Non-Financial Performance Measures on Local Culture Basis in Assessing The Health of Microfinance Institutions

Abstract

Objective - Health assessment on microfinance institutions was conducted through non-financial measurements consisted of assessment on general and risk managements. The assessment was commonly used to assess commercial banks. Microfinance institutions, however, are differed to commercial bank in terms of their closeness to the poor. The paper presented the development and analysis of non-financial performance measures using local culture basis that can be applied to properly assess microfinance institutions. Methodology/Technique - Qualitative study with ethnomethodology approach was applied to see cultural activities undertaken. Managers were considered as key informants. Results of qualitative study were analyzed using Fuzzy-Analytic Hierarchy Process method and Weighted Product Model was applied to weight the criteria and sub-criteria as well as the final assessment. Findings - Results showed that local culture activities that could be used to assess general management in microfinance institutions were providing assistance in establishing places of worship, supporting religious activities, supporting the development of facilities and infrastructures in the villages, relief activities of cultural festival, helping in funeral, wedding favors, educational assistance, medical assistance, forming arts groups, and business group. Novelty - This study suggests that non-financial performance measurements can use local culture and facilitate the management of microfinance institutions to perform performance measurement Type of Paper - Empirical Keywords: Non-Financial; Performance Measures; Local Culture; Microfinance Institutions. JEL Classification: G21, G31.

Credit Risk Management Based on Harmonious Cultural Values to Support Microfinance Institution Performance in Indonesia

“…Traditional leaders actively conducted meeting with managers regarding loan or other matters related to the progress of microfinance institutions, customsand religion. The role of traditional leaders in reducing credit risk through supervision had significant influence (Said et al, 2016;Alonso, 2015;Mitrovi, 2015;Lay, 2016;Astawa et al, 2017). An interesting finding in other indicators was the existence of belief element or a cultural value called karma law which means good deeds lead to good results.…”

“…Organizational culture followed by microfinance institutions is originated from local cultures in Indonesia called by harmonious culture. The harmonious culture gives emphasize on the harmonious relationship between microfinance institution and God (parahyangan) as the creator of the universe through various religious and indigenous activities (Astawa, Sudana, & Murni, 2017;Sukawati & Astawa, 2017;. Two other harmonious relationships are maintaining the relationship between microfinance institution and the employees, customers, and environment.…”

“…Two other harmonious relationships are maintaining the relationship between microfinance institution and the employees, customers, and environment. The harmonious culture has become an organizational culture in microfinance institution and has a significant impact on company performance (Astawa et al, 2017, Sukawati & Astawa, 2017 and is used as a strategy to win the competition with general banks. The ability to win the competition is based on the ability of the companies to adjust their resources to give the best service to the consumers.…”

“…Previous researches on this condition found an element of risk management. Risk management is a part of performance appraisal that is crucial to be noted by microfinance institutions since it consists of various risks such as liquidity risk, market risk, credit risk, operational risk, legal risk, owner reputation risk and last obedience risk (Rozzani, Mohamed, & Yusuf, 2017;Astawa, Sudana, & Murni, 2017;Hussain et al, 2012;Churchill & Coster, 2001). The control of and reputation (Khan & Ashta, 2013).…”