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Financial services for the poor: assessing microfinance institutions

Peter Koveos (Professor and Chair, Department of Finance, School of Management, Syracuse University, Syracuse, NY 13244‐2130, USA)
Dipinder Randhawa (Visiting Assistant Professor, NUS Business School, National University of Singapore, Business Link, Singapore 117592)

Managerial Finance

ISSN: 0307-4358

Article publication date: 1 September 2004

Abstract

The objective of this study is to analyze the framework within which microfinance institutions (MFIs) deliver their services and provide an assessment of their operations and financial management. These institutions are examined because of their current importance to a special group of consumers, primarily the poor and disenfranchised in the developing world, and of their future promise as an economic development solution. Since the objective of these institutions is somewhat unique, the manner of their assessment must also differ from that used to assess the performance of traditional financial intermediaries. In particular, assessment of MFIs must recognize their dual (bank and development instrument) status. Their efficiency, then, must be analyzed in terms of its economic (or financial) dimension as well as its social dimension. The first dimension may be examined with traditional measures, while examination of the second requires measures that reflect the MFI’s social objectives. In order to accommodate the special nature of MFIs, this study proposes the use of a Balanced Scorecard approach. It contributes to the study of financial institution performance by examining a non‐traditional group of institutions using a variety of assessment measures. The findings should be of value to those interested in the financial sector as well as those involved in public policy decision making.

Keywords

Citation

Koveos, P. and Randhawa, D. (2004), "Financial services for the poor: assessing microfinance institutions", Managerial Finance, Vol. 30 No. 9, pp. 70-95. https://doi.org/10.1108/03074350410769281

Publisher

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Emerald Group Publishing Limited

Copyright © 2004, Emerald Group Publishing Limited