Assessing the overall performance of microfinance institutions

In recent years, there has been a growing interest in microfinance institutions (MFIs). Some studies assess the financial condition of MFIs on the basis of individual criteria while a few others attempt to explain differences in profitability on the basis of firm-level attributes and country-level characteristics. However, there is no widely accepted measure for assessing the performance of MFIs. The present study employs a two stage analysis. In the first stage, I propose the use of the PROMETHEE II multicriteria method. This allows the evaluation of the overall performance of the MFIs. In the second stage of the analysis, I use regression analysis to explain differences in the overall performance of the MFIs on the basis of various country-specific characteristics. The results show that the size of the MFIs has a robust non-linear, inverted U-shaped impact on overall performance. Age and the status of non-governmental institution also appear to matter. As it concerns the country-level attributes, GDP growth has a robust positive impact on overall performance. Regional differences also appear to matter.