Evaluating the application of a balanced scorecard by a development finance institution : a case study

Abstract

Development finance institutions (DFIs) play a significant role in the development finance industry. DFIs mainly focus on the funding of economic development initiatives which targets the reduction of unemployment; addressing inequality; women empowerment; and poverty alleviation, amongst others. These institutions are usually majority-owned by national governments, source their capital from the national- and international markets, and they also receive government grants and guarantees. These sources of capital require the DFIs to pursue both the profit- and development objectives, in their ongoing drive to create value for their stakeholders. To achieve these sometimes-contradicting objectives, DFIs design, implement and measure the performance of their strategies. The Balanced Scorecard tool measures the performance on their strategies and it incorporates both the financial- and non-financial measures. The purpose of this study is to evaluate how a DFI perceives the application of the BSC as a strategic management- and a performance measurement tool. The appropriate theoretical framework the study was nested in, is the stakeholder theory. The study adopts a qualitative case study approach of a DFI, located in South Africa. The literature review conducted focused on strategic management, performance measurement and the Balanced Scorecard. The empirical study entailed face-to-face semi-structured interviews with five participants from the DFI using a newly-developed questionnaire. The results of the empirical study were grouped into themes identified during the interviews and literature review. The findings indicate that in their attempt to meet the ever-growing demands of the Small-, Medium-, and Micro Enterprises, DFIs face the challenge of conducting their business in a financially sustainable manner. Furthermore, the application of a BSC as strategic management- and a performance measurement tool by a DFI is perceived to be effective. It is recommended that the DFI improves the communication of the BSC tool within departments to ensure that there is a consistent understanding and application of the tool.