Measuring the Impact of Microfinance

Topic :

This paper states at the outset that after years of struggle, the proponents of impact measurement in the microfinance industry can claim a well-deserved victory. It notes that most industry leaders now take the need to measure impact as given both to prove the effectiveness of microfinance as well as to improve it as well.

The aim of this paper is to improve the level of discourse by surveying the most significant microfinance impact evaluations that have been published as of mid-2005. The paper rightly highlights that the quality and rigor of microfinance impact evaluations vary greatly. It reviews a range of studies from the most rigorous analysis, however, also adds to this from a “middle range” (in quality terms) of evaluations and, where appropriate, more “practitioner-orientated” studies. This is also complimented with guideposts to assist the reader in identifying the reliability of each study discussed.

After a brief introduction to some of the analytical issues involved in microfinance evaluations, the paper begins the literature review and attempts to answer the question: “Does microfinance work?” The next section reviews the contribution of the Assessing the Impact of Microenterprise Services (AIMS) Project evaluations before the paper moves on to discuss evaluations commissioned by MFIs and their funders. The latter part of the paper then considers “wider impacts” such as in the areas of empowerment, nutrition, wages, education and follows this with a evaluation of what is known about which factors lead to greater impact. The concluding section discusses the differences between approaches to the evaluation of impact, and how they might be viewed as complimentary.

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