Measuring the Performance and Achievement of Microfinance Institutions Incorporating Subsidy Dependence Index and Outreach Index in Pakistan's Case

• Published in: Pakistan development review 2015-12, Vol.54 (4), p.353-369
• Main Authors: Almas, Hina, Mukhtar, Mubashir
• Format: Article
• Language: English
• Subjects: Cost control; Cost recovery; Dependence; Economic growth; Evaluation; Indexation (Economics); Literature reviews; Microfinance; Microfinance institutions; Objectives; ON THE ROLE OF MICROFINANCE; Poverty; Product development; Rural areas; Self sufficiency; Society; Subsidies; Sustainability; Trends
• ISSN: 0030-9729
• DOI: 10.30541/v54i4i-iipp.353-369

Microfinance provides strength boosts the economic activities of low-income group people and thus contributes to the eradication of their poverty. Research has highlighted the vital role of microfmance institutions in reducing the sufferings of poor. Microfmance institutions strive to alleviate poverty at the risk of their own financial sustainability. In this regard Pakistani Microfinance institutions are also facing the problem of their financial sustainability while serving the poor people. This paper investigates the level of subsidy dependence and outreach for measuring microfmance institutions impact and poverty outreach. Moreover, this paper also compares subsidy dependence index and financial selfsufficiency index, explaining the objectives and limitations of each of them. Hence in this way, we can easily understand that of these two methods (SDI and FSS), which method is better than the other. While lot of research has been conducted in different countries to study this issue, but no such study have yet been done in Pakistan's context, especially in Rawalpindi/Islamabad. For this study we have focused on eight microfmance institutions. These institutions are working in Rawalpindi and Islamabad. Sample institutions comprise of seven conventional and one Islamic microfmance institution. Data for this research have been drawn from financial statements of microfmance institutions and mix market website, from 2006 to 2012. Findings of this study have thrown some light on microfmance institutions financial sustainability while fulfilment of their promise of poverty reduction. Thus we can say that the combination of subsidy dependence index and outreach index um play a vital role as regulatory and supervisory tool for microfmance institutions and it can enable microfmance institutions to fulfil their mission of poverty reduction while remaining financially sustainable themselves.