What are the future perspectives of microfinance in enhancing performance? This research reveals that while microfinance institutions in Gulu District utilize Balanced Scorecard principles, significant gaps in innovation and growth hinder optimal service delivery, highlighting critical areas for improvement and strategic focus.
5.6 – The evaluation of performance measurement
The findings on the evaluation of performance measurement in the selected MFIs, presented in Table 14, indicated that the highest percentage of 80.95% of the respondents agreed that staff made regular follow up contacts and visits with existing customers.
Secondly, there was improvement in household incomes for the MFI customers. Thirdly, there was an increase in the number of customers coming for the services.
Fourthly, performance was measured by profits or loss generated by the MFIs, and fifthly, all processes took short time with high levels of accuracies.
Sixth, the low overhead & operating expenses experienced by the MFIs were a measure of performance of the MFIs. Seventh, a small percentage of 42.86% of the respondents agreed that staffs were often rewarded for good performance.
Finally, the lowest percentage of 38.09% of the respondents agreed that the MFIs offered regular staff training programmes
The findings on what the employees considered obstacles to improving performance measurement were presented in, Figure 20.
It was shown that the major obstacle was the inadequacy of funds, required for building capacity of the staff and other stakeholders, for providing loans to the customers on time, and for buying equipments such as computers, ATMs, and other relevant tools and equipments required for the MFIs.
5.7 – The evaluation of service delivery levels
According to the result presented in Table 15, the discussions on the evaluation of service delivery levels of the MFIs may be summarised into three areas namely: customer, employees, and finance.
The highest percentage of 85.72% of the respondents accepted that information was shared among staff and there was a high level of work coordination.
In addition, 80.95% of the respondents accepted that staffs provided fast services in accordance to customer needs. These two aspects directly relate employees to the customers.
Information sharing among the employees, and a high level of coordination are signs of highly motivated staff, consequently provision of service was fast and efficient.
However, a low percentage of the respondents, who accepted that the staffs were provided with the right tools and equipment, indicated a negative result.
That, it was not true that the staffs were provided with the right tools and equipment for their work. The major obstacles in improving the delivery of services, according to the findings were lack of funds, few staffs working in the selected MFIs, and lack of equipments.
5.8 – Linking Performance measurement and Service delivery
In section 4.7, it was found out that there was an average relationship between performance measurement and service delivery.
A model was derived to describe the association between the service delivery level as the dependent variable and the performance measurement as the independent variable.
The association was not a perfect linear model, since the Pearson’s correlation coefficient was found to be 0.521. (A perfect model requires the coefficient to be +1 or -1).
5.9 – Conclusions
The purpose of this study was to evaluate the performance of the microfinance institutions using the balanced scorecard approach, and Gulu district was chosen as a case for the study, because of its proximity to the researcher.
Applying the balanced scorecard in the evaluation of MFIs was appropriate given its blend of quantitative and qualitative measurements perspectives.
The balanced scorecard allows the MFIs to align its objectives and activities with the high-level objectives of the organization.
Based on the findings of this research it was clear that MFIs could have better performance and effective service delivery, if they used the BSC as a tool in the management of their organizations.
However, although most of the MFIs addressed nearly all the perspectives of the BSC, namely customer satisfaction, internal business processes, organisational growth, learning & innovations and financial, general weaknesses were seen in the areas of learning, growth, and innovation perspectives, in nearly all the MFIs selected for the study.
As a result, the employees’ welfare was not taken care of, yet they are the ones to make the internal business processes effective, and to the satisfaction of the customers and other stakeholders.
Customer satisfaction results into a good financial performance, such as prompt loan repayment, low overhead costs, rise in capital base etc.
In addition, the employees need to be provided with appropriate tools and equipments to improve the internal business processes.
It was also found out that there was a general acceptance that BSC was an appropriate tool to be used, however introducing the BSC, like any other new innovation or concept, requires a clear understanding of the concept, and this can be done by having a thorough training and involvement of staff and other stakeholders.
Apart from the training, appropriate performance measures need to be selected, and sufficient support by top management is a prerequisite, of introducing BSC.
The empirical results showed that the majority of the customers from the selected MFIs had secondary education, but there were some with primary, post secondary certificates, diploma, and University degrees.
This was in agreement with the literature review that the MFIs rarely serve very poor people, but instead they reach the « upper poor ».
It is also becoming a known fact that modern microfinance is broadening its target from ‘the poorest of the poor’ to all victims of financial exclusion.
The phenomenon of financial exclusion may be defined as ‘the inability to access financial services in an appropriate way’. The fight against extreme poverty has become part of a wider objective in the fight against financial exclusion.
The beneficiaries of the financial services are no longer restricted to poor people only, since the MFIs offer of products foresees other financial services and technical assistance, as well as micro credit, which may benefit the middle class people as well.
The research showed that the customers required sensitisation, through radio programmes, workshops, or seminars for them to join the MFIs.
Those customers, who had been with the MFIs for sometimes, needed some incentives such as having shares with the MFIs, so that they could have ownership attitudes towards the MFIs, and would be able to convince other non-members to join.
The strategy map that relates all the performance metrics, which were used for the study, is given in Appendix B, Figure 23. A Strategy map provides a visual macro view of an organization’s strategy.
It aligns the organization by articulating goals and initiatives that support those goals throughout the enterprise (SAS, 2007).
The researcher believes that the metrics indicated in the strategy map, if appropriately implemented, can help in aligning the MFIs to have an effective performance and efficient delivery of service, and subsequently to the satisfaction of customers and the stakeholders.
Frequently Asked Questions
What are the key findings on performance measurement in microfinance institutions in Gulu?
The key findings indicated that 80.95% of respondents agreed that staff made regular follow-up contacts with existing customers, there was improvement in household incomes, an increase in the number of customers, and low overhead & operating expenses were observed.
How does the Balanced Scorecard framework impact microfinance institutions’ performance in Gulu?
The Balanced Scorecard framework allows MFIs to align their objectives and activities with high-level organizational goals, blending quantitative and qualitative measurements to enhance performance and service delivery.
What obstacles do microfinance institutions face in improving service delivery?
The major obstacles identified were inadequacy of funds for building staff capacity, providing loans on time, and lack of equipment such as computers and ATMs.