Much of the passion behind microfinance is driven by its potential to help poor people better manage their financial resources, take on new economic opportunities, mitigate everyday risks, reduce vulnerability, and improve their living conditions. Yet the success of microfinance is often measured by the financial performance of institutions, not on how clients are faring, nor on how well institutions are meeting their social objectives.
In fact, just a couple of years ago, there was significant opposition in the industry to introducing performance criteria to assess social achievements. The assumption was that high loan repayment rates proved that microfinance benefited the poor and that adding more performance indicators would be burdensome and would dilute the focus on financial sustainability the industry had struggled to achieve.
Today, as the industry takes a harder look at its ability to serve very poor people, organizations are taking a second look at measuring social performance and developing guidelines and tools for reporting.
This Brief discusses the industry's growing interest in social performance and new advances in measuring social performance and developing guidelines and tools for reporting.