The Effectiveness of Balanced Scorecard in Measuring the Performance of Islamic Microfinance Institutions

EasyChair Preprint 14766

Abstract

Islamic Microfinance Institutions (IMFIs) play a critical role in fostering financial inclusion and supporting socio-economic development, particularly in underbanked communities. Given the unique ethical and operational principles governing these institutions, traditional performance measurement tools may fall short in providing a comprehensive evaluation of their success. This abstract explores the effectiveness of the Balanced Scorecard (BSC) framework in measuring the performance of Islamic Microfinance Institutions, considering both financial and non-financial metrics that align with the principles of Islamic finance.

The Balanced Scorecard is a strategic performance management tool that evaluates organizational success across four key perspectives: financial, customer, internal business processes, and learning and growth. In the context of Islamic Microfinance, these perspectives require adaptation to capture the ethical and social objectives central to Shariah-compliant operations, such as poverty alleviation, social justice, and equitable financial practices.

This study adopts a mixed-methods approach, integrating both qualitative and quantitative analyses to assess the applicability of the Balanced Scorecard in the Islamic microfinance sector. The research identifies specific performance indicators within each of the four BSC perspectives, tailored to the operational realities and objectives of IMFIs. Financial metrics, for instance, emphasize profit-sharing models and zakat distribution, while customer satisfaction is evaluated in terms of outreach to low-income communities and the adherence to Islamic financial principles. The internal business process perspective focuses on the efficiency of Shariah governance frameworks and the ability to deliver ethical financial products. Finally, the learning and growth perspective is assessed through the development of human capital and the promotion of Islamic financial literacy.

Keyphrases: Balanced Scorecard, Financial Inclusion, Islamic Microfinance, Shariah Compliance, Strategic Management, Zakat, performance measurement, profit sharing, social justice, socio-economic development

@booklet{EasyChair:14766,
  author    = {Axel Egon},
  title     = {The Effectiveness of Balanced Scorecard in Measuring the Performance of Islamic Microfinance Institutions},
  howpublished = {EasyChair Preprint 14766},
  year      = {EasyChair, 2024}}