This document offers an alternative approach for assessing the effectiveness of microfinance organizations from the generally accepted standards. It states that if the standards by which microfinance organizations are evaluated are improved, the organizations adjust to the new goals.
The paper identifies problems with the already existing standard measures:
* Reporting the repayment rates does not help in understanding the health of the MFI's capital base.
* There is no information regarding the variance in turnover within the client base.
* The aggregate number of active loans does not give a true picture of the organizational goal.
The improved sets of measures, with there benefits, that the paper suggests are:
* Measure the real receipts, thus removing ambiguity and comparing the performance of different organizations.
* Report lost clients as a percentage, and conduct exit interviews, to allow a much detailed analysis of success and failure of the organizations.
* Use graduation schedule analysis to provide information on the impact of the organization on the growth of the business.
The paper concludes that applying some standard accounting tools will provide much needed information about the health of a microfinance organization and this will assist in making judgment about interventions in the sector.
