Microfinance Synergies and Trade-offs: Social versus Financial Performance Outcomes in 2008
This paper identifies and quantifies trade-offs and synergies between the social performance (SP) and financial performance (FP) goals of MFIs.
While struggling to achieve rapid growth, serve more clients, improve portfolio quality, and become financially sustainable, MFIs with a double bottom line have to ensure they are meeting their development goals. The paper explores whether significant relationships exist between SP and FP, and whether these relationships lead to trade-offs and synergies in terms of MFIs achievement of their double bottom line. Findings indicate that:
- Investments in human capital in terms of SP training and social responsibility go hand-in-hand with higher staff productivity and better portfolio quality, but lower efficiency;
- SP training and human resource policies have stronger synergies and weaker trade-offs with FP;
- Serving the very poor and poor comes at a cost in terms of efficiency, but not in terms of risk or productivity.
Finally, study findings demonstrate that rural MFIs are more productive and efficient than urban ones. They also suggest relative loan sizes and targeting policies appear to be complementary variables in explaining differences in productivity and efficiency among MFIs.
