Evaluation of Financial and Social Aspects of Local Microfinance Funds in Bahkharz County Based on Social Entrepreneurship Approach

Local microfinance institutions (MFIs) are financial entities that play a significant role in local economic and social development by providing micro-loans to low-income individuals and businesses. This article examines the performance of microfinance institutions in the city of Bakharz and evaluates their financial and social impact, focusing on social entrepreneurship. Social entrepreneurship encompasses businesses primarily aimed at solving social and environmental problems. Microfinance institutions support this type of entrepreneurship by providing financial assistance, training, and guidance. The evaluation of these institutions encompasses both financial and social aspects. Financial evaluation focuses on sustainability, profitability, and risk management, while social evaluation assesses the institutions impact on the community, including poverty reduction, job creation, and empowerment. An evaluation of 52 microfinance institutions (MFIs) in the city of Bakharz, spanning from June 2022 to October 2024, revealed positive impacts at the rural community level. Social impact grew by 15.1%, while economic impact increased by 5.56% during this period. Strategies like diversifying funding sources, improving risk management, and reducing operational costs can contribute to the sustainability of microfinance institutions. Ultimately, local MFIs, by supporting social entrepreneurship and conducting thorough performance assessments, can play a significant role in developing local communities and improving the lives of low-income individuals. This article, using a comprehensive evaluation framework, assists managers and policymakers in improving the performance of microfinance institutions and enhancing their impact.