MIX Publishes New Research on Relationship between Social and Financial PerformanceData Brief No. 7 explores the trade-offs and synergies between the social and financial performance of MFIs
Microfinance Information Exchange has recently released a paper by its Lead Researcher Adrian Gonzalez investigating the linkages between social and financial performance. Drawing on the 2008 MIX Social Performance Standards (SPS) Reports from 200 MFIs, Data Brief No. 7 – Microfinance Synergies and Trade-offs: Social vs. Financial Performance Outcomes in 2008 presents findings from regressions designed to evaluate the associations between Social Performance Task Force Indicators (SPTFIs) and some common financial indicators related to productivity, portfolio quality, and efficiency. The research both confirms and challenges common wisdom on social performance management in microfinance, while introducing some new postulations based on his analysis. Specific results support that as expected, investment in staff training on Social Performance and Social Responsibility is associated positively with an MFI’s portfolio quality (although it is impossible to separate the effect from general training), while there is a negative relationship between financial efficiency and targeting of very poor or poor clients. Further results show that efficiency actually deteriorates as the percentage of urban clients increases, challenging the conventional belief that having a predominantly rural clientele increases costs and decreases efficiency.
Gonzalez concludes his report by suggesting some changes for the SPTF’s questionnaire to make future SP data more usable and informative. You can read a summary of the results on MIX's SP Indicators Blog, or read the full publication.
