Microfinance holds a big promise to generate income and employment and alleviate poverty in the developing countries. The Microfinance Institutions (MFIs) are financial institutions with a primary objective of making credit available to that segment of the population, which has been ignored by the commercial banking system for not having collateral requirements. The efficient functioning of these MFIs on a sustainable basis is important but for MFIs it is equally important that people at or below the poverty line are reached, quality services are provided, and that microfinance improves clients' lives. Financial sustainability does not ensure the automatic fulfillment of social objectives expected of a typical MFI. In other words, both financial performance and social performance matter. This paper discusses the emerging importance of social performance in microfinance and reviews some of the assessment tools recently developed. The study makes an attempt to assess the social performance of an MFI situated in the state of Jharkhand, using the social rating methodology developed by M-CRIL, the world's leading microfinance rating agency. Finally, the study recommends some guidelines for the MFIs in India to enable them to implement social reporting in their organizations and institutionalize social performance management.

The age old saying, `India is a rich country where poor people live', still holds good. In the present era there is a need for practical and workable solutions to improve the socioeconomic conditions of the poor in India, thereby helping in wiping out the deep-rooted problem of poverty. Microfinance practices in India seem to provide such a solution. The Task Force on Supportive Policy and Regulatory Framework for Microfinance constituted by NABARD defined microfinance as "the provision of thrift, saving, credit, and financial services and products of very small amount to the poor in rural, semi-urban, and urban areas for enabling them to raise their income levels and improve their standard of living".

In microfinance, performance has long been associated with financial outcomes. The measures of financial performance have been tested, revised, refined, and largely standardized across the industry. Yet, such progress in measurement, though considerable, tells only half of the performance story in microfinance. As a social enterprise, an MFI must achieve both the goals-social as well as financial performance. Different MFIs may articulate slightly different social goals or mission statements. However, there is a general agreement that social goals in microfinance generally include serving poor people, serving people otherwise excluded from formal financial services, providing appropriate financial services, contributing to employment, contributing to poverty reduction. Thus, there is an increasing attention among MFIs to meet both financial and social goals, thereby managing a double bottom line.

Applied Finance Journal, Financial Services, Commercial Banking System, Social Performance Management, Microfinance Information Exchange, MIX, Balanced Scorecard, Social Performance Assessment, Social Metrics, Management Information System, MIS, Self-Help Groups, SHG, Micro Credit Ratings.