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Measuring the Performance of Microfinance Institutions

Giovanni Ferro-Luzzi

University of Geneva

Sylvain Weber

University of Neuchatel - Institute for Research in Economics (IRENE)

July 2006

Measuring the performance of microfinance institutions (MFIs) is not a trivial task. Indeed, looking at the financial sustainability of an MFI only gives one feature of its performance. As many MFIs primarily exist in order to help the poorest people, one also has to include aspects of outreach in their performance. Hence, MFIs' performance can be termed multidimensional.

This paper illustrates how some statistical tools can offer new insights in the context of MFIs' performance evaluation. Factor analysis is used in a first step to construct performance indices based on several possible associations of variables without posing too many a priori restrictions. The base variables are thus combined to produce different factors, each one representing a distinct dimension of performance. We then use the individual scores ascribed to each MFI on each factor as the dependent variables of a simultaneous-equations model and present new evidence on the determinants of MFIs' performance.

Number of Pages in PDF File: 17

Keywords: Microfinance, Outreach, Self-sustainability, Factor analysis

JEL Classification: O12, O16, G21, C35

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Date posted: July 27, 2006 ; Last revised: January 29, 2008

Suggested Citation

Ferro-Luzzi, Giovanni and Weber, Sylvain, Measuring the Performance of Microfinance Institutions (July 2006). Available at SSRN: https://ssrn.com/abstract=918750 or http://dx.doi.org/10.2139/ssrn.918750

Contact Information

Giovanni Ferro-Luzzi
University of Geneva ( email )
Fac SES-DSE (Unimail)
40, Boulevard du Pont-d'Arve
Genève 4, CH - 1211
+41223798266 (Phone)
+41223798293 (Fax)
HOME PAGE: http://www.unige.ch/ses/ecopo/Staff/maitresass/ferroluzzig.html
Sylvain Weber (Contact Author)
University of Neuchatel - Institute for Research in Economics (IRENE) ( email )
A.-L. Breguet 2
Neuchatel, 2000
+41327181442 (Phone)
HOME PAGE: http://www2.unine.ch/irene/lang/en/collaborateurs/sylvain_weber
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