Can microfinance performance evaluation reveal hidden strengths and weaknesses? This study uncovers how Gulu District’s microfinance institutions utilize the Balanced Scorecard framework, highlighting critical insights into their operational effectiveness and areas needing improvement, reshaping our understanding of performance measurement in this sector.
4.6 – Evaluation of performance measurement
This sub section presents the findings related to the second objective of this study. It is to give answers to the research question; « What are the levels of performance in each of the selected organisation? ». To answer this question, the researcher designed eight (8) closed-ended questionnaires, and two (2) open-ended questionnaires, just like in Section 4.5.
The questionnaires were used in getting responses from the employees. The results of the findings are presented in Table 14.
Table 14 – Evaluation of level of performance
| Table 14 – Evaluation of level of performance | |
|---|---|
| Parameter/Criteria | Description/Value |
| Performance measurement metrics | Increase in number of customers, satisfaction levels, improvement in livelihood, staff training and rewards, internal business processes, profits/losses, overhead costs and operating expenses |
| Average agreement rate | 60.12% (45.24% agreed + 14.88% strongly agreed) |
| Disagreement rate | 29.16% (10.71% strongly disagreed + 18.45% disagreed) |
| Undecided rate | 10.71% |
Source: Research data August 2007
The table consists of the performance measurement metrics, which were selected for the study, to give quantitative measures of the performance of the selected MFIs. According to the table, performances of the MFIs were measured or evaluated in terms of increase in the number of customers, their satisfaction levels, and improvement in their livelihood, regular and appropriate staff training and rewards.
Fast and efficient internal business processes, profits or losses, then low overhead costs and operating expenses. All these performance metrics are also components of the balanced scorecard four perspectives, and components of the « Critical Microfinance triangle » as were seen in the literature review.
On the average, 60.12 % of the respondents agreed (45.24% agreed & 14.88% strongly agreed) that the selected performance metrics were in use, showing that the performance level of the MFIs was slightly above average, whereas 29.16% disagreed (10.71% strongly disagreed & 18.45% disagreed) and 10.71% were undecided.
According to the table, two notable negative factors, which brought down the performance level, was on, The MFIs offer regular staff training programmes, in which 38.09% of the respondents agreed (33.33% agreed & 4.76% strongly agreed) whereas 42.86% of the respondents disagreed (28.57% strongly disagreed & 14.29% disagreed) and 19.05% were undecided.
Secondly, the metric, Staffs were often rewarded for good performance, in which, 42.86% of the respondents agreed whereas 47.62% disagreed (28.57% strongly disagreed & 19.05% disagreed), and 9.52% were undecided.
The highest percentage of 80.96% of the respondents agreed (66.67% agreed & 14.29% strongly agreed) that the staff made regular follow up contacts and visits with the existing customers. Another 80.95% of the respondents agreed (57.14% agreed & 23.81% strongly agreed) that there was improvement in household incomes for the MFI customers.
Then 76.19% of the respondents agreed (33.33% agreed & 42.86% strongly agreed) that there was increase in the number of customers coming for the services. Also 57.14% agreed (33.33% agreed & 23.81% strongly agreed) that performance was measured by profits or loss generated by the MFI, and 52.38% agreed (47.62% agreed & 4.76% strongly agreed) that low overheads & operating expenses was a measure of good performance in the MFI, and that all processes took short times with high level of accuracies.
Then 47.62% disagreed (28.57% strongly disagreed & 19.05% disagreed) the statement that staffs were often rewarded for good performance.
This result showed that the performance of the MFIs depended more on the non-financial metrics such as improvement in household incomes, increase in the number of customers and regular follow up contacts of employees to the customers than on the financial metrics such as generation of profits or losses.
In the second part of the second objective, an open-ended question was given to the respondents for qualitative analysis as follows; « What do you perceive to be the biggest obstacle to improving performance in this organisation, and what suggestions do you have to overcome the obstacle? ». The result obtained from the responses is shown Figure 20.
Figure 20 – Obstacle to improving performance
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Source: Research data August 2007
The figure indicates that, 47.6% of the respondents stated that the MFIs had inadequate funding, 19.0% of the respondents did not respond, and the remaining percentage was distributed among the seven remaining responses, with an average score of about 4.8%.
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Frequently Asked Questions
What metrics are used to evaluate the performance of microfinance institutions in Gulu?
Performance measurement metrics include increase in the number of customers, satisfaction levels, improvement in livelihood, staff training and rewards, internal business processes, profits/losses, overhead costs, and operating expenses.
What percentage of respondents agreed that performance metrics were in use by the MFIs?
On average, 60.12% of the respondents agreed that the selected performance metrics were in use, indicating that the performance level of the MFIs was slightly above average.
Which factors negatively impacted the performance levels of microfinance institutions?
Two notable negative factors were the regularity of staff training programs and the frequency of staff rewards for good performance, with 42.86% of respondents disagreeing that staff were often rewarded for good performance.