MICROCAPITAL BRIEF: Blogger for the New York Times Proposes an Alternative Method for Evaluating Microfinance Programs Without “Breaking the Bank”

A recent guest blog post on the New York Times newspaper website titled, “Evaluating Microfinance When Randomization Isn’t an Option,” covers an alternative evaluation method that Michael Frank, the Director of Finance for the Mali Health Organizing Project, has proposed, which he hopes will allow him to evaluate his organization’s microfinance program without “breaking the bank”. The regular author of the blog, Freakonomics, poses, as an introduction to Mr Frank’s post, that in recent years, randomized program evaluation has become the “gold standard” for evaluating development programs, but for small non-governmental organizations it can be prohibitively expensive to implement. Mr Frank’s alternative evaluation method is a variation on the “waiting list-control group” method typically used in medical studies.

Mr Frank’s evaluation program requires a call for loan applicants in the most similar nearby community that does not have a similar microfinance program already present. Using the same criteria as his organization uses to select applicants, they will choose 120 loan recipients to be on a waiting list for the loans. (They will select 120 waiting list loan recipients because that is the same number of loans that his organization has already given out.) They will track these entrepreneurs, effectively using their community as a control group to the community in which they are currently providing microfinance services. The hope is that this will be an effective tool in assessing the effect of microfinance on the community as a whole that will require less labor and finances than randomized testing.

Upon completion of the study those individuals on the “waiting list” will either be given loans by the Mali Health Organizing Project, or they will be compensated in some other way that has not yet been determined.

By: Christine Chang, Research Associate 

Additional Resources:

The New York Times: Evaluating Microfinance When Randomization Isn’t an Option By Michael Frank, March 31, 2010: http://freakonomics.blogs.nytimes.com/2010/03/31/evaluating-microfinance-a-guest-post/

Mali Health Organizing Project website: http://www.malihealth.org/

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