By Microfinance CEO Working Group Co-Chairs, Lauren Hendricks of CARE and Scott Brown of VisionFund International
The Microfinance CEO Working Group, in collaboration with our members Grameen Foundation and Accion as well as Dominican University’s Brennan School of Business, co-published Measuring the Impact Of Microfinance: Looking To the Future. This report, authored by Kathleen E. Odell, examines microfinance impact literature over the last five years.
As leaders of international microfinance networks, we share a mission to bring full financial inclusion to underserved communities around the world. We are constantly working to improve how we measure the effectiveness of our programs in achieving that mission, and external research plays a critical role in these evaluations.
Anne Hastings, who served as the Executive Director of the Microfinance CEO Working Group, authored this report’s foreword. She summarizes perfectly why this report is so important to our group for understanding both the value and limitations of current research and how future research can produce actionable findings that will help us improve our programs as we proceed through the increasingly exciting digital age of financial services.
Excerpted foreword from Measuring the Impact Of Microfinance: Looking To the Future by Anne H. Hastings:
The Microfinance CEO Working Group is especially pleased to be co-publishing this document with its two members Grameen Foundation and Accion for one simple reason: All of us need to fully understand the state of the research in the field we are dedicating our lives to. This study by Kathleen Odell does just that, using language everyone can understand. Most of us are not researchers, and not all of the research out there is accessible in a meaningful way to us. This review of the literature makes a massive amount of the best research accessible to all of us.
There are other reasons we are honored to be part of this project. When the first paper in this series came out, we were all a good bit younger—and perhaps a bit naïve. But taking in the findings summed up in this review, together with the two that preceded it, we can see just how much the research has matured over the years and how much more is known today than was known in 2005.
At the same time, Professor Odell helps us to think about, and plan for, the future. Throughout the study she suggests ways future research can produce actionable findings that will allow us to improve practice. And isn’t that really the goal?
Certainly that is the goal for the Microfinance CEO Working Group, which has been carefully studying how we can improve our measurement of outcomes and use the results to ensure that our programs do achieve the goals we set for them.
It is especially refreshing to read Professor Odell’s reminder that there are some reasons why we should redouble our work in microfinance despite headlines like “Microcredit Doesn’t Live Up to the Promise of Transforming Lives.” First, she clearly explains in both the executive summary and in the detailed report exactly what the studies have shown, and that includes many underappreciated and encouraging findings. Second, while acknowledging the strengths of the randomized controlled trial (RCT) methodology, she cautions us not to rely exclusively on this method of research. As she points out, RCTs are expensive to conduct and often they only study impact over a relatively short duration. Furthermore, we often don’t know if an effective institution implementing best practices is running the same kind of program the researchers chose to study.
The pragmatic questions Professor Odell poses and seeks answers to by investigating the research literature are exactly the kinds of questions the Microfinance CEO Working Group and its members focus on. We are committed to applying the lessons that have been learned through research, gathering additional data for better decision-making by upgrading our own monitoring and evaluation systems. Of course, we are pleased that Professor Odell concludes that the research shows no consistent pattern of harm being done to clients. However, we must take steps to further minimize the potential for any client to be harmed by financial services through our active support of client protection and the Smart Campaign. At the same time, we are advancing the Universal Standards for Social Performance Management to increase the likelihood that we are also maximizing client benefits.
This new digitally enabled world of financial inclusion is nothing if not exciting. We agree with Professor Odell that it is too early to conclude whether and how digital finance solutions can both protect clients while advancing their wellbeing. But you can bet that the Microfinance CEO Working Group will be working with stakeholders throughout the industry to understand and shape their impact on those most excluded, including women, the poor, and those living in the most remote areas of the world. We hope you too will give this report a careful read and join us in this mission.