How do you calculate portfolio at risk (PAR 30) on a loan book?
The whole balance of loans more than 30 days late over the gross portfolio: the two standard definitions, the 5% to 10% covenants funds write, and one Mexican book that reads 2.0%, 5.5% or 17.5%.
PAR 30 is the whole outstanding principal of every loan with an instalment more than 30 days late, divided by the gross loan portfolio. The whole balance counts, not the missed payment. Funds that lend to lenders usually add restructured loans and set the covenant at 5% to 10%; the 2011 lenders' guidelines put it below 5%.
PAR counts the whole balance of a late loan, not the instalment that was missed
The reference text is CGAP's consensus guidelines of September 2003. Portfolio at risk is «the value of all loans outstanding that have one or more installments of principal past due more than a certain number of days», and it «includes the entire unpaid principal balance, including both past-due and future installments, but not accrued interest». The ratio, R11, divides that amount by the gross loan portfolio on the same date. CGAP calls it «the most accepted measure of portfolio quality» and adds that a lender «should always specify the number of days»: PAR 1, PAR 30 and PAR 90 are different numbers.
The arrears rate, the missed instalments over the portfolio, reads much lower. A borrower one instalment behind on a two-year loan has missed a twenty-fourth of it, and all of it is at risk.
Our computation, a modelled book of 10,000 units of gross principal. PAR as defined by CGAP (2003), R11; restructured loans as in the IDB and MicroRate technical guide (2003); written-off loans added back to the numerator and the portfolio, as a fund that counts them does.
| What is counted | Amount | Ratio |
|---|---|---|
| Instalments more than 30 days unpaid | 90 | Arrears rate 0.9% |
| Whole outstanding principal of those loans | 520 | PAR 30, 5.2% |
| Plus restructured loans | 520 + 150 | PAR 30 with restructured, 6.7% |
| Plus loans written off in the last 12 months | 670 + 400 | 10.3% of 10,400 |
Each step a fund adds moves the ratio up. A lender that quotes 0.9% and a fund that reads 10.3% can be looking at the same book.
The two standard definitions disagree on restructured loans, and funds take the stricter one
CGAP's definition leaves restructured loans out and asks the lender to say whether it included them. The technical guide of the Inter-American Development Bank and MicroRate, of the same year, puts them in: PAR is the balance of loans more than 30 days late «plus all refinanced (restructured) loans», over the gross portfolio. Its reason is a case. A Colombian lender, Finansol, nearly tripled its portfolio in 1995, covered rising arrears by restructuring the late loans, and was near bankruptcy by early 1996 when they fell behind again.
Write-offs pull the other way. A loan written off leaves the numerator and the portfolio at once, so a lender that writes loans off soon after 90 days shows a low PAR 30 however much it loses. Funds answer in one of two ways: they put written-off loans inside the ratio, or they cap the write-off ratio, written off in twelve months over the average portfolio, as a covenant of its own.
Lenders' Guidelines for Setting Covenants in Support of Responsible Microfinance (work begun June 2011 by AFD, AECID, PROPARCO, Oikocredit, Incofin, BNP Paribas and others), covenants C.1 and C.2. Alterfin and MCE Social Capital, eligibility criteria for financial institutions, read 23 October 2026. Asian Development Bank, Access to Green Finance Project, financial management assessment of partner institutions, February 2013.
| Funder or standard | PAR 30 test | Write-off test |
|---|---|---|
| Lenders' Guidelines, 2011 | PAR 30 plus renegotiated loans below 5% | Below 3% a year |
| Asian Development Bank, 2013 | PAR 30 below 5% | Below 5% |
| MCE Social Capital | PAR 30 plus rescheduled loans below 10% | Below 2% |
| Alterfin | PAR 30 plus restructured and written-off loans below 10% | Inside the PAR test |
Every funder here adds restructured loans, written-off loans or a separate write-off cap. A PAR 30 quoted without them does not answer the covenant.
The guidelines also say why a covenant should not be set too low: in a crisis it «might tempt the MFI» to speed up lending to dilute its PAR, or to swap portfolio with another institution to hide it. Their third test is loss reserves, the loan-loss allowance, of more than 90% of PAR 30 plus renegotiated loans. Measured PAR levels sit in the same range. The median PAR 30 of the institutions in BlueOrchard's microfinance fund was 4.09% at 30 November 2024, with write-offs of 1.53% over twelve months, according to its investor update of February 2025.
PAR 30 plus renegotiated loans, the covenant in the 2011 lenders' guidelines
Lenders' Guidelines for Setting Covenants in Support of Responsible Microfinance, covenant C.1.
One Mexican book reads 2.0%, 5.5% or 17.5%, depending on the question
HR Ratings' report of 11 June 2026 on Crediclub, a Mexican savings and loan company rated HR A+, sets out its book by days late at March 2026: 92.0% current, 2.4% at 1 to 30 days, 1.8% at 31 to 60, 1.7% at 61 to 90 and 2.0% beyond 90. The same report gives a past-due ratio of 3.1% and, with twelve months of write-offs added back, 17.5%.
HR Ratings, Crediclub, report of 11 June 2026: book by days late (Figura 6), past-due and adjusted past-due ratios, write-offs over twelve months and total book at March 2025 and March 2026. PAR from the buckets and the write-off ratio are our computation.
| Measure, March 2026 | Level | How it is built |
|---|---|---|
| Any instalment late, PAR 1 | 8.0% | 100% less 92.0% current |
| PAR 30 | 5.5% | 31 to 60, 61 to 90 and over 90 days |
| Over 90 days, in the buckets | 2.0% | Last bucket of the table |
| Past-due ratio, reported | 3.1% | As published by HR Ratings |
| Past-due with 12 months of write-offs | 17.5% | As published by HR Ratings |
| Write-offs over 12 months | 18.3% | Over the average of March 2025 and 2026 |
PAR 30 is low because the book writes off fast: twelve months of write-offs equal 18.3% of the average portfolio. The covenant table above tests both, and neither number alone describes the book.
The buckets and the reported ratio differ by 1.1 points at 90 days, and the report does not reconcile them; a fund asks which cut the covenant certificate uses. A second rated lender shows the opposite profile. Grupo CAPEM, an unregulated SOFOM, the Mexican non-bank lender licence, rated HR BBB, had 74.7% of its book current at December 2025, 13.4% at 1 to 30 days, 6.2% at 31 to 60 and 2.6% at 61 to 90, a reported past-due ratio of 3.2% and no write-offs in the year, according to HR Ratings on 9 March 2026. Its PAR 30 on those buckets is 11.9%, our computation. Two past-due ratios of 3.1% and 3.2% sit on PAR 30 of 5.5% and 11.9%.
A Mexican past‑due ratio is a 90‑day number, and a covenant is usually a 30‑day one
The ratio a Mexican lender publishes counts cartera vencida, the past-due book under the regulator's day counts, 90 days for an instalment loan. PAR 30 starts the clock two months earlier and takes the same whole balance. So a fund rebuilds it from the loan tape, the file with one row per loan: for each loan, the oldest unpaid instalment gives the days past due at the cut-off date, and the outstanding principal of every loan above 30 days is summed and divided by the gross portfolio. It does the same with restructured loans flagged and with the write-offs of the last twelve months, because those are the two numbers the covenant is written around.
Definitions are CGAP's and the IDB's and MicroRate's, covenant levels the funders', the Mexican books HR Ratings'; PAR from the buckets, the write-off ratio and the worked book are our computation from them.
Questions this raises
- What is PAR 30?
- Portfolio at risk over 30 days: the whole outstanding principal of every loan with an instalment more than 30 days late, divided by the gross loan portfolio. CGAP's 2003 consensus guidelines call portfolio at risk the most accepted measure of portfolio quality.
- What is the formula for portfolio at risk?
- PAR (X days) equals the outstanding principal of loans with one or more instalments more than X days late, divided by the gross loan portfolio on the same date. The IDB and MicroRate guide adds restructured loans to the numerator.
- What is the difference between PAR and the arrears rate?
- The arrears rate counts only the instalments that were missed; PAR counts the whole balance of the loans behind them. In a modelled book of 10,000 units, 90 of missed instalments sit on 520 of outstanding loans: a 0.9% arrears rate and a 5.2% PAR 30, by our computation.
- What is a good PAR 30?
- Funds that lend to lenders write it at 5% to 10%. The 2011 lenders' guidelines set PAR 30 plus renegotiated loans below 5%, MCE Social Capital PAR 30 plus rescheduled loans below 10%, and Alterfin PAR 30 plus restructured and written-off loans below 10%. BlueOrchard's fund reported a median of 4.09% at 30 November 2024.
- Should restructured loans be included in PAR?
- CGAP's 2003 definition excludes them but asks the lender to say whether they are in; the IDB and MicroRate guide includes them. Funds usually include them, because a lender can hide arrears by restructuring late loans.
- Is PAR 30 the same as cartera vencida?
- No. Cartera vencida, the ratio a Mexican lender publishes, counts loans past the regulator's day counts, 90 days for an instalment loan. PAR 30 counts the whole balance of loans more than 30 days late. At March 2026 Crediclub's buckets gave 2.0% beyond 90 days and 5.5% beyond 30, according to HR Ratings.
Where every figure on this page comes from 8 sources
- 01CGAP, Microfinance Consensus Guidelines: Definitions of Selected Financial Terms, Ratios, and Adjustments for Microfinance, September 2003: portfolio at risk (B3), restructured portfolio (B4), PAR ratio (R11), write-off ratio (R12), risk coverage ratio (R13).
- 02Inter-American Development Bank and MicroRate, Performance Indicators for Microfinance Institutions: Technical Guide, 3rd edition, 2003: portfolio at risk with refinanced (restructured) loans, and the case of Finansol.
- 03Lenders' Guidelines for Setting Covenants in Support of Responsible Microfinance, work begun June 2011 by AFD, AECID, PROPARCO, Oikocredit, Incofin, BNP Paribas, Triple Jump and others: covenants C.1 (PAR 30 plus renegotiated), C.2 (annualised write-off ratio) and C.3 (risk coverage).
- 04Alterfin, financing criteria for microfinance institutions, and MCE Social Capital, investment criteria for financial service providers, live pages read on 23 October 2026.
- 05Asian Development Bank, Access to Green Finance Project (RRP TAJ 45229), Supplementary Document 17, financial management assessment of microfinance institutions, February 2013.
- 06BlueOrchard Microfinance Fund, Class P investor update as of 28 February 2025: medians across financial institutions in the portfolio at 30 November 2024.
- 07HR Ratings, Crediclub, S.A. de C.V., Sociedad Financiera Popular, rating report of 11 June 2026: buckets of delinquency (Figura 6), past-due and adjusted past-due ratios, write-offs and total book at March 2025 and March 2026.
- 08HR Ratings, Grupo Olinx, S.A.P.I. de C.V., SOFOM, E.N.R. (Grupo CAPEM), rating of 9 March 2026: book by days late and past-due ratios at December 2025.