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Measuring Microfinance Performance

In: Microfinance Institutions: Financial and Social Performance

Author

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  • Mersland, Roy
  • Strøm, R. Øystein
Abstract
MFIs are measured according to two dimensions. One is their outreach to poor people, that is, their ability to provide poor families access to financial services. This is the MFIs’ social mission. The other dimension is their financial sustainability, that is, their ability to pay their employees, lenders, and other suppliers, in short, their ability to produce a profit from their operations. We set out the main microfinance measures and confirm earlier findings that profitability is rather weak in microfinance, and that operational costs constitute a large part of the total costs. We argue that researchers should put more efforts into identifying the MFI’s cost drivers because social outreach is related to high costs and thus difficult to upheld as competition in the industry hardens.

Suggested Citation

  • Mersland, Roy & Strøm, R. Øystein, 2014. "Measuring Microfinance Performance," EconStor Open Access Book Chapters, in: Microfinance Institutions: Financial and Social Performance, pages 12-30, ZBW - Leibniz Information Centre for Economics.
    • Handle: RePEc:zbw:eschap:323845
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    File URL: https://www.econstor.eu/bitstream/10419/323845/1/Mersland-et-al-Measuring-microfinance.pdf
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    Cited by:

    1. D’Espallier, Bert & Goedecke, Jann & Hudon, Marek & Mersland, Roy, 2017. "From NGOs to Banks: Does Institutional Transformation Alter the Business Model of Microfinance Institutions?," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 89, pages 19-33.
    2. Zamore, Stephen & Beisland, Leif Atle & Mersland, Roy, 2021. "Excessive focus on risk? Non‐performing loans and efficiency of microfinance institutions," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 28(2), pages 1290-1307.
    3. Stephen Zamore & Leif Atle Beisland & Roy Mersland, 2023. "Excessive focus on risk? Non‐performing loans and efficiency of microfinance institutions," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(2), pages 1290-1307, April.
    4. Abidemi C. Adegboye*, 2023. "Financial Market Environment And Efficiency Of Microfinance Banks In Nigerial," Ilorin Journal of Economic Policy, Department of Economics, University of Ilorin, vol. 10(1), pages 1-14.
    5. Zamore, Stephen, 2018. "Should microfinance institutions diversify or focus? A global analysis," Research in International Business and Finance, Elsevier, vol. 46(C), pages 105-119.

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