Evaluating Microfinance Program Innovation with Randomized Control Trials: An Example from Group Versus Individual Lending

This document is a concept paper highlighting the importance of randomized trials for a microfinance institution (MFI) planning to introduce a new product, or adopt any kind of new changes in its operation.The document emphasizes the importance of these trials by comparing the group lending and individual lending, and discusses the following:

• The target audience for the document;
• The primary operational differences between experimental and typical non-experimental evaluations for product/idea trials;
• The need to have a control group to evaluate the outcomes of an innovation in a program;
• The idea behind choosing random control groups;
• Various aspects that need to be considered while designing an experiment;
• The costs related to these randomized trials/experiments.

Further, the document talks about a randomized control experiment, designed in the Philippines, to evaluate group liability versus individual liability loans, and highlights the following:

• The objective of the study conducted in the Philippines;
• The experimental design of the study;
• The out come and learnings from the study.

The document concludes by explaining the approaches to experiment with various other lending products.