Thirty years into the movement, it might seem strangethat researchers are still asking whether microfinance reduces poverty. In fact, by the standards used to judge whether drugs are safe and effective in the bloodstreams of people, the safety and effectiveness of microfinance injected into the fabric of villages and barrios remains unproven. Somewhat by chance, 2009 is turning out to be a pivotal year in the study of the impacts of microfinance. A new generation of studies is emerging that promises to give us a clearer view of the effects.
Few doubt that financial services have helped some poor people permanently improve their circumstances. What’s unclear is whether microfinance reduces poverty on average. The worry is that microcredit in particular might leave some people worse off, just as in rich countries credit cards and mortgages have. (Savings and money transfer services cause less concern.)
Lack of Solid Evidence So Far
Over the years, academics and evaluators have conducted many studies on the impact of microfinance, especially microcredit. Yet the average effect is still unknown because nearly all studies to date share a serious shortcoming: when studying complex social systems such as families and communities, it is extremely hard to use a correlation to prove a causation. If affluence and microcredit go hand-in-hand, does that mean that the better-off borrow more or that borrowing makes people better off?
Much of econometrics consists of devising mathematical techniques to address this challenge. Despite the rigorous mathematics involved, these methods often fail: even when econometricians have done the best they can with the data they have, it has typically not sufficed to prove that A causes B instead of B causing A. Indeed, the complexity of the latest techniques sometimes only makes it harder to detect the failures.
In a new paper, Jonathan Morduch and I make this point with respect to what were historically the leading studies of microcredit's impacts. We replicated threenotedstudies of data from Bangladesh in the 1990s, including one by Morduch. That is, we applied the original methods to the original data in order to scrutinize these influential analyses on our computers. In the case of the most prestigious of these (the 1998 study by Pitt and Khandker), which Muhammad Yunus has indirectly cited as showing that 5 percent of Grameen borrowers climb out of poverty each year, we arrived at the opposite result of the paper. Seemingly, lending microcredit to women made their families poorer. We ran additional statistical tests to further examine the discrepancy. Our results question key assumptions behind the original claims that microcredit was affecting household spending and not the other way around. The negative relationship we found may arise from women in richer households taking less (or no) microcredit.
Should such findings drive us to nihilism? Should we dismiss all statistical studies of microfinance's impacts? Not quite. One method of study rises above the controversies over causality: randomized controlled trials (RCTs), which randomly offer some people a service while withholding it from others (at least temporarily). What sets RCTs apart, and what made them the gold standard for drug trials, is that they introduce a source of variation into the world that is independent of everything else. If women randomly offered microcredit earn more money years later than those not offered, the only creditable explanation is that microcredit made the difference.
Emerging Randomized Control Trials
South Africa: The first RCT study on loans to the poor appeared in 2006—though the loans in question might not fit your definitions of microcredit. Yale’s Dean Karlan and Dartmouth’s Jonathan Zinman worked with a cash lender, not unlike a payday lender in the United States, to randomly “unreject” some applicants whose scores from an automated credit rating system fell below the acceptance threshold. Six to twelve months after they applied for the four-month loans, unrejected applicants were 10 percentage points more likely to have a job, 7 points less likely to be below the poverty line, and 6 points less likely to report that someone in the household had gone to bed hungry in the last month than those rejected.
Philippines: Karlan and Zinman did a similar study of individual microcredit in Manila; this time, however, the sample was middle class. The study produced strikingly different results, which just appeared in July 2009. The authors found no changes in household income, spending, or diet 1–2 years later. Borrowers did appear to cut back on some types of spending, including paid helpers, health insurance, and home improvements, perhaps because of belt-tightening at the beginning of new, loan-enabled investments.
India: Another new study does focus on people usually thought of as microcredit targets. Researchers at the Jameel Poverty Action Lab (J-PAL) worked with Spandana to randomize the district-by-district order of Spandana’s expansion into the Indian city of Hyderabad. Household spending averaged about $1/day among the study subjects. Following up some 15–18 months after credit was offered, the researchers found no impact on total income, spending, health, or school enrollment rates. They did find that microcredit boosted profits for families that already had a business. And those deemed most likely from the outset to start their first business, as indicated by having more land or more working-age or literate women, in fact did so more in the districts with microcredit offerings.
Kenya: The brightest spot in the new research has also been the least heralded—a trial of savings undertaken by two economists just finishing their dissertations. Pascaline Dupas and Jonathan Robinson worked with a cooperative in Kenya to offer savings accounts to vendors in a market town on the road linking Kampala to Nairobi. The study was also original in using diaries rather than a one-off follow-up survey to track subjects’ financial transactions. Despite the small sample—122 people were randomly offered an account and 67 took it—the researchers found significant impacts, on women. The accounts appeared to help them accumulate money for investments such as stock for their stores, leading eventually to greater prosperity. Unclear is whether the accounts, which charge significant fees to discourage withdrawals, helped women save by giving them more control over their own spending impulses, or by giving them a way to deflect family requests for money.
Conclusion
Surveying these new works, it becomes apparent how fragmentary are the insights they offer. We have just one strong study of group credit for the truly poor, for instance, and it only shows us effects about one year out. Claims that microcredit is a proven anti-poverty intervention thus seem dubious. But more RCTs are coming, and they will paint a fuller picture.
That said, our judgment of the impacts of microfinance should not stand or fall solely on whether studies prove that it systematically reduces poverty. Can tens of million clients be wrong? In my book, I am also looking at microfinance through Amartya Sen’s “development as freedom” lens, which leads to a focus on when microfinance gives people more control over their lives and when less. I also consider the “development as institution-building” perspective, in which the great contribution of microfinance is the enrichment of the institutional fabric of nations. Statistical studies are important, but they do not substitute for deeper reflections on the process of development and how financial services can contribute to it.
The study of Roodman, D.is revealing as it shatters the belief that microfinance is the panacia of all ills of the poor the world over. However, the experience of certain other programmes of agriculture development, watershed development, dairy cooperative movement, etc., in India show that if an economic activity (livelihood activity) is combined with microfinance the results will be good. There are success stories where watershed development has converted a dry village (which was dependent on government tankers for drinking water) into a milk exporting village. which in turn has led to prosperity of the village community.Thus microfinance per-se may not be adequate for eliminating or even reducing poverty but it can greatly help if combined with well planned livelihood activities.
Dilip Deshpande NABARD India
30 Jan 2010
About Microfinance
I'm a student researching profit driven investment in microfinance and if profit driven investment in microfinance reduces poverty. After reading through the various discussions, my question concerns this recent debate. Does profit driven investment through microfinance reduce poverty? Thoughts?
Cambodia
29 Nov 2009
POVERTY ALLEVIATION
Micro finance bank,is essential in any economy,the poor in the society can borrow money through the micro finance bank
Tochukwu Ezeifekwuaba Student Nigeria
31 Oct 2009
A community perspective rather than an organization or family view.
In my experience, over a period of more than four decades ... development performance has been mixed from very good to awful ... with no statistically significant reasons for the differences in performance. On the other hand each example of performance had solid reasons for the outcome which any good manager would easily observe. When these individual experiences are aggregated or averaged ... the result is meaningless.
The development community ... of which the microfinance community is part ... seems to be trying to do this aggregating and averaging and then wonders why the answers are not clear.
My own view is that we need to start looking at socio-economic performance from the community perspective ... and how MFIs and all the other economic actors in the community are performing in this context ... to appreciate what is working and good and what is not.
I have a lot of strong ... and perhaps unconventional view about performance metrics and how it is best done. One idea that I find very helpful is to relate actual performance to what it would be reasonable to have expected ... if you will, in corporate accounting speak, a standard actual comparison. In my view MFIs working in a tough poor environment should not be expected to have the same financial performance metrics as the MFIs working in an easier economic environment.
This is a big subject ... but so far not much of the dialog has the perspective I am looking for.
Peter Burgess Tr-Ac-Net United States
28 Oct 2009
MFI's Objective
According to me impact of MFIs operation on poverty reduction depends to a great extent on the objective and approach that an MFI adopts while conducting its operations. Recently this bottom of the pyramid market has become a happy hunting ground for commercial investments. Such commercialisation of this industry coupled with growth phase (industry life cycle) has led to overleveraged clients who are being carpet bombed with loans from various institutions. This has made borrowers to fall into debt trap by generating an artificial need for credit amongst them and they are merely adjusting cash flows through loans from multiple MFIs.
I would like to conclude by saying that social and commercial objectives of microfinancing cannot go hand in hand. A target driven commercially viable entity will hardly make any difference to lives of poor people if not leave them worse off. Although exceptions are always there.
Raunak Kapoor Spandana Microfinance India
15 Oct 2009
There is no perfect tool and also solution
A plethora of methodologies and econometric tools have been used to study impact of mF on proverty reduction. But, each one has certain merits and limitations as selection of tools depends upon the area (country, region, district etc), the target people to be studied, institutional arrangements available, time and other resources available to the researcher. Therefore, it may be difficult to say one methodology / set of tools is correct and another one incorrect. But, as for its impact on poverty reduction, I agree with the comments dated 06/09/09 of Mr Salaluddin Ahmed of BRAC. MF is only a process. Wherever market driven income generating activities are undertaken by the users of mF, the poverty reduction is higher. On the other hand, if mF is taken mainly for consumption purposes, the poverty reduction will be negligible. I also agree with Mr Varadarajan Rengarajan that where 'Social Capital' is strong, the effects are positive and more visible.
Srinivasan Santhanam India
12 Oct 2009
Microfinance and Poverty Reduction
In this complex global environment, generating economic growth in developing countries while reducing poverty is a fundamental development challenge. Providing financial services which includes (credit, deposits, insurance, money transfers) to poor people is clearly an important means to help improve their livelihoods but not the panacea for poverty reduction. This is also about creating an environment in which people can develop their full potential and lead productive, creative lives in accord with their needs and interests. The question many are asking is what the primary objective of MFI's are. It is becoming more profit-driven than an a genuine attempt to provide opportunities for the poor and marginalized. What about non-financial services such as social development needs? It is important to note that poor people are capable of driving their own life's path into success when an enabling environment and the right opportunities exist.
United States
22 Sep 2009
...
Dear peter: you are probably right. I may add, that mixing social (incl. training) with financial services has been identified as counterproductive for both aspects since the mid/late seventies. rgds
jan ennenbach Germany
22 Sep 2009
Let's make things easier
Dear all, why not make things easier for all of us. Money and financial services are only useful when they bear stable value and when they give people a choice, a free and clear choice that produces rights and obligations for all concerned. If an MFI earns the trust of a better understanding public, it will attract more deposits, it will manage more current accounts, transfers, payments, loans. And when the MFI is successful as a business, profitable and chooses to reinvest a substantial amount of profits in increasing and improving its outreach, they demonstrate poverty alleviation impact, no? Debates on Impact Assessment in MF have up to now not led to much else than to wealth creation of researchers in wealthy nations and they obviously did not learn more about the financial sector in which microfinance is to be integrated as a tool for building inclusive financial sectors, as governments (who are responsibe for the poor) of countries with massive poverty decided. Please limit the performance indicators to those that micro finance services providers can produce easily as part of their daily work. As common sense dictates and principles of banking supervision confirm, enterprises should be kept "at arm's length" of banks; enterprise development is NOT the task of MFIs and Micro-enterprise Credit experts should not appropriate the term Microfinance. Kind regards, Peter
peter van dijk Indonesia
17 Sep 2009
Microfinance ecosystem
Microfinance initiatives and the impact should not be measured in the scope of the immediate end user but rather in the whole context of the implementation. Beyond creating access to finance for the marginalized it is establishing a vibrant and competitive financial industry in that very context, developing infrastructure that enables people to make choices. It helps for the banks to evolve and face a very different competitor and helps to grow an emerging market that can’t be ignored any longer.
This goes to support the very argument that development is enrichment of intuitional fabric of nations that can’t be measured only by RCT.
Loucine Hayes Slovakia
15 Sep 2009
MFIs future
I have just one comment. MFIs have to change the way they operate, the way they finance their operations and the way they manage their human resources. MF in Morocco can be a very good case study in this matter...
Adil Sadoq MEDA Morocco
14 Sep 2009
Microfinance is NOT everything as they claimed
I have been with the microfinance industry for more than 10 years now. As implemontor of different MF programs, we always say that because of microcredit, savings mobilization through capital build-up and micro insurance people are being helped out of poverty. This has been our battle cry. However, seeing some of our clients, many did not actually improve their lives or have experience life more convenient. Instead, they were burdened by many MFIs' lending facilities. They are pushed deeper into the mud. Microfinance has become a tool as consumption-smoothing only and NOT as a poverty alleviating tool. On the other hand, quite few have also progressed. These microborrowers were the ones with extraordinary entrepreneurial skills. Often, these are the borrowers that are featured in magazines, bulletins and case studies as success stories. So, as for my conclusion, microfinance is just a tool, either to help them out of poverty or will make them poorer. It solely depends on how they will use it and impact their lives. BUT for the MFIs, microfinance has been a tool that made them bolder and richer!
Philippines
10 Sep 2009
Segmentation of MFIs by function
It is indeed high time that we studied the impact of microfinance and measure how it helps in alleviating poverty. The problem with using RCTs is that they are indeed too technocratic and treat microfinance as an isolated intervention. The idea of controlling for microfinance temporarily and then measuring poverty levels between two groups a few years down the line overlooks that there are many other factors that influence a person’s life and income. Marriage, divorce, children, widowhood, illness or health all can make a difference as well, so microfinance could not be said to have caused a potential increase in income alone.
It is unfortunate that the impact studies appear to lump in all types of microfinance together. Indeed, it is high time that we developed a more sophisticated segmentation of MFIs. If we consider microfinance as being banking for the poor, then similar to ‘mainstream’ banking, we have to recognise that there are various functions that banking fulfils. There may be banking for the slightly more affluent, who may not require as much support as the poorest, and who are simply rejected by mainstream banks because they live in a slum and present a reputational rather than a financial risk to mainstream banks.
Others will aim to reach out to the poorest of the poor, with less a focus on becoming sustainable but for providing capacity building and training rather than financial sustainability and profit.
Others will seek to provide consumer services such as savings accounts and loans for education, furniture etc.
Without a segmentation into these categories, impact studies will miss the point and will be unable to give us a better idea of how microfinance helps the poor.
Veronika Thiel new economics foundation United Kingdom
10 Sep 2009
Are microfinance impact assessments valid?
Much of the hullaballoo about RCT is misplaced. As has been said below/above in this blog, RCT emerged from drug trials. The local economy is a vastly different context. A local economy is largely finite. Demand does not automatically adjust upwards to match the inflow of new microenterprises producing goods and services meant to be sold locally. So inevitably most new microenterprise capacity will simply displace incumbent capacity. The question is How much? Studies in the UK in the 1980s showed up to 100% displacement at times in some sectors, (i.e., all new jobs in a microenterprise were offset by job losses in the same type of microenterprise somewhere else in the local community). Elsewhere, the figures were generally always above 50%. Also, researchers found higher displacement figures in the poorer regions, suggesting that higher poverty means higher displacement. Not good news for developing countries then, suggesting that microfinance might actually be making things worse for the poor (depending upon the strengths of the trends). Something other than microfinance is needed. In drug trials, however, there is no such limit on a new drug curing me of cancer. It is perfectly possible for us ALL to be cured if the drug works. Because RCT does not directly measure something as crucial to understanding local microfinance impact as displacement, it should not be considered as anything other than a very weak methodology in local economic development evaluation, unfortunately.
Milford Bateman
Croatia
09 Sep 2009
It really helps
Micro credit given to the productive poor helps a lot. the fact is if the client is productive and is given capacity building training on how to be productive and how not to spend unneccessarily, the loan given will be of value.
usally when a person mishandles the loan given, he/she experiences problems that make him/her feel the loan has not been helpful.
i really believe that one way to make the impact of microfinancing great in the life of the client is to include training for the client.l
I'm a student researching profit driven investment in microfinance and if profit driven investment in microfinance reduces poverty.
After reading through the various discussions, my question concerns this recent debate. Does profit driven investment through microfinance reduce poverty? Thoughts?
United States
08 Sep 2009
Microfinance end-use vs. impact
Thanks for this work. I agree that RCT's are perhaps better methods although drug test analogy may not completely apply right. In theory microfinance is aimed at micro-entrepreneurs while in practice it is extremely difficult to ascertain the end-use. Also it is hard to say if a borrower is an entrepreneur by compulsion or by nature. It is important to consider these factors while assessing the impact of microcredit because just by pumping in credit regardless of purpose is bound to yield mixed outcomes in developing economies unlike consumption driven developed economies. Spandana's study is a case in point wherein pre-existing businesses got a boost from credit but on an average borrower the impact was insignificant. Eventually, I am sure such RCT's can help inform MFIs and policymakers about suitable products, methodologies and institutional structures that make microfinance more meaningful and economically beneficial for all.
Sasi Thumuluri United States
08 Sep 2009
Impact
Researchers and practitioners have been trying to measure the impact of cmicro credit on the the borowers and it has been found difficult to conclud with certianty. in assessing the impact of microcrdit, we need to note that credit is one of the inputs as it is true in every activity. there are money factors that afffect the success of microfinace borrowers such legal infrustructures, physical infrustructures, business envirnment, skills of the borrowers in managing business, climate and etc... Hence, it is not as such simple to measure the impact of microcredit as there are many factors to be controlled during analysis.
Gebeyaw Aychile National Bank of Ethiopia Ethiopia
08 Sep 2009
MFIs are just focusing to increase number of borrowers not entreprenuers
I have only one comment that it is really still a question and will remain question for the Micro Financing Institutions (MFIs)what impact they brought into the lives of poor people and the answer will be discouraging. But if the MFIs will adopt the policy of creating entreprenuers rather than borrowers.
Zahid Jalbani Pakistan
07 Sep 2009
Some research questions for imapct study
Some fundamental research questions, would help the researchers for the impact study.
1. Conceptual issues . What are the basic tenets of MF ? What are the purpose of Micro finance for which it has emerged and who are the ultimate user or clients or customers? Who are the target groups? What is the mission and practice? MIX data reveals coverage of non poor also under Micro finance and is it for reducing vulnerability for the non poor?
Does micro finance represent micro credit only? Whether Micro credit alone bring the desired result in the given environment ? Whether micro credit alone could take care of the most vulnerable and the poorest? What is the difference between micro credit lending and and other lending to the poor 2. Economics 3. is the casual relationship(cause and effect) between micro credit and income generation strong in a given area in a given vulnerable profile if the poorest ? If micro credit helps the people with small business and enable them to come out of poverty , how to make an impact with Micro finance on those poor with out such small business and those with more health vulnerability in the poverty sector ?Does it not result in widening inequity gap among the poor themselves in the poverty segments ? Is micro credit alone suffice for sustaining the impact ? . If the project is limited to micro credit only, what is the impact in the project area(partly treated group) comparatively with the impact with the provision of all the components of MF (fully treated group).? Will there be any difference in the level of impact in the above comparative study? 3. Political issue 4. Are the main planks in Indian MF system namely MFI and SHG highly susceptible to political interferences? 5.What is the impact of political decisions like debt relief and other financial sops extended to the bank clients in the formal sector on the recovery derive in MFI ?4. Social and ethical values How far the ethical and social considerations are examined correspondingly with other evaluative criteria under Micro finance arena in the context of reduction of poverty? .What makes difference between Micro finance and other finance or are they one and the same except the word Micro prefixed.?. To what extent the deviation takes place in the adoption of the globally conceived concept “Micro Finance” ?
Regarding the impact studies in different countries referred to in the posting , they all dwell on partial input of Micro finance ( micro credit) which although necessary, may not sufficient for impacting on poverty. Any number of RCTs will not deliver the good for the said purpose if it confines to Micro credit inputs only .under Micro finance arena
Towards development as freedom (A.Sen) MF need to focus on human development with all MF financial services integrated with non financial services such as capacity building to the poorest as it ensures the target group control over their livelihood and sustainable development.. In this context it would be ideal to focus development as social capital building perspectives as SHG system in India nurtured with ethical values of MF holistically.
Varadarajan rengarajan Independent consultant -Microfinance India
06 Sep 2009
Objective of the Microfinance
MF works on its true mechanism. That means, if the credit given to the clients for income generating activities then it will work. In addition to that, there is no guaranty that it will work at the very first loan. Just like other business MF success is a combination of lots of things. MF program is to provide a support from only one side. We should keep in mind that Microcredit is not a machine which makes the poor people to be rich rather it is a process which support poor people financially so that they can use their other skills and knowledge to break the poverty cycle. So, with the combination of skills, knowledge, experience and money, a poor person can expect to change his/her condition.
The objective of microfinance is to provide financial support to the poor people. So, a study should be made on whether MF is successful to provide that financial support or not. Elevation of poverty is a combination of lots of other supports and it is definitely not an easy task to provide all support together. I expect that this study will not just criticize microfinance rather it will bring out some ideas that how could poor people can get other support along with Microfinance.
Salauddin Ahmed BRAC Bangladesh
04 Sep 2009
Living Breathing Organism and Capacity Development
I agree with Anton that the complexities of human interactions and human behaviour are far too innumerable and diverse to be measured by RCT. Unlike the human body, with its well studied chemical processes, which have minimal variations across different populations, the driver of human behaviour – the human mind – has a far greater capacity for manipulating and absorbing an infinite number of variables.
The approach of studying microfinance with RCTs likens microfinance to a machine – push one button and this lever will move. Yet in reality microfinance is more akin to a living, breathing organism that is constantly evolving in an environment where the immediate surroundings (inclusive of everything from the regulatory framework to loan officers’ and mullahs’ attitudes) profoundly shape and influence its localized outcomes. This makes it nearly impossible to hold the same expectations/hypotheses of outcomes across the world.
Even with international publicity, the payment revolt in Ramanagaram, Karnataka, India, was contained to one place. Would these same RCT researchers ever thought of controlling for the influence of mullahs on repayment? No, I don’t think so.
Keep looking through Sen’s “development as freedom” lens which advocates for the development of human capacities. Here you will find that capacity development is a PROCESS; something which does not equate to taking drugs and looking for an input/outcome effect. Give a person a fish and they will eat for a day, teach a person to fish and they will eat for a lifetime. It’s the process of teaching that makes the difference here. I’m all for studying more processes, rather than how many fish are given, within microfinance that can further develop capacities toward sustainable, prosperous livelihoods.
Sara Duke United States
04 Sep 2009
Multiplier Effect?
I think that RCTS are a powerful statistical tool, but I think that they may not capture the whole picture. A single borrower is not the only person who should be positively affected. Take the India study - people with businesses took the credit. Did their business expand? Are they employing more local people? Or are they blowing the extra cash on prostitutes and drugs? The answer to these questions will be decisive in determining if the project had a positive or polarising effect.
-Alex
Germany
03 Sep 2009
Yes, implementers matter, but RCTs still useful
Anton, I quite agree that the many complex details of how a program is implemented matter greatly for its success, and that RCT write-ups often abstract from this, creating the impression that microcredit is the same everywhere. In fact, a general concern with RCTs is that they often evaluate a program just as it is being rolled out rather than after it has been up and running for a couple of years, so the staff have no time to work out the kinks. I blogged about that. That said, I think it goes too far to argue that "Then and only then could we start to understand what input leads to what outputs." By the same reasoning, we should not generalize from results of randomized drug trials since, after all, if I take the drug it will be prescribed by a doctor working in a different part of the country with a different level of experience in a different kind of organization (hospital vs. private practice), etc. Maybe that is not the best example, but the point stands that generalization across non-identical cases is an unavoidable fact of life, so purism is impractical. If a bunch of RCTs in different contexts reach similar conclusions (something that hasn't happened yet), at some point generalizations become more credible.
David Roodman Center for Global Development United States
02 Sep 2009
Are microfinance impact assessments valid?
There is a missing half to these microfinance impact assessments – we need to understand the inputs be able to make sense of the outputs. The Randomised Control Trial (RCT) impact assessments in microfinance look at the impact of ‘microfinance’ without analysing what this means in each specific case in terms of design and implementation.
We need to understand the specific design of an MFI in terms of its products, services and delivery mechanisms and who they reach, as well as the reality of how these are delivered and whether there are variations in terms of consistency of the methodology and its management:
• microfinance can include a lot of different services, delivered in a range of ways. If I planned to do an impact assessment of ‘health services’ I’d be quickly put in my place. Sure, we can assess the impact of a new drug, or a primary health clinic, or a vaccination programme. But assessing health services per se makes no sense – it’s too broad, too varied.
• the consistency of delivery can vary within a single organisation. Without knowing exactly what was delivered and how the inputs the conclusions can be very mis-leading. For example a recent study of the impact of a new school book concluded that it had no impact; but the researchers forgot to ask if anyone had actually used the book! (they hadn't).
MFIs do influence the impacts that they have. They do this through the design of their products, services and systems, and the day to day management of issues such as avoiding over-indebtedness, incentivising good client service, incentivising outreach to poorer or excluded clients, monitoring client-staff relationships and a host of other day to day activities. Some MFIs do this better than others.
As we become clearer about what inputs lead to what outputs we can become better at designing and managing organisations towards our desired impacts – this is the essence of Social Performance Management (see www.Imp-Act.org)
So for me a ‘valid impact assessment’ would not just put huge resources into randomising and controlling for the results, but would provide very detailed analysis of what inputs were provided, how these varied, how these were experienced by clients. Analysis would then segment results in relation to a detailed analysis of variation in the inputs. Then and only then could we start to understand what input leads to what outputs and be able to make some generalisable claims about the impact of microfinance, and work towards improving the impacts of microfinance on poverty.
Anton Simanowitz
Director, Imp-Act Consortium
www.Imp-Act.org
www.spmnetwork.net
Anton Simanowitz Imp-Act Consortium United Kingdom
