Where Good Intentions Meet Good Business Practice: A Correlation Analysis of Social, Operational and Financial Performance in Microfinance

Date Published: 
Aug 2016
Husain, M. & Pistelli, M.

Highlighting new findings from data provided by 780 financial service providers

Over the past eight years, more than 1,000 financial service providers (FSPs) have demonstrated their commitment to information transparency by reporting social performance data to MIX. Drawing from this wealth of information collected, MIX conducted a regression analysis that explores the synergies and trade-offs between social, operational and financial performance using data reported by 780 FSPs during the 2014-2015 period.

Statistically significant findings emerged mainly in five areas, namely - governance, women as a target market, poverty segmentation by target market, social responsibility towards staff, and borrower retention. In particular, the findings suggest that:

  • FSPs with a board of directors that monitors social performance and with a specific focus on targeting women consistently show better portfolio quality, efficiency and productivity;
  • The presence of more progressive Human Resources (HR) policies is associated with better staff productivity and portfolio quality;
  • Exclusively targeting poorer clients is associated with higher operating expenses but also with lower costs per borrowers; the lack of a poverty strategy for market segmentation, on the other hand, is associated with higher costs per borrowers;
  • Borrower retention is positively correlated to higher staff retention, productivity and lower costs per borrowers.