Beyond Good Intentions: Measuring Impact Investment and Social Performance in Microfinance

This paper investigates the correlations between impact investments and various types of MFI performance indicators by comparing data on social performance, financial performance, and funding liability of 658 MFIs. The paper is based on two hypotheses: first, MFIs funded by impact investors should demonstrate better capacity to report social performance outcome indicators, and second, goals and product/service offerings of these MFIs should have a social focus distinct from that of institutions funded by more commercial investors.

From the analysis, no evidence emerges that impact investors tend to invest more in MFIs with an inclusive social agenda than their commercial peers. This is because most MFIs report financial inclusion, poverty reduction, and/or employment creation as their main development goals independent of funding structure. When it comes to outcome measurement, the vast majority of MFIs do not report indicators associated with their mission, illustrating the gap between intention and outcome measurement in microfinance.