Microfinance Product Costing Tool

June, 2004     Brigit Helms, Lorna Grace

CGAP developed and field tested this activity-based costing tool to help MFI managers understand and analyze individual product costs, especially administrative/organizational costs. Once a product's costs are determined, the tool suggests methods for understanding why and how the costs were incurred and how the product contributes (or not) to the overall financial viability of the MFI. Activity-based costing, the preferred method outlined in this tool, traces indirect costs in microfinance to core operational activities. It is a potent tool for identifying opportunities to improve business process effectiveness and efficiency.