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Bert D’Espallier and Jann Goedecke

Microfinance institutions (MFIs) which provide financial services in developing economies are hybrid enterprises in the sense that they balance social and financial objectives. It is therefore not surprising that empirical researchers have studied characteristics, conditions and managerial practices related to increased social or financial performance1 or sometimes both.2 While the financial dimension of an MFI is straightforward to quantify given the abundance of accounting-based and comparable metrics, the social performance is harder to grasp. Most empirical studies resort to the framework of Schreiner (2002) who distinguishes the breadth of outreach referring to the number of poor clients reached from the depth of outreach referring to the poverty-level of the clients. Consequently, most studies use the (growth in) number of clients as proxies for outreach-breadth and average loans and proportion of vulnerable clients (female clients and rural clients) as proxies for outreach-depth. There is, however, discussion whether these MFI-level univariate proxies are reliable indicators to capture one or more dimensions of social performance, which is an inherently complex and multidimensional concept. Interestingly, the concept of social performance is viewed very differently by researchers and practitioners. Whereas practitioners advocate an encompassing view involving several institutional layers, empirical researchers typically zoom in on a single institutional outcome. It remains to be seen whether both views are reconcilable and offer complementary insights or whether they are discordant.