Draft for Public Comment
Measuring Financial Performance of Microfinance Institutions
To be published by the SEEP Network
An Update (2nd Edition) of Measuring Performance of Microfinance Institutions: A Framework for Reporting, Analysis, and Monitoring (2005)
DRAFT FOR PUBLIC COMMENT – June 2010
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Welcome to the KDID.org Beta site. We are pleased to host this online public comment forum for the “Measuring Financial Performance of Microfinance Institutions” as part of the Microfinance Reporting Standards Initiative. As you can see, the site is still under development. KDID.org will be fully launched this summer. As we prepare the site, we conduct activities to test out all the great new features and functionality on our site. The SEEP Network and Social Enterprise Associates join the Knowledge-Driven Microenterprise Development Team to host this activity and bring you new ways to contribute to the effectiveness of microfinance institutions. Use the table of contents to the right to navigate through the information. When you see information you would like to comment on, use the text entry field at the bottom of the page. Click “Log In” at the top of the page to create an account or log in so that you can use this feature. If you encounter any difficulties while commenting on the standards, or if you have suggestions or ideas for the site, please send us an email. |
This document is a working draft for public comment and review. The public comment period is open until July 18th, 2010, and seeks to build consensus within the microfinance community on the updated set of 35 ratios and four asset-liability management tables. The SEEP Network will release these updates in the forthcoming Microfinance Financial Reporting Standards (the Standards) as a revision to the 2005 document Measuring Performance of Microfinance Institutions: A Framework for Reporting, Analysis, and Monitoring, otherwise known as the SEEP Framework.
- NOTE: This document contains only supplementary text to the SEEP Framework published in 2005. View the original SEEP Framework.
- NOTE: Reviewers with limited time. Please focus on the 9-page Executive Summary of this document.
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Comments
This new process is very exciting. How many ratios is the right number? I don't think there is a single correct answer, as it depends on how people use information and knowledge. But, it feels like the number we have is too many and might be segmented into primary and secondary. They are differentiated by topic area, which should help, but more comments and thoughts on this is helpful.
Andrew (Drew) Tulchin | Managing Partner
drew@socialenterprise.net
cell +1.202.256.2692 | wk +1.505.715.6927
skype dtulchin
Social Enterprise Associates
www.socialenterprise.net
Financial Performance | Social Impact | Environmental Sustainability
We do have to consider that MFI group includes both profit and non-profit organizations. This is a crucial point. In the current trend of microfinance industry, all MFI have social objectives as a common denominator. From the below Figure it emerges that although any MFI is social oriented the degree of achieving a social mission could be quite different whether the MFI is in the segment of Enterprise Development (ED, accumulation), Income Generating Activities (IGA, increase family income) and Food Security (FS, distribution of basic food to very poor people).
The different strategy to achieve a social goal may be represented by the below depicted equation where the social performance is function of various variables.
Social performance = F (ED; IGA; FS)
All the financial circuits should be under a unique umbrella; however when we are going to evaluate an individual MFI, should we use the same yardsticks for all MFI?
Obviously, we have to use different parameters. In conclusion, while dealing with MFI' evaluation, it could be advisable to have specific guidelines with regard to the microfinance activities and different institutions types. Here is the main problem because we have a variegated reality as the document under review has well recognized: this problem can be sorted out by providing guidelines on how to design a country-tired regulatory framework and taking into account above proposed MFI categorization.
This does mean that when we are going to evaluate an MFI we have to refer to above mentioned categories and set ad hoc ratios that have been worked out for the category to which the MFI belongs.
Ascanio Graziosi
Banking Consultant & Microfinance Specialist
www.cambridgedata.com/GraziosiAscanio