Microfinance holds a big promise to generate income and employment and alleviate poverty in the developing countries. The Microfinance Institutions (MFIs) are financial institutions with a primary objective of making credit available to that segment of the population, which has been ignored by the commercial banking system for not having collateral requirements. The efficient functioning of these MFIs on a sustainable basis is important but for MFIs it is equally important that people at or below the poverty line are reached, quality services are provided, and that microfinance improves clients' lives. Financial sustainability does not ensure the automatic fulfillment of social objectives expected of a typical MFI. In other words, both financial performance and social performance matter. This paper discusses the emerging importance of social performance in microfinance and reviews some of the assessment tools recently developed. The study makes an attempt to assess the social performance of an MFI situated in the state of Jharkhand, using the social rating methodology developed by M-CRIL, the world's leading microfinance rating agency. Finally, the study recommends some guidelines for the MFIs in India to enable them to implement social reporting in their organizations and institutionalize social performance management. [ABSTRACT FROM AUTHOR]