Limitations of the Theories of Nonprofits and Benchmarking Services Delivery Dimensions of Poverty-Reduction Programs in Rural Bangladesh

Abstract

Even though both contract failure and consumer control theories of nonprofits stress the need for monitoring the performance of the firms, these models fail to offer any guidelines on how to do so. In general, the performance of poverty-reduction projects are assessed on amounts of loan disbursement, repayment rates, area of coverage, and financial sustainability. However, performance assessment based on the efficiency of service delivery has in the past been ignored even though the importance of efficient service delivery in poverty-reduction programs is well recognized in the literature and in the theories of nonprofits. Due to this specific lacuna, benchmarking in the aspects of efficient service delivery has never been applied. Based on primary data collected from 78 villages in Bangladesh from September to December 2009, this article develops a two-dimensional multi-item service delivery index to compare the efficiency of participating organizations in the stated programs in order to set industry benchmark values for each item of the index.

Keywords:

• benchmark
• poverty alleviation
• government
• nongovernmental organization
• Bangladesh

Notes

1. The original idea of this theory was first developed by Nelson and Krashinsky (1973).

2. These are nonprofits that receive little income from donation and derive all or nearly all their income from prices they charge for services they produce and sell. In the microcredit sector, these institutions can be exemplified as those who have credit-driven projects.

3. Governments enable private provision but should minimize their direct role in the economy; because of their supposed cost effectiveness in reaching those who are poorest, official agencies support NGOs in providing welfare services to those who cannot be reached through markets (Fowler, 1993; Meyer, 1992).

4. There is evidence to show that beneficiaries are borrowing credit from one microfinance institute to repay the interest burden of another, thus a higher rate of repayment is not a valid measure of the efficiency of service providers (Goldin Institute, 2007).

5. For details, see Saul (2004).

6. Furthermore, Hossain (2009) showed that between 2004 and 2007, 30% of households were unable to rise above the poverty line and another 19.2% of people moved from being nonpoor to poor.

7. This contains industry referenced service delivery items.

8. Data for index development was collected through Bengali (local language) questionnaire.

9. For details, see http://www.eldis.org/vfile/upload/1/document/0901/section4_2.pdf.

10. Respondents were chosen randomly from the districts where literacy rate is lower than 50% (the national rate is 52%). Respondents were chosen randomly. Questions were read to those respondents who were found illiterate. None of the respondents were dropped because of their illiteracy as it is common that many of the credit recipients can write their name only.

11. An acceptable range of MSA is above 0.50 (Hair, Black, Babin, & Anderson, 2009, p. 132).

12. Similar rules were followed in the marketing literature by Shimp and Sharma (1987); Bawa (2004); in the psychology literature by MacCallum and Austin (2000); and in the research methodology literature by Hair et al. (2009).

13. According to Hair et al. (2009), 0.30 is a suggested factor loading if sample size is 350 or above. However, considering 0.50 as the minimum loading value for item acceptance would be an indication of better fit.

14. CFI = 0.906, RMSEA = 0.073, Hoelters are 153 and 166, AIC and ECVI values are still larger than the saturated model.

15. As there are no such standard values available in literature, the findings of our study can reasonably be the starting point.

16. Report of Microcredit Regulatory Authority (2011).

17. It has been observed that development expenditure on housing, education, health, and family planning by the Government of Bangladesh drastically increased to 26.63% in the 1990s from 12.88% in the 1980s (World Bank, 1991; Bangladesh Bureau of Statistics, 2002).