The Role of Research in Microfinance (Background reading)

This paper is not being presented at the Rural Finance conference but it is a very useful introduction to the issues being considered.

Researchers and development organisations have an uneasy relationship in the field of microfinance. The criticism aimed at research by the people who strive to promote microfinance (practitioners, support staff, decision-makers, donor agencies, etc.) is both commonplace and severe. Research in this area is said to be too slow, too expensive, disconnected from operational realities, incomprehensible in the way it presents its results, etc.

The intention of this article is to try to re-establish dialogue between these two functions that play an essential role in developing the innovative approach that is known as microfinance. The article sets out to clarify: 1) the different forms of research with regard to microfinance and their various objectives; 2) the issues for discussion between researchers and practitioners; 3) the contribution of research to microfinance.

The authors’ note that there is no single form of research.

  • Basic research is the production and organisation of knowledge around a theoretical corpus. In order to achieve this aim it has to produce general explanatory models, evaluation rules that may be universally applied and it must also focus on abstraction and simplification. Basic research is carried out mainly in universities.
  • Academic research highlights the institutional background of the “researchers” (academics, scientists for whom research activity is their prime function) and it normally stands in opposition to the forms of research carried out by practitioners. This form of research obeys the criteria of basic research, but may also integrate some elements of so-called applied research.
  • Applied research presents a contextual and operational vision: its aim is to describe and to analyse particular situations and to infer operational results from this analysis for the various stakeholders in the sector (practitioners and decision-makers). This form of research may also go as far as the formulation of recommendations. It has a practical objective and may be undertaken by universities, research institutes or practitioners.
  • Action research appears to be a component part of applied research. It has the dual objective of producing scientific know-how and knowledge that is useful for undertaking action, through a process of diagnosis, elaboration of innovation or experimentation. It is carried out by the very people who perform the action themselves or by researchers who are closely involved in the actions that are being studied.

The authors go on to examine the argument that often arises between basic or academic research and applied or action research, characterised by such statements as “only applied research is useful, basic research is a luxury we could do without” or, from the opposite point of view, “only basic research produces “real” scientific knowledge”. They suggest that there should be no opposition between these two types of research, rather there should be close complementarity. “Whilst applied research would appear to be more useful in the short-term, there can be no applied research without long-term basic research.”

Among the difficulties encountered in the dialogue between researchers and practitioners are differing time frames, demands for confidentiality by research sponsors, limited research funds and the influence of donor agencies, and the lack of encouragement for academic researchers to conduct field work and create relationships with practitioners.

With regard to microfinance the authors conclude that research on the financial sector in general and on microfinance in particular, has contributed to the revisiting of theoretical approaches, to the production of knowledge regarding the processes of economic and social change within a neo-liberal context, and the review of forms of public and private involvement in the area of funding. They provide a number of examples to illustrate this and show both the potential and limits of research.

The article concludes that the researcher’s role is multifaceted. It involves developing new theoretical approaches and proposing interpretations and analyses that are likely to guide action and to facilitate the decision-making process; it also involves being attentive to economic and social practices that are innovative and herald social changes. Finally, it involves fuelling the public debate or playing the role of intermediary between the various groups of actors.

Researchers need the support of practitioners in order to be in a position to fully play their role. In the absence of their own resources or even resources that have been pooled by practitioners in order to encourage researchers to work in the microfinance field (which is something that many of them could do since they may well be sympathisers from an intellectual point of view), then the microfinance actors have to lobby the public authorities in order to gain recognition of their training and research needs. This could lead to the creation of “dedicated” positions for researchers and teaching staff (within universities or research institutes). Similarly, this could also help to create the conditions for the launch of specialised invitations to tender and the provision of specific support for this type of research. Without the support of the actors involved in microfinance, then any researchers who wish to invest their time and efforts in this field have little chance of having their needs taken into account.

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