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)

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);
Funded by the Department for International Development (DFID); 2010; 104 pages; available at http://eppi.ioe.ac.uk/cms/LinkClick.aspx?fileticket=FM4Kv2S%2fRyU%3d&tabid=53&mid=2009&language=en-US

In this paper, Stewart et al present a review of 15 studies that were conducted to evaluate the impact on the poor of microfinance interventions, specifically microcredit and microsavings, in sub-Saharan Africa.

The studies included four randomized controlled trials, two non-randomized controlled trials and nine case-control studies. Eleven of the studies were of credit interventions, two were of combined credit and savings interventions and two were of savings schemes alone.

The impact of microfinance on the poor generally is evaluated based on outcome measures that include, but are not limited to, consumption, income stability and growth, nutrition improvements, employment levels, empowerment indicators and reduced vulnerability to shock. The review of these variables, as addressed in the 15 studies, led the authors to put forth the following conclusions:

1. Some people are made poorer by microfinance.

2. Although not universal, microfinance generally positions poor people to deal better with shocks.

3. There may be a need to focus more specifically on providing loans to entrepreneurs, rather than regarding everyone as a potential entrepreneur.

4. Microsavings may be a better model than microcredit, however the limited evidence on microsavings warrants further rigorous evaluation.

5. Donors and policy makers have a responsibility not to raise expectations unduly, lest they obscure the potential for harm.

The authors offer several recommendations for microfinance stakeholders.  They suggest that policy makers introduce more rigorous evaluation of pilot programs and consider the causal chain to ensure that all possible impacts are considered prior to extending microfinance services. Also, they encourage practitioners to promote microfinance using empirical – rather than anecdotal – evidence and to use due diligence when offering loans to clients.  Finally, the authors recommend researchers to improve reporting on microfinance interventions in terms of consistency and level of detail, develop and employ greater standardization of outcomes measured, and compare and reflect on the results of related systematic reviews as they are published.

By Jacqueline Foelster, Research Associate

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