There is near unanimous consensus that financial sustainability is a crucial gauge of the success of microfinance institutions (MFIs)—after all, an MFI that can cover its costs can also grow, serving more and more clients. Today, more than 400 sustainable institutions report to the Microfinance Information eXchange (MIX), a leading source for market data. The industry as a whole is growing fast, adding 13 percent more borrowers each year since 1999.
This growth is thanks in large part to the insistence on financial sustainability. But for most microfinance practitioners and funders, it is also important to reach poor and very poor people, to provide quality services, and most important to improve clients’ lives. In other words, both financial performance and performance in positively affecting people’s lives—social performance—matter. And the two aims are not necessarily at odds with one another. Thus, many funders and financial institutions are seeking more transparent ways to measure social performance in addition to measuring for financial performance.
This Focus Note highlights the emerging emphasis on social performance in microfinance and reviews some of the assessment tools recently developed.
