MICROBANKING BULLETIN - Microfinance Information Exchange

APPENDICESStatistical IssuesThe Bulletin reports the means and standarddeviations of the performance indicators for eachpeer group. At this stage, peer groups are stillsmall and the observations in each peer groupshow a high variation. Outliers distort the results ofsome of the peer group averages. Consequently,the reader should be cautious about the interpretivepower of these data. Over time, as more MFIsprovide data, we will be in a better position togenerate deeper and more sophisticated types ofanalyses of the data at our disposal, and will have ahigher degree of comfort with the statisticalsignificance of the differences between the meansof the distinct peer groups.To ensure that the averages reported represent thegroup as accurately as possible, we have excludedoutliers for each of the indicators. Statistics for thecategory All MFIs were calculated by deletingobservations in the first and last deciles for eachindicator. In other words, the values between the11th and 89th percentiles were used for theanalysis. For the FSS sample and peer groupcalculations, the first and last percentileobservations were excluded for each indicatorexcept macroeconomic indicators. The averagesare calculated on the basis of the values betweenthe 2nd and the 99th percentiles for each group. Ineffect, for each indicator we rank the MFIs in thegroup and eliminate the top and bottom values. Inmost cases, this exclusion eliminates twoobservations for each peer group: the institutionwith the highest and the lowest value on eachindicator. In cases where indicators containobservations with tied values for highest and lowestvalues, more than two observations are deleted.For this reason, we have reported the sample sizefor each group and indicator on the tables. Wherethe sample size is reduced to n=1, we have notreported the result so as to maintain confidentiality.This method helps to prevent outliers fromdominating group results, and smoothes the data byminimizing data dispersion.We have carried out statistical tests to determinethe impact of outliers where they exist, and toquantify the results in terms of how well theyrepresent the peer groups. Where large differencesexist between the means of different peer groups orgroups sorted by selection criteria, we have verifiedtheir statistical significance using t-tests. Thesetests compare the mean of the group to the mean ofall MFIs in the sample, taking into account factorslike the number of observations and the dispersionof the sample. The test statistic is then comparedto a standard critical level (using 5 percent as thesignificance level) to decide whether the differencebetween the group and the sample as a whole isstatistically significant. In other words, they allowus to decide whether the difference we see isrobust, by considering it in the context of howcohesive and how large the group is.58 MICROBANKING BULLETIN, SEPTEMBER 2000