MICROCAPITAL WRAP-UP: Measuring Changes in Client Lives through Microfinance: Contributions of Different Approaches; By Mayada El-Zoghbi and Meritxell Martinez; Published by CGAP (Consultative Group to Assist the Poor)

By Mayada El-Zoghbi and Meritxell Martinez; published by CGAP (Consultative Group to Assist the Poor); May 2011; 4 pages; available at http://www.cgap.org/gm/document-1.9.50966/MeasuringBenefits_Brief.pdf

This brief by Mayada El-Zoghbi and Meritxell Martinez of CGAP examines various approaches that are used in gauging the effect of microcredit on poor people. The authors cite the following evaluation methods used in microfinance: (1) qualitative evaluation methods, which may be in the form of interviews or focus groups; and (2) quantitative evaluation methods which may be quasi-experiments (not involving random placement of clients) or randomized controlled trials (RCTs) seeking evidence of causality between an intervention and impact on the lives of clients as compared to a control group. While the selection of the method should be based on the research question being considered, the authors argue that both qualitative methods and quasi-experiments are subject to biases. RCTs on the other hand, despite being costly to implement, are able to address selection bias and are more precise in evaluating causality.

The brief states that microfinance historically has focused on monitoring by tracking financial indicators. Over time, other social performance tools such as social audits and social ratings have been used. The authors argue that while these tools are useful in assessing how certain practices such as staff training and disbursement mechanisms influence outcomes, they do not help microfinance institutions (MFIs) in directly attributing effects on clients’ welfare to their program. This is because they do not measure the changes that would likely have occurred for the clients had the program not been introduced to them.

The brief states that to date only three RCTs have been completed that focus on the effect of microfinance in addressing capital constraints. However RCTs are now used in examining product design and evaluating the impact of product features. The authors state, “It is in the refinement of products and in the testing of the right mix of services that some researchers believe RCTs can be most valuable for microfinance.”

The authors conclude by saying that newer RCT studies on a range of services provided by microfinance providers including savings, money transfers and microinsurance are revealing households’ increased ability to smooth out consumption and better prepare themselves for shocks.

By Medha Ravi, Research Associate

About CGAP (Consultative Group to Assist the Poor):
Housed at the World Bank Group, CGAP (Consultative Group to Assist the Poor) is an independent policy and research center dedicated to facilitating the provision of financial access to poor people worldwide. CGAP is supported by approximately thirty development agencies and private foundations. Its mission is to provide market intelligence, to promote standards and to offer advisory services to governments, microfinance providers, donors and investors.

Resources:

MicroCapital.org paper wrap-up, February 21, 2011, “MICROFINANCE PAPER WRAP-UP: What is the Impact of Microfinance on Poor People? A Systematic Review of Evidence from Sub-Saharan Africa; by Ruth Stewart, Carina van Rooyen, Kelly Dickson, Mabolaeng Majoro and Thea de Wet; Published by Evidence for Policy and Practice Information and Coordinating Centre (EPPI-Centre)”, https://www.microcapital.org/microfinance-paper-wrap-up-what-is-the-impact-of-microfinance-on-poor-people-a-systematic-review-of-evidence-from-sub-saharan-africa-by-ruth-stewart-carina-van-rooyen-kelly-dickson-mabolaeng-maj/

MicroCapital.org paper wrap-up, January 24, 2011, “MICROFINANCE PAPER WRAP-UP: The Effect of Microinsurance on Economic Activities: Evidence from a Randomized Natural Field Experiment by Hongbin Cai, Yuyu Chen, Hanming Fang and Li-An Zhou, published by the University of Pennsylvania”, https://www.microcapital.org/microfinance-paper-wrap-up-the-effect-of-microinsurance-on-economic-activities-evidence-from-a-randomized-natural-field-experiment-by-hongbin-cai-yuyu-chen-hanming-fang-and-li-an-zhou-published-b/

 

 

 

 

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