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Portfolio at risk value shows the portion of the portfolio that is contaminated by arrears and as such at risk of not being repaid.
Portfolio at risk value or ratio is calculated by dividing the outstanding balance of all loans with arrears over thirty days plus all refinanced ( restructured) loans by the outstanding gross portfolio as of a certain date.
Because the value or ratio is often used to measure loans affected by arrears of more than sixty, ninety ,one twenty and one eighty days, the number of days must be clearly stated ,(for example PAR thirty days).
Any portfolio at risk ( PAR thirty) exceeding% should be cause concern, because unlike commercial loans, most microcredits are are not backed by bankable collateral.
Formula
Outstanding balance on arrears over thirty days plus total gross outstanding refinanced ( restructured) portfolio / Total outstanding gross portfolio
Portfolio-at-risk (PAR) ratio : Portfolio at risk (X days) / Gross loan portfolio
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