Measuring the Performance and Achievement of Social Objectives of Development Finance Institutions

This paper develops and tests a proposed
methodology that puts forward a new integrated method for
evaluating the performance of development finance
institutions. This methodology applies assessment criteria
that take into account both the social objective that the
development finance institution addresses and the subsidies
it received in order to achieve such an objective. This
methodology is applied to two pilot case studies-Banadesa
(Honduras) and Banrural (Guatemala). The authors calculate
the previously tested subsidy dependence index, which
measures the degree of an institution's subsidy
dependence. The paper develops and estimates a new
measure-the output index- which indicates the level to which
the institution fulfills the social objectives of the state.
The analysis integrates the subsidy dependence index and the
output index to assess the effectiveness associated with
meeting the social objective. The findings suggest that the
integration of the two indexes can constitute the basis of a
meaningful evaluation framework for the performance of
development finance institutions. This new methodology can
also be a useful metric for policy makers who are seeking to
decide on an optimal allocation of scarce funds for
development finance institutions that pursue social goals
and for management that seeks improved performance outcomes.