Microfinance Synergies and Trade-Offs: Social vs. Financial Performance Outcomes in 2008

MIX Data Brief, No. 7, 2010

15 Pages Posted: 23 Oct 2010

Date Written: August 1, 2010

Abstract

The microfinance industry has long speculated about potential trade-offs between financial and social goals. While struggling to achieve rapid growth, serve more clients, improve portfolio quality, and become financially sustainable, microfinance institutions (MFIs) with a double bottom line have to ensure they are meeting their development goals (women’s empowerment, rural outreach, and social responsibility to clients). Often, development goals put pressure on financials, and many MFIs worry that becoming “socially-focused” may deteriorate their efficiency, portfolio quality, or productivity. At the same time, the microfinance industry is giving more importance to avoiding over-indebtedness, having better human resource policies in place, and implementing proper staff training and incentive schemes that may improve financial performance as well. These potential synergies between social performance (SP) and financial performance (FP) can compensate for some of the trade-offs commonly associated with pursuing a double bottom line.

The main goal of this paper is to identify and quantify both trade-offs and synergies between the social performance and financial performance goals of microfinance institutions. The main questions explored are whether significant relationships between social and financial performance exist, and whether these relationships lead to trade-offs and synergies in terms of MFIs’ achievement of their double bottom line.

Keywords: Microfinance, Trade-Offs, Synergies, Policies, Double Bottom Line, Social Performance

Suggested Citation

Gonzalez, Adrian, Microfinance Synergies and Trade-Offs: Social vs. Financial Performance Outcomes in 2008 (August 1, 2010). MIX Data Brief, No. 7, 2010, Available at SSRN: https://ssrn.com/abstract=1696582

Adrian Gonzalez (Contact Author)

World Bank Group ( email )

2121 Pennsylvania Avenue, NW
Washington, DC 20433
United States

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