What does microfinance really accomplish…? Microfinance is an enabler says the author…
Microfinance has a lot of different outcomes. First of all, there are the ‘escape from poverty, empower yourself, send all your children to school, invest in your business, create jobs, access quality healthcare’ outcomes. These are the huge, best-case outcomes, and also what microfinance advocates usually preach. Then there come the smaller outcomes, such as ONE rural villager sending their child to school, or ONE person being able to expand their business based on a micro-loan. The best way to talk about these outcomes is by story-telling, or using qualitative methods such as interviews and group meetings to find out how microfinance has made an impact in the lives of individual clients. This is a very important part of outcome analysis in microfinance.
But, microfinance also has more economic and quantitative outcomes to measure as well. These include measuring net impact, like how much a client’s income has actually increased such receiving a micro-loan, or how much they are putting away for savings each month. These outcomes are hard to measure by story-telling, but are equally important.
In the past six months, the first two extensive and rigorous evaluations of the impact of microfinance have been published. One was done in India, lead by Esther Duflo and Abhijit Bannerjee of J-PAL; the other in Philippines led by Dean Karlan and Jonathan Zinman of IPA.. The main research questions for both center around the question, ‘does access to microcredit have a significant impact on household expenditures and welfare?’ Their findings included both economic data and some story-telling, through a case by case approach.
Their findings? That microfinance has positive, but mostly small effects. For example, that access to microcredit has important effects on household expenditure patterns and the creation and expansion of businesses, but no effect on health, education, and women’s decision making in the short term – which are the main qualitative, story-telling outcomes that has made microfinance so popular in the first place.
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