II.3- Impact of Microfinance Institutions
In this section, we will discuss the impact of microfinance as
measured by their impact on clients, their enterprises, households, and the
communities in which they live. As a general rule, MFIs work toward a double
bottom-line (financial and social) unlike the typical formal financial
institution which works solely toward a financial bottom-line. Measuring
financial returns is relatively straight-forward. Microfinance has borrowed
liberally from the financial accounting and performance standards in the formal
financial sector. Concepts such as return on equity, return on assets,
portfolio-at-risk, and so forth are increasingly becoming the lingua franca of
the microfinance industry5. Measuring social return, however, is
anything but straightforward. In practice, the specific impacts of microfinance
are hard to pin down and harder still to measure. Impact assessments require
adoption of research methodologies capable of isolating specific effects out of
a complicated web of causal and mediating factors and high decibels of
random
5 Use of standard accounting measures of
institutional performance in microfinance frequently requires adjustment to
reflect financial subsidies (e.g., cash donations, in-kind donations, or other
types of below-market financing) received by MFIs. Thus the common use of the
concept «Financial Self-Sufficiency», which adjusts institutional
profitability for the imputed market cost of subsidized financing, in lieu of
profitability.
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Analysis of microfinances' performance and
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By Djamaman Brice Gaétan
environmental noise, as well as attaching specific units of
measurement to tangible and intangible impacts that may or may not lend
themselves to precise definition or measurement.
II.4- Literature review on the social performance of
microfinance institutions
In the social performance standards report a distinction is
made between the achievement of social goals by MFIs and the poverty
measurement amongst microfinance clients. Also, Zeller, Lapenu & Greely
(2003) argued that social performance measurement is not the same as social
impact measurement. Social impact measurement should be concerned with the
poverty outreach, and the changes in welfare and quality of life of
microfinance clients, whereas social performance measurement is associated with
the outreach measurement of microfinance programs.
II.4.1- Impact studies on microfinance
Although the number of empiric studies on the impact of
microfinance from large samples of microfinance clients is growing,
«measuring the impact of financial services has become one of the most
controversial issues facing the microfinance industry». (Meyer, 2006, p.
225) Armendáriz & Morduch (2005) and Meyer (2006, p. 226) found
several «issues of study design, data collection and statistical
analysis», making impact measurement and analysis troublesome. First,
appropriate poverty proxies have to measure the initial levels and the change
in the poverty levels of microfinance clients and non- clients. Second, an
important issue in providing empirical evidence on the benefits of microfinance
is clarifying the causal role of microfinance. Accordingly, identifying
reliable treatment and control groups is crucial. In more detail, while
measuring the impact of microfinance programs one should (1) account for the
displacement of economic activity undertaken by non-clients, (2) one should
consider current and past clients by identifying previously successful and
inactive microfinance graduates?, and (3) one should deal with attrition by
accounting for household drop outs. (Armendáriz & Morduch, 2005)
Third, Meyer (2006) considers two important forms of selection biases. The
selection of microfinance clients participating in microfinance programs is
likely biased. Random selection is unlikely since new microfinance clients may
be: (1) more entrepreneurial, (2) willing to take risk or (3) may have more
carefully been selected by loan officers. Also, the programs placement is
likely to be biased, since MFIs may choose to locate their activities in areas
with better infrastructure and communication facilities.
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Analysis of microfinances' performance and
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