Time Value of Money (Annuity)

Future Value of an Annuity
An annuity is a series of equal payments made at fixed intervals for a specified number of periods. If the payments occur at the end of each period, as they typically do, the annuity is called an ordinary or deferred annuity.

Equation 3
FVAn = PMT (FVIFAi,n)
Where
FVAn = The future value of an annuity over n periods
PMT = The payments at the end of each period
FVIFAi,n = Future value interest factor for a annuity

If you deposit $100 at the end of each year for three years in a savings account that pay 5 percent interest per year, how much will you have at the end of three years?

Spreadsheet Solution
In Excel, click the function wizard, Financial, FV, and OK to get the FV dialog box. Then, we would enter 0.05 for Rate, 3 for Nper, and -100 for Pmt (the payment is entered as a negative number to show that it is a cash outflow). We would leave PV blank because there is no initial payment, and we would leave Type blank to signify that payments come at the end of the periods. Then, we clicked OK, we would get the FV of the annuity, $315.25.

If payments are made at the beginning of each period, the annuity is an annuity due.

Equation 4
FVAn (Annuity due) = PMT (FVIFAi,n)(1+i)

For the annuity due, proceed just as for the ordinary annuity except enter 1 for Type to indicate that we now have an annuity due. Then, when you click OK, the answer $331.01 will appear.

Present Value of an Annuity
If the payments come at the end of each year, then the annuity is an ordinary annuity.

NEXT>>>

Read more...

INDONESIAN MICROFINANCE

INDONESIA CASE STUDIES ON MICROFINANCE
AND SMALL-SCALE FISHERIES
Prepared by:
Agus Rachmadi
Bank Rakyat Indonesia

I. Overview of the Country’s Fishery Sector
Importance of the Fishery Sector
Indonesia is the world biggest archipelago, one third of the Indonesia area consist mostly sea water covering about 5,8 million km2 with almost 81,000 km2 line beaches surrounding its 193 millions hectare. On the other hand there are about 24 million hectare are very potential for the fishery business with potential production about 47 million ton year. While location which are considered very potential for pond product is about 1 million hectare potential production is about 5 million ton /year.
The number of fishery household establishment averagely increased 3,53% per annum at period of 1999 - 2004, that was 2.033.175 units in 1999 to 2.405.688 units in 2004. These fishery household establishment was consist of captured and aquaculture fisheries household establishment. At period of 1999 - 2004, the number of captured fisheries household establishment averagely increased 4,20 % per annum, which came from marine and inland open water fisheries business unit.
At the same period, the number of aquaculture fisheries household establishment averagely increased 3,21 % per annum. This aquaculture fisheries household establishment came from fisheries household establishment of marine, brackish water pond, freshwater pond, and cage, floating net and paddy field culture.

Based on activity, fishermen divided into two categories, they are: marine fishermen and inland open water fishermen. These years, the number of marine fishermen from 2003 to 2004 had significantly decreased for over 29,14%, that was 3,31 million in 2003 to 2,35 million in 2004. Inland open water fishermen is fisherman which their major part of working day applied to-do fishing. In this decade, the number of inland open water fishermen from 2003 to 2004 increased 7,83%, that was 545.776 people in 2003 to 588.507 in 2004. The number of fish farmers in 2004 was 2.459.355 person. These fish farmers classified into group of marine fish farmers 81.377 person, brackish water pond farmers 440.545 person, freshwater pond farmers 1.131.078 person, cage farmers 58.565 person, floating net farmers 51.439 person, paddy field farmers 696.351 person. The number of fish

NEXT>>>

Read more...

A Microfinance Path for Commercial Banks

A Microfinance Path for Commercial Banks

By Mohamad Nazirwan*)

In the recent years we have witnessed the flourishing of microfinance around the globe – particularly after the United Nation launched the International Year of Microcredit 2005. Perhaps, the greatest indication of this growing trend was when Professor Muhammad Yunus, the founder of Grameen Bank and the pioneer of microcredit for women was awarded a Nobel Prize. In many perspectives, microfinance has been proven an effective tool to support the Millennium Development Goals campaign in reducing the half number of poor people.

Microfinance has come a long way from its beginnings as a non-profit program to combat chronic poverty in developing countries. The best practice in the past was that the government created state owned banks to channel subsidized loans to farmers to produce food crops and many international NGOs gave charity to poor inhabitants in order to help them climb up from chronic poverty trap. Furthermore, microfinance gradually evolves from social intermediation to financial intermediation which adopts market mechanism and commercial practices. Surprisingly, this approach has worked well in the bottom of the pyramid (BOP) economy mainstream and it has generated good impact on the prosperity of low income households and the poor.

The presence of microfinance institutions in local community has successfully opened financial access to microentrepreneurs and under banked clients who need loans for working capital and investment. The spectrum of commercial microfinance also broadens through providing saving products, remittance and payment system to the entire society efficiently and profitably. A key feature of this approach is double bottom lines that are to seek profits and also to create social values. One of the best examples and also the pioneer of commercial microfinance is BRI-Unit microbanking system which developed over two decades ago, after BRI struggled with massive losses during the rice self sufficient program (Bimas).

NEXT>>>

Read more...