376 27,019,462 30,716,613 33,727,306 39,428,776
Current Tax Liabilities 44,009 - - - 3,521
TOTAL CURRENT
22,483,385 27,019,462 30,716,613 33,727,306 39,432,297
LIABILITIES (B)
WORKING CAPITAL (A-B) 11,380,817 10,254,944 10,837,408 11,324,128 10,782,676
Source: Annual Report of Chimmek Laghubitta Bittiya Sanstha Limited

NET WORKING CAPITAL

11,600,000
11,400,000
Amount (NPR in thousand)

11,200,000
11,000,000
10,800,000
10,600,000
10,400,000
10,200,000
10,000,000
9,800,000
9,600,000
2077/78 2078/79 2079/80 2080/81 2081/82
Axis Title

NET WORKING CAPITAL

Figure 2: Net Working Capital Source: Table

4
 14

We can observe that the lowest working capital was in FY 2078/79 amounting Rs.
10,254,944 and the highest working capital was in FY 2077/78 amounting Rs.
11,380,817.

2.1.2 Comparison of profit and loss account

Net profit shows the bank’s performance in the ground of profitability. It shows how
effectively and efficiently microfinance is using its resources to generate the appropriate
returns. Thus, it is very important to take the account of net profits during the various
periods to know the growth trend of microfinance based on profit. Following table and
diagram shows the profit and loss account of Chhimek Laghubitta Bittiya Sanstha
Limited for the past five years:

Table 2:

Comparative Profit and Loss Account (Amount in Thousand) NPR

Particulars 2077/78 2078/79 2079/80 2080/81 2081/82
4,227,807 4,968,06 5,823,174 5,965,677 6,132,210
Interest Income 2
1,998,020 2,471,96 2,969,125 3,122,261 3,302,786
Interest Expense 9
2,229,787 2,496,09 2,854,049 2,843,416 2,829,424
Net Interest Income 4
Fee and Commission Income 530,952 266,845 186,296 244,397 336,800
Fee and Commission Expense 76 101 123 483 638
Net Fee and Commission 530,952 266,744 186,173 243,914 336,162
Income
Net Interest, Fee and 2,760,738 2,762,83 3,040,222 3,087,330 3,165,586
Commission Income 7
Other Operating Income 702 20,499 106 3,442 2,641
2,760,433 2,764,88 3,040,328 3,090,772 3,168,227
Total Operating Income 7
Impairment Charge/ (Reversal) (60,290) 216,831 405,243 416,272 99,882
for Loans and Other Losses
2,821,731 2,548,05 2,635,085 2,674,500 3,068,345
Net Operating Income 6
Operating Expense
Personal Expenses 828,447 910,617 940,411 1,086,351 1,111,472
Other Operating Expenses 122,407 144,408 182,288 187,460 190,620
Depreciation & Amortization 31,503 34,408 42,366 41,563 39,119
1,838,366 1,458,62 1,470,020 1,359,126 1,727,134
Operating Profit 4
Non-Operating Income 65,167 18,393 18,692 30,420 28,316
Non-Operating Expense - - - 2481 -
1,903,532 1,477,01 1,488,712 1,387,065 1,755,450
Profit Before Income Tax 6
Income Tax Expense
Current Tax 604,792 534,310 465,272 451,046 559001
 15

Deferred Tax (15,116) (4,516) (1,563) (8,397) (18,976)

Profit for the Year 1,313,856 947,222 1,025,003 944,416 1,215,425
Profit Attribute To:
Equity-holders of the Financial 1,313,856 947,222 1,025,003 944,416 1,215,425
Institution
Non-controlling Interest - - - - -
Profit for the Year 1,313,856 947,222 1,025,003 944,416 1,215,425
Source: Annual Report of Chimmek Laghubitta Bittiya Sanstha Limited
 16

Table 6:
Increment in Net profit

Particulars Net Profit after tax (NPAT) Increment (%)

FY 2077/78 1,313,856 -
FY 2078/79 947,222 (28%)
FY 2079/80 1,025,003 8%
FY 2080/81 944,416 (8%)
FY 2081/82 1,215,425 29%
Source: Annual Report of Chimmek Laghubitta Bittiya Sanstha Limited

Table 5 shows the increment of profit in comparison to its previous years. In FY

2078/79, there is a significant decrease in profit by 28% compared to FY 2077/78. This
shows the effect of second wave of lockdown due to the impact of COVID 19 on the
business in the year 2078/79. The businesses were not able to run during the pandemic,
and as a result could not repay the loan. The change in market sentiment and crises of the
post pandemic market condition have adversely affected the lower income group
significantly, which has caused them to default on payments, and the microfinance has
suffered losses due to it. The following two years, FY 2079/80 and FY 2080/81 show an
increment of 8% and decrease in profit 8% consecutively. It shows that microfinance and
the related market took about two years to recover from the strain caused by the
pandemic. In FY 2081/82, there is a significant increase in profit of 29%. This depicts
that microfinance has managed and utilized its resources properly and has started to
recover from the effects of post pandemic market downfall.

The same is represented by the following diagram:

 17

Net Profit
1,400,000

1,200,000

1,000,000

800,000

600,000

400,000

200,000

0
2077/78 2078/79 2079/80 2080/81 2081/82

Net Profit

Figure 3:Comparative Net Profit after tax Source:

Table 6

In Figure 3, Fiscal Year and net profit after tax have been measured in the X-axis and Y-
axis respectively.

2.1.3 Return on total assets

The ROA reflects the ability of a bank’s management to generate profits from the bank’s
assets. It shows the profits earned per assets. It also indicates how effectively the bank’s
assets are managed to generate revenues. Lower ROA means lower profit and higher
ROA means higher

profit.

Net Profit after Tax (NPAT)

Return on Assets (ROA) = Total Assets
 18

Table 7:
Return on Assets (ROA)
Particulars NPAT (NPR' in Total Assets (NPR' in Ratio
Thousand) Thousand) (%)
FY 1,313,856 34,286,756 3.83%
2077/78
FY 947,222 38,255,894 2.48%
2078/79
FY 1,025,003 42,732,041 2.40%
2079/80
FY 944,416 46,146,827 2.05%
2080/81
FY 1,215,425 51,493,184 2.36%
2081/82
Source: Annual Report of Chimmek Laghubitta Bittiya Sanstha Limited

Table 6 shows, Return on Assets (ROA) of the microfinance shows a fluctuating trend
over the last five years. Return on Assets (ROA) is lowest in the FY 2080/81 whereas it
is the highest in FY 2077/78. The same can be represented in the form of graph. Figure 3
provides the comparison of the Return on Assets over the past five years in the graph:
 19

Return on Assets
4.50%
4.00%
3.50%
3.00%
2.50%
2.00%
1.50%
1.00%
0.50%
0.00%
FY 2077/78 FY 2078/79 FY 2079/80 FY 2080/81 FY 2081/82

Return on Assets

Figure 4: Return on Assets (ROA) Source: Table 7

In Figure 4, FY and ROA are represented in X-axis and Y-axis respectively.

2.1.4 Return on equity capital

Return on Equity measures the ability of a firm to generate profits from its shareholder’s
investments in the company. The higher the rate of return, the more efficient the
management and utilization of Shareholder’s funds is. This ratio is calculated as follows:

Earnings after Tax (EAT) x100

ROE =
Shareholder’s Funds (SF)

Table 8:
Return on Equity (ROE)
Return on
Net Income (NPR' in Equity (NPR' in
Particulars Equity
Thousand) Thousand)

FY 1,313,856 5,071,112 25.91%

2077/78
FY 947,222 5,813,608 16.29%
 20

2078/79
FY 1,025,003 6,746,867 15.19%
2079/80
FY 944,416 7,344,021 12.86%
2080/81
FY 1,215,425 8,283,028 14.67%
2081/82
Source: Annual Report of Chimmek Laghubitta Bittiya Sanstha Limited

As per the above table, ROE is highest in the FY 2077/78 with a return of 25.91%. The
same can be shown through the below diagram:

Return on Equity
30.00%

25.00%

20.00%

15.00%

10.00%

5.00%

0.00%
FY 2077/78 FY 2078/79 FY 2079/80 FY 2080/81 FY 2081/82

Return on Equity

Figure 5: Return on Equity Source: Table

8
In Figure 5 and 6, FY and ROE are shown on X-axis and Y-axis respectively.
 21

Return on Equity
30.00%

25.00%

20.00%

15.00%

10.00%

5.00%

0.00%
FY 2077/78 FY 2078/79 FY 2079/80 FY 2080/81 FY 2081/82

Return on Equity

Figure 6: Trend line showing Return on Equity Source: Table 8

2.1.5 Net interest Earned to Total Assets Ratio

Net interest is the difference between interest income and interest expense. Total assets
comprise of all the financial and non-financial assets which are within the control of the
microfinance. The net interest earned to total assets gives the information about how
much interest has been earned by assets. It is calculated as follows:

Net Interest earned to Total Assets Interest Income x 100 Ratio =

Total Assets

Table 9:

Net Interest Income to Total Assets

(NPR' in Thousand)
Particulars Net Interest Income Total Assets Ratio (%)
FY 2077/78 2,229,787 34,286,756 6.50%

FY 2078/79 2,496,094 38,255,894 6.52%

FY 2079/80 2,854,049 42,732,041 6.68%

FY 2080/81 2,843,416 46,146,827 6.16%

FY 2081/82 2,829,424 51,493,184 5.49%

Source: Annual Report of Chimmek Laghubitta Bittiya Sanstha Limited

 22

From this, we can notice that there is a slight increase in the net interest earned to total
assets over the years till FY 2079/80. However, since FY 2080/81 the interest earned to
total assets has decreased slightly. The interest earned to total assets ratio is highest in
the FY 2079/80.

The bar diagram showing the Net Interest Earned to Total Assets is as follows:

Net interest earned to Total Assets

8.00%
7.00%
6.00%
5.00%
4.00%
3.00%
2.00%
1.00%
0.00%
FY 2077/78 FY 2078/79 FY 2079/80 FY 2080/81 FY 2081/82

Net interest earned to Total Assets

Figure 7: Net Interest Earned to Total Assets Source: Table

9
In Figure 7, FY and Net interest earned to total assets ratio are shown on X-axis and Y-
axis respectively.

Net interest earned to Total Assets

8.00%

7.00%

6.00%

5.00%

4.00%

3.00%

2.00%

1.00%

0.00%
FY 2077/78 FY 2078/79 FY 2079/80 FY 2080/81 FY 2081/82

Net interest earned to Total Assets

 23

Figure 8:Trend showing Net Interest Earned to Total Assets Source: Table
9

2.1.6 Staff expenses to net profit ratio

It is the ratio of the staff expenses to the net profit earned during the year. Staff expense
includes all the expenses related to employees with leave encashment and bonuses.

Staff expenses to Net profit ratio is calculated using following formula:

Staff Expense x 100

Staff Expense to Net Profit ratio =
Net Profit

Table 10:
Staff expenses to Net Profit
Particulars Staff Expenses (NPR) Net Profit (NPR) Staff Expense to Net Profit Ratio
(%)
FY 2077/78 828,447 1,313,856 63.05%
FY 2078/79 910,617 947,222 96.14%

FY 2079/80 940,411 1,025,003 91.75%

FY 2080/81 1,086,351 944,416 115.03%

FY 2081/82 1,111,472 1,215,425 91.45%

Source: Annual Report of Chimmek Laghubitta Bittiya Sanstha Limited

The staff expenses have remained the major portion of the revenue expenditure and it has
an inverse relationship with the net profit earned. From the Table 9, it is seen that the
profit is increasing although the staff expenses to net income ratio is high. The same is
shown in Figure 9 and Figure 10:
 24

Staff Expense to Net Profit Ratio (%)

140.00%

120.00%

100.00%

80.00%

60.00%

40.00%

20.00%

0.00%
FY 2077/78 FY 2078/79 FY 2079/80 FY 2080/81 FY 2081/82

Staff Expense to Net Profit Ratio (%)

Figure 9: Graph showing Staff Expenses to Net Profit Source: Table

10

In Figure 9 and 10, FY and Staff Expense to Net Profit Ratio% is shown in X-axis and
Y-axis respectively.

Staff Expense to Net Profit Ratio (%)

140.00%

120.00%

100.00%

80.00%

60.00%

40.00%

20.00%

0.00%
FY 2077/78 FY 2078/79 FY 2079/80 FY 2080/81 FY 2081/82

Staff Expense to Net Profit Ratio (%)

Figure 10: Trend line showing Staff expense to Net Profit Source: Table
10
 25

2.1.7 Earnings per share

It is the ratio of net profit after tax to the number of common shares. EPS measures the
profit available to equity shareholders on a per share basis, that is the amount that they
can get on every share held. It is calculated as:

Net Profit After Tax

EPS =
No. of common shares outstanding

Table 11:
Earnings Per Share (EPS)
Particulars NPAT (NPR) No. of common share EPS (NPR)
FY 2077/78 1,313,856 18,300,000 71.80

FY 2078/79 947,222 23,241,000 40.76

FY 2079/80 1,025,003 28,354,020 36.15

FY 2080/81 944,416 29,771,721 31.72

FY 2081/82 1,215,425 32,153,458 37.80

Source: Annual Report of Chimmek Laghubitta Bittiya Sanstha Limited

From Table 11, it can be concluded that the EPS of Chhimek Laghubitta Bittiya Sanstha
Limited is in decreasing trend except in the FY 2081/82 due to the impact of post
pandemic market condition as the earning per share has been decreased to 31.72 over the
period of 4 years. Moreover, the EPS in FY 2081/82 has been increased to 37.80.
 26

EPS (NPR)
80.00

70.00

60.00

50.00

40.00

30.00

20.00

10.00

-
FY 2077/78 FY 2078/79 FY 2079/80 FY 2080/81 FY 2081/82

EPS (NPR)

Figure 11: Bar Graph showing Earning Per Share Source: Table
11

In Figure 11, Fiscal Year is shown in X-axis while the Earning Per Share is shown in Y-
axis respectively.
 27

2.2 Major Findings of the Study

Chhimek Laghubitta Bittiya Sanstha Limited is one of the leading microfinances

established in Nepal with the objective to provide reliable and quality banking services to
the poor people. Due to its immense importance in contributing towards overall
development of the country, it is very important that it is functioning well and is of sound
health. Thus, this study is carried out to know the overall financial performance of
Chhimek Laghubitta Bittiya Sanstha Limited.

 There has been a gradual increase in the total assets of Chhimek Laghubitta
Bittiya Sanstha Limited. There has been an overall increase of 50% on the total
assets of the microfinance over the last five years. This shows the level of
increase in productivity and performance that Chhimek Laghubitta Bittiya
Sanstha Limited has achieved over the past five years.
 The net profit of CLBSL has fluctuated throughout the last 5 years due to the
post-COVID market recession and increase in provision due to overall rise in
defaults of borrowers throughout the market. The profit was lowest at NPR
944,416,000 on FY 2080/81, and it has the highest profit of NPR 1,313,855,775
on FY 2077/78. Overall, microfinance has persevered through the market
conditions and has now almost recovered its level of profit.
 The ROA of CLBSL was lowest in FY 2080/81 being 2.05%, compared to the
highest ROA in FY 2077/78 at 3.83%. The analysis indicates that microfinance is
efficiently using the resources in order to generate the profit.
 The ROE of CLBSL was lowest in FY 2080/81 being 12.86% compared to the
highest ROE in FY 2077/78 at 25.91%. The decrease in the ROE of the
microfinance is probably due to fall in performance of the microfinance.
 The EPS of the microfinance is decreasing over the period. The highest level of
EPS is NPR 71.80 in FY 2077/78, while the minimum level of EPS is NPR 31.72
in FY 2080/81. This indicates that microfinance has suffered decline throughout
the last 5 years.
 CHAPTER III: SUMMARY AND CONCLUSION

3.1 Summary

Microfinance plays an important role in fighting the multi-dimensional aspects of

poverty. Microfinance is an innovation for the developing countries. It provides self-
employment opportunity for poor people who are unemployed, entrepreneurs and
farmers who are not bankable because of the lack of collateral, very low level of income.
It has successfully enabled poor people to start their own business generating income and
often beginning to build up wealth. It has the capacity to enhance the socio-economic
development of the vulnerable and marginalized people, especially women.

Microfinance is a simple but effective credit tool that enables the poorest to pull
themselves out of poverty. It involves advancing small loans to the working poor.
Microfinance helps the working poor to establish or expand small businesses that
generate additional income for family use. This extra income allows a poor family to buy
food, access healthcare, educate their children, put aside savings and lay the foundation
for a better future. Microfinance is one of the best alternatives to generate self-
employment. It provides services to the communities who have no collateral to offer
against the loans they take but have indigenous skills and strong desire to undertake
economic activities for self-employment and income generation.

In this report, the general objective of

3.2 Conclusion

The report provides an overview of Chimmek Laghubitta Bittiya Sanstha Limited.

Chhimek Laghubitta Bittiya Sanstha Limited (CLBSL) is a micro-finance incorporated
in December 2001 and obtained banking license from Nepal Rastra Bank in January
2002. The overarching aim is to improve access to financial services of the poor and
marginalized women members. It strives to promote a culture of saving, encourages
income generation, supports micro-enterprises development and provides social security
services to its member.
 29

The findings of the report show that CLBSL has been suffering through a decline in its
performance due to the post-COVID market where number of market-wide loan
defaulters rose significantly. However, the data of FY 2081/82 shows that the
microfinance is recovering from such losses.
 30

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 32

APPENDICE – I

Balance Sheet of CLBSL

i. As on 32nd Ashadh 2082

 33

ii. As on 31st Ashadh 2081

 34

iii. As on 31st Ashadh 2080

 35

iv. As on 32nd Ashadh 2079

 36

v. As on 32nd Ashadh 2078

 37

APPENDICE – II

Profit and Loss Account

i. For the period from 1st Shrawan 2081 to 32nd Ashadh 2082
 38

ii. For the period from 1st Shrawan 2080 to 31st Ashadh 2081
 39

iii. For the period from 1st Shrawan 2079 to 31st Ashadh 2080
 40

iv. For the period from 1st Shrawan 2078 to 31st Ashadh 2079
 41

v. For the period from 1st Shrawan 2077 to 32nd Ashadh 2078