Financial Efficiency and Social Impact of Microfinance Institutions

Abstract

This paper contributes to the literature by investigating whether the increased focus on financial self-sustainability of microfinance institutions has been disadvantageous to the target audience. We investigate the association between social efficiency and financial performance using a comprehensive data set that includes 650 microfinance institutions. A self-organizing map methodology is used to fully capture the existing heterogeneity among institutions. The results show that we cannot support the hypothesis that there exists a trade-off. On the contrary, we find evidence of a significant, positive relationship between social efficiency and financial performance.