Measuring the Social Performance of Microfinance in Europe

Microfinance promise to serve low-income or disadvantaged beneficiaries excluded from the formal banking sector in a financially sustainable way (thus to achieve the so called “double bottom line” of financial and social performance) built excitement around the development of a global industry. However, for a long time an anti-subsidy position embedded in the international key donor community have shown little concern of social performance data and information on beneficiaries profiles in terms of various dimension of social and financial exclusion. Until recently, most of the emphasis of microfinance advocates has been devoted to MFIs financial performance following the “win-win” proposition, according to which financial viability should be sufficient to show social impact, a view that is supported by a controversial evidence and is based on a selective understanding of conceptual facts. Nevertheless, several initiatives recently translated into the Social Performance Task Force (SPTF) attempt to explore social aspects of microfinance providing a new definition of social performance more focused on the whole process leading to a social impact. Aim of this paper is to measure European MFIs social performance according to a core set of common indicators developed by the SPTF but using data collected in 2010 by the European Microfinance Network (EMN) on a sample of 170 microfinance actors operating in 21 countries out of 27 European Union (EU) member countries, current EU candidate countries and countries belonging to the European Free Trade Area (EFTA). The reference framework followed in the current social performance analysis examines the whole process of translating MFIs mission into social impact and includes the analysis of three connected dimensions of the social performance process corresponding to different set of indicators: the intent of the MFI, the effectiveness of the internal system and activities in achieving its targets, MFI outputs and eventually its capacity to positively affect clients life and achieve social goals.