A comprehensive framework for understanding microfinance performance evaluation methods

Abstract

Multiple stakeholders in the microfinance sector seek to foster financial, social, and environmental development in a sustainable way by providing a wide range of products and services for financial inclusion. This heterogeneity is also reflected in the multiple methods to evaluate the performance of financial service providers. For this reason, it can be challenging for stakeholders to identify and understand the evaluation approaches that may be required to meet their needs and help them improve their performance. This study presents a comprehensive review of the existing approaches for the evaluation of the financial and social performance of microfinance. This research provides a systematic and comprehensive classification of microfinance performance evaluation methods, an explanation of evaluation methods and techniques, and a theoretical framework suitable to explain the applicability every method to assess different dimensions of microfinance. These results of this research are useful to help policymakers, donors, and practitioners understand and compare existing evaluation methods. Also, this framework enables the identification of the appropriate evaluation method according to the type of performance being examined and considering how to communicate this information effectively to the market.