To the 30 or so people who came together to talk about microfinance impact, I posed the question: “What do you hope to achieve through your work in microfinance?” Not surprisingly, the first thing shouted out was “Lifting people out of poverty.” The list continued: women’s empowerment, stabilizing incomes, smoothing consumption, creating and saving jobs, building businesses, opening the financial system to everyone, promoting a just and equitable society and more. I was moved by aspirations reflected in this list. The people in the room bring their best hopes for making a difference in the world to their work in microfinance.
"Microfinance Miracle or Myth" session participants sketched out their definitions of microfinance impact
In the lunchtime session, we noted the variety of ways that the group learns about the impact of their work, from talking with clients, to tracking their performance, to carrying out surveys. As an international microfinance practitioner, I was struck by how much easier it is to get reliable information about client status in the U.S., where business records are more formal than in developing countries. We briefly discussed the randomized control trials that have been garnering great attention. The trials are the only method with a claim to demonstrate causality.
I likened the various ways of learning about the effects of microfinance to painting a picture, with each method adding details to our emerging understanding. I gave each table paper and markers and asked them to create their own picture of the impact of microfinance. After a brief, painful silence, the room burst into a series of noisy conversations. As I listened, I was struck by this: the kind of information people want to use depends on their role. Investors asked for financial accountability and assurance of conformity to social standards. Board members wanted direct consumer feedback. Managers wanted to monitor performance indicators like default rates and repeat loans. The only people asking for proofs of causality were those who had to decide how to allocate subsidies.
Participants were reluctant to take up their markers and start drawing, though most tables eventually produced some kind of sketch. A woman from Mexico reported that Compartamos had once given art supplies to the young children of clients and asked them to draw a picture about how Compartamos influenced their lives. One youngster drew a box and a bed, saying, “I used to sleep in a cardboard box, but now I sleep in a bed.” Anecdotal, to be sure, but what does it prove? That 6 year old children can sometimes express the essence of things better than a roomful of grown-up microfinance professionals.
Elisabeth Rhyne is Managing Director of the Center for Financial Inclusion (www.centerforfinancialinclusion.org) and a founder of The Smart Campaign (www.smartcampaign.org).
