Microfinance Impact: Are We Asking the Right Questions?

This was one of the questions raised in a lively discussion that CGAP organized on “the Impact of Microfinance” early September with about 60 French microfinance stakeholders and experts from the AFD, CERISE, and the Poverty Lab. The debate kicked off with an overview of three main approaches to impact measurement and monitoring in microfinance: quasi experimental and qualitative studies, social performance measurement, and randomized control trials (RCTs). Having three different discussants from a donor agency, a promoter of social performance measurement, and a researcher at the same table was a unique opportunity for establishing common ground and debating these three trends.

The discussion included animated debate about the degree to which one can draw lessons from the three existing RCTs on microfinance. Participants raised several questions such as: “is the time span used by RCTs (1 to 2 years) sufficient to measure impact on household poverty?” or “if an RCT measures the impact of a type of credit in selected remote areas in Morocco, what does it tell us on the impact of credit in the entire country?” One RCT supporter responded that microentrepreneurs make quick returns on small investments based on recent research but reckoned that it would be wrong to extrapolate local impact results in a remote area of Morocco to the national context. Some participants also argued that it was unethical to keep a population excluded from the services for two years. Finally some donors mentioned that RCTs were expensive (about 400-500,000 $US each) given that they do not provide them with full answers on how they can improve their microfinance projects. One randomista responded “is this amount a lot when we know all the money that goes to development without knowing whether interventions actually work?”

There’s plenty of appetite to further this discussion so that we can learn more about the value that different types of research approaches can bring to answering some fundamental questions.

CGAP is sponsoring a conference on Microfinance Impact and Innovation together with academics, practitioners and investors in NYC 21-23 October.