The Impact of Microfinance: A Review of Methodological Issues

This paper argues that the important challenge for an impact evaluation study is to determine the answer to the question how lives of participants would have changed had the policy not been implemented. An evaluation that provides an answer to be above question can be considered as a reliable evaluation. The paper proposes conducting impact evaluations as it:

• Is a good market and client research and help design better products and processes;
• Helps justify the subsidies received by MFIs relative to the next best use of public funds;
• Provides important information about the types of products and services that work best for particular type of clients;
• Helps in understanding the impact of alternative organizational structures on clients.

The paper, further, argues that the first step for an impact evaluation is to clearly define microfinance since the definition of microfinance is not clear. It lists down seven traditional features of microfinance to define it.The paper then discusses three types of microfinance evaluations:

• Program evaluations;
• Product or process evaluations;
• Policy evaluations.

The paper also:

• Reviews experimental and quasi-experimental evaluations methodologies in urban and rural environments;
• Discusses some of the key results from past studies;
• Reviews common indicators of impact and sources of data;
• Concludes with a discussion of impact issues that have yet to be adequately addressed.