MFIs face many challenges. Operating and financial expenses are high. Efficiency in terms of cost per borrower, technological innovations, product refinements, and ongoing efforts to strengthen the capacity of MFIs are needed to reduce costs, increase outreach, and boost overall profitability.
Financial performance of an institution determines its outreach and depth in service provision. NGO-MFIs are viewed predominantly as instruments of social change; their performance has been often measured by non-financial parameters. The concept of social performance has seemed to overshadow the state of financial health of the MFIs.
MFIs with a “double bottom line” approach measure both their financial and social performances to ensure that they not only make a profit but that they also positively benefit the lives of their clients.
Using two different measures of financial performance (portfolio yield and profit margin), the results indicate that the depth and breadth of social outreach can improve FP of MFIs. In particular increasing average loan per borrower and increasing the number of active borrowers can contribute significantly to enhance the FP of MFIs. Increasing savings and reducing operating expense can also contribute to increase MFIs’s financial performance.
Management and officers of micro-finance institutions, finance managers and credit officers.
- Operative and financial Sustainability
- MFI Financial Sustainability vs Outreach
- Key Concepts: “Up-Scaling”, Down-Scaling” and Competing MFIs