What if the theoretical framework for microfinance could redefine performance metrics? This study uncovers surprising insights from Gulu District’s microfinance institutions, revealing how the Balanced Scorecard’s principles are applied, alongside critical weaknesses that could hinder growth and innovation.
4.5 – Establishing extent of the use of BSC
This sub section presents the findings related to the first objective of this study. It is to answer to the research question; “To what extent do the selected MFIs use BSC in the management of their organisations?”. To answer this question, the researcher designed eight (8) closed-ended questionnaires, and two (2) open-ended questionnaires, which were used to collect responses from the employees.
The respondents were given the opportunities to choose appropriate responses using the Likert’s scale in the range 1 to 5 corresponding to “Strongly disagree”, “Disagree”, “Undecided”, “Agree”, and “Strongly agree from the eight (8) closed-ended questionnaires. The results of the findings are presented in Table 13.
According to the table, the given variables adequately represent the four perspectives of the balanced scorecard. For example variable 1,3 & 8 represents the financial perspective, variable 2 & 7 represent customer perspective, variable 3 represents customer perspective, variable 4 & 6 represent learning, growth & innovation, and variable 5 & 8 represent internal business processes.
The variables used for the study also interlink all the four perspectives of the BSC as can be seen from the table. The variables may also be summarised as follows; vision & strategies for an organisation are met through meeting financial outcome goals of the organisation. The financial gains or success can be achieved, if the customers are satisfied.
Both customer satisfaction and financial outcomes come due to effective and efficient internal business process management. Then effective internal business processes come when there is intensive staff learning, innovations, and growth processes.
Table 13 – Extent of the use of Balanced Scorecard
| Table 13 – Extent of the use of Balanced Scorecard | |
|---|---|
| Parameter/Criteria | Description/Value |
| Financial Perspective | Variables 1, 3 & 8 |
| Customer Perspective | Variables 2 & 7 |
| Learning, Growth & Innovation | Variables 4 & 6 |
| Internal Business Processes | Variables 5 & 8 |
Source: Research data August 2007
The results from the table shows that, an average of 67.26% of the respondents agreed (49.40% agreed & 17.86% strongly agreed), and 18.45% disagreed (7.74% strongly disagreed & 10.71% disagreed). Then 14.29% of the respondents were undecided. This result may be interpreted to mean that, the extent of the use of BSC was not very high. This arose because of the high percentage of disagreements on some of the variables.
According to the table, 38.10% disagreed (23.81% strongly disagreed & 14.29% disagreed) that, low percentage of clients dropouts or inactive clients was related to good customer care and service, whereas 47.62% agreed (33.33% agreed & 14.29% strongly agreed), and 14.29% were undecided on this metric, probably because the respondents did not understand the statement clearly.
In addition, 57.14% agreed (33.33% agreed & 23.81% strongly agreed) that effective loan recovery was related to customer satisfaction and effective internal business processes, whereas 38.10% disagreed (14.29% strongly disagreed & 23.81% disagreed), and 4.76% were undecided. This was also fairly positive result.
Other positive results were, 80.95% of the respondents agreed (52.38% agreed and 28.57% strongly agreed) that, increases in the number of customers in the MFIs were a result of a good internal business process management, 76.19% agreed that, there was improvement in both customer satisfaction and financial outcomes due to effective and efficient internal business process management.
Another 76.19% agreed (47.62% agreed & 28.57% strongly agreed) that good financial outcomes were realised because customer satisfaction measures were being met. Then 71.43% agreed (47.62% agreed & 23.81% strongly agreed) that competence, quality of staff and employee satisfaction were related to learning and growth in the organisation.
Another 71.42% agreed (61.90% agreed & 9.52% strongly agreed) that learning and growth aspects were focused on improving internal business processes in order to improve output goals. Then 57.15% agreed (42.86% agreed & 14.29% strongly agreed) that vision & strategies were met through meeting financial outcome goals of the organisation.
In the second part of the first objective, two open-ended questions were given to the respondents. The first question was to find out whether it was appropriate to use BSC in their organisations. Then secondly, to find what measures to be adopted, in order to make BSC practicable. The results of the responses are presented in Figure 19.
Figure 19 – Appropriateness of using BSC & measures adopted
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Source: Research data August 2007
The figure show that, 76.2% of the respondents agreed that BSC was appropriate for use in their organisations, whereas 14.3% did not respond, and 9.5% disagreed.
On the measures to be adopted, the respondents generally indicated that, before such a concept was used, sensitisation and training should be given to the staff and other stakeholders, so that they have the implementation capacity. Also that, a thorough evaluation should be done to assess its effectiveness before it was put into use.
Frequently Asked Questions
How do microfinance institutions in Gulu use the Balanced Scorecard?
The extent of the use of BSC among selected MFIs in Gulu was not very high, with an average of 67.26% of respondents agreeing that BSC principles were used, indicating some indirect application of its principles.
What are the perspectives of the Balanced Scorecard used in the study?
The study identified four perspectives of the Balanced Scorecard: financial perspective (variables 1, 3 & 8), customer perspective (variables 2 & 7), learning, growth & innovation (variables 4 & 6), and internal business processes (variables 5 & 8).
What challenges did the microfinance institutions face regarding learning and growth?
Weaknesses were identified in the learning, growth, and innovation perspectives, which affected the overall service delivery and performance levels of the microfinance institutions.