Trainer: The Trainer should use his/her discretion as to whether this section of the manual is necessary, and at what level of detail it should be discussed.

For very small banks it might be too complicated, whilst for sophisticated banks it might be too simplistic. The Trainer will need to decide, based on what he has learnt about the attendees during the workshop so far.

Introduction

Trainer: In this section, the Trainer will explain how the PESO performance standards and the individual ratios in the different categories are interconnected. Then, when reviewed together, how they can tell the reader a lot about the MFI/Bank.

The Trainer should introduce this section for Banks as follows:

1. While the PESO performance standards are designed for banks, co-operatives and NGOs; the Banks have different characteristics than the other 2 categories.
   
   
   1. They are much more tightly regulated.
      
      
   2. They prepare a series of standardized reporting formats.
      
      
   3. Their MISs should be able to produce most of the necessary data.

The interconnectivity of the standards

Trainer: The Trainer should identify the links between the standards as follows:

PESO stands for

Portfolio quality
Efficiency
Sustainability
Outreach.

Trainer: The Trainer should ask which of these standards represent what could be called final goals.

If the attendees are having difficulty with this concept, the Trainer should ask them what it is that they want their Banks to achieve, and what is the overall goal of microfinance.

The answers should be:

1. To provide financial services to the lower income segments of the population. This is called outreach.
   
   
2. To provide services on a sustainable basis. This is called sustainability.

Trainer: The trainer then should ask what are the standards that are key to achieving these goals.

The answers should be:

1. Maintaining good portfolio quality and being well reserved against losses. This is called portfolio quality
   
   
2. Extending credit in the most efficient, cost effective manner possible. This is called efficiency.

As such the PESO performance standards measure the performance of the critical inputs for achieving the goals of microfinance; and then measure how well the Bank is doing in achieving those goals.