Measuring the Performance and Achievement of Social Objectives of Development Finance Institutions
In this paper, the authors develop and test a methodology that puts forward a new integrated method for evaluating the performance of development finance institutions. The methodology applies assessment criteria on the social objectives and the subsidies that a development finance institution receives to achieve this objective.
The authors:
- Apply this methodology to two pilot case studies- Banadesa (the Honduran state agricultural bank) and Banrural (a government-owned development bank in Guatemala that aims to be profitable, while at the same time adhering to its social goals);
- Calculate the previously tested subsidy dependence index, which measures the degree of an institution’s subsidy dependence;
- Develop and estimate a new measure - the output index - which indicates the level to which the institution fulfills the social objectives of the state;
- Integrate the subsidy dependence index and the output index to assess the effectiveness associated with meeting the social objective.
The paper suggests that the integration of the two indices can constitute the basis of a meaningful evaluation framework for the performance of development finance institutions.
The paper concludes that this new methodology can be a useful metric for policymakers who seek to decide on an optimal allocation of scarce funds for development finance institutions pursuing social goals and for management that seeks improved performance outcomes.
