Efficiency In Social Performance Management Of Microfinance Institutions: A Case Of Pakistan
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Date
2016-09
Authors
Riaz, Madiha
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Abstract
The microfinance industry in Pakistan has demonstrated a continuous expansion and growth since few years back and women borrowers persistently dominate the market. Although the microfinance industry is intensively encouraging and attain perpetual support from contributors, but however this sector still fails to address the poverty problems faced by the people of Pakistan. Portrayed as a poor country, although there is a contribution of 11.5 percent of the microfinance sector, it is still insufficient to eradicate poverty. Why this paradox arises? Hence, this study has been designed to analyze the scenario and question the ability of the microfinance sector in this country. The main objective of this study is to evaluate the Financial Efficiency (FE), Social Efficiency (SE), to propose the relationship between FE and SE, and Social Performance Management (SPM) of the microfinance institutions (MFIs) in Pakistan. In order to answer the questions; a mixed method approach is applied. Stochastic Frontier Analysis, an econometric approach is used to analyze the financial stability as well as the social efficiency status of the institutions based on their technical efficiency scores. The determinant of financial and social efficiency and expected relationship between FE and SE is also being evaluated by the same method. On the other hand, in order to assess the SPM focus of the industry, 15 stakeholders have been interviewed based on a qualitative approach, i.e. by using semi-structured interview tool. The findings illustrate that industry performance was satisfactory, but less than the optimum level due to underutilizing its
potential resources. Furthermore, the social performance is better than financial performance and there is a positive association between both performances. While through the SPM indicators, the earnings from the industry is less, but satisfactory since there are some indicators has given good results and being implemented in the industry. Apart from that, findings reveal that there is an enormous potential in the industry to grow as there is plenty of underutilized resources and market potential for the poor to explore. Both poverty alleviation and financial sustainability is a competency phenomenon and not due to lacking in government policies or structure of the economy. Moreover, efficiency is not the end, but rather it is crucial in achieving social goals. Hence, a greater focus on the efficiency of MFIs may produce better results in order to achieve the required targets. Similarly, several initiatives being implemented to improve SPM implication in order to ensure the microfinance industry is on the right path and MFIs are responding to FE and SE goals in a sensible way.
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The microfinance industry in Pakistan has demonstrated a continuous expansion , and women borrowers persistently dominate the market.