Why is it important for financial institutions to assess social performance?
Social performance measures are necessary to determine whether institutions are meeting the social goals set out in their missions. Currently, common performance measures for microfinance focus almost exclusively on an institution’s financial performance. While this is necessary it says little about whether social goals are being met. A financially sustainable and profitable institution deemed extremely successful in financial terms could theoretically charge very high interest rates and push its clients into greater indebtedness, thereby creating a long run institutional crisis. Conversely, tracking social performance and using the information to tailor services to improve client conditions not only assist clients but also bring in better business for institutions. MFI managers need social performance data to meet both financial and social goals.
