MICROFINANCE PAPER ROUND-UP: Measurement: from Financial Access to Economic Empowerment; Savings Groups’ Impact; MFIs’ Role with Start-ups

“Advancing Financial Inclusion Metrics: Shifting from Access to Economic Empowerment;” by Carlos Monteverde, Mahadevan Chidambaram, Matthew Blake and Drew Propson; published by the World Economic Forum; January 2018; 24 pages; available at
http://www3.weforum.org/docs/WEF_White_Paper_Advancing_Financial_Inclusion_Metrics.pdf

The authors of this report address how to improve the measurement of financial inclusion and ultimately how to bridge financial inclusion with financial health. They identify the following mechanisms as critical to successful financial inclusion: (1) payments; (2) savings; (3) credit; and (4) regulation and policy. Regarding the connection of financial inclusion to financial health, the authors consider three case studies: (1) Insight2Impact, a data-analysis company seeking to measure financial inclusion based on the needs of consumers rather than on the products they are offered; (2) the nonprofit Center for Financial Services Innovation (CFSI), which measures “long-term” consumer outcomes in the US; and (3) the application of CFSI’s model to other countries by Accion’s Center for Financial Inclusion. The authors argue that customer-centric approaches can help improve the understanding of consumer behavior, which can reveal avenues to improve that behavior. Furthermore, they suggest that NGOs and members of the private and public sectors increase data sharing to support new initiatives.

“Understanding the Impact of Savings Groups,” by Megan Gash, published by the SEEP Network, January 2018, 32 pages, available at
https://www.mangotree.org/files/galleries/SEEP_Understanding-the-Impact-of-Savings-Groups_20180117_FINAL.pdf

Ms Gash reviews 53 studies on the impact of savings groups (SGs), organizing the findings by “intervention type, research method, geography, year, intervention period, and type of evaluator.” Among the studies, 44 of which cover Africa, the two most common types of intervention are: standalone SGs and SGs with a health component such as health education. Ms Gash concludes that members of standalone SGs – those that do not receive wraparound services – generally experience an increase in self-confidence, food security and credit usage. However, additional services are required in order for SG members to achieve sustainable improvements in health behaviors, gender equality, youth education and youth training. In closing, Ms Gash argues that more resources should be allocated to research on women’s empowerment and social capital, as well as the relationships between SGs and financial service providers.

“Microfinance and Business Start-ups: Review of the Current Practice in Europe,” by Justyna Pytkowska and Piotr Korynski, published by the Microfinance Centre (MFC), January 2018, 34 pages, available at
http://mfc.org.pl/wp-content/uploads/2018/01/Microfinance-Startups-Research-Paper-final.pdf

The authors of this paper review the climate for start-up companies in 11 European countries and the participation of microfinance institutions (MFIs) within that ecosystem. They argue that MFIs’ support of start-ups could be improved: for 43 percent of the surveyed MFIs, start-ups comprise one fifth or less of their client base. Among MFIs in Eastern Europe, the same is true of 70 percent of MFIs. Policy and regulatory barriers persist, such as: (1) the lack of an EU-wide framework for start-up support; (2) limited appreciation of MFIs by national governments; and (3) a lack of risk-management and other skills MFIs need to be successful serving start-ups.

The authors offer the following recommendations: (1) establishing a EU-wide definition of a start-up; (2) granting MFIs access to public funds to on-lend to start-ups (3) improving MFIs’ risk management systems; (4) creating financial products tailored to the needs of start-ups; and (5) the provision of non-financial support to entrepreneurs.

Sources and Additional Resources:

World Economic Forum
https://www.weforum.org/

SEEP Network
http://www.seepnetwork.org/

Microfinance Centre
http://mfc.org.pl/

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