Research & Analysis

Cost Allocation for Multi-Service Microfinance Institutions

Using examples from the field and an actual MFI (BRAC), the paper explores alternative answers to a series of questions that MFI managers should ask themselves regarding the allocation of costs and assets among cost centers and the impact of cost allocation on the financial statements of multi-service MFIs. Many multi-service MFIs have realized the importance of creating distinct cost centers for their financial and non-financial programs. Separating the financial statements into cost centers facilitates analysis of past and current financial performance of microfinance services and provides a basis for business planning and projections.