Social Performance considered within the global performance of Microfinance Institutions: a new approach

In last years, microfinance has been seen as an effective measure for empowering whole nations or marginalized groups. However, some negative issues especially with respect to over-indebtedness and high interest rates have been discussed as well. In fact, the performance of Microfinance Institutions (MFIs) has traditionally been measured by ratios. Thus, it should be remembered that MFIs are special socially-oriented financial organizations, mainly interested in the economic development of both rural and urban areas, in creating jobs, incorporating women into the labour market and addressing environmental concerns. The activity and performance ratios of these organizations are usually based on a single criterion, generally related to financial aspects or the extent of their outreach, in such a way that the performance measurement can vary according to the criterion selected. This paper proposes a new approach, a multicriteria method based on goal programming that considers not only financial aspects and outreach, but also the social Performance related to the activities of a group of MFIs in Ecuador. Our study shows the weight of the Social Performance dimension on the rankings compared with other dimensions. The practical significance of these results lies in that now it is possible to present a more comprehensive picture of the performance of MFIs. Besides, the methodology chosen can shed some light on the mission drift debate.