What is the Evidence of the Impact of Microfinance on the Well-being of Poor People?

This policy brief highlights the need to re-investigate existing microfinance impact evaluations and the validity of claims that microfinance alleviates poverty and empowers women. It presents findings from a systematic review that followed the systematic review guidelines set out by the Cochrane and Campbell Collaborations. The review analyzed databases and literature. It classified study material according to research design as randomised control trials (RCTs), pipeline designs, natural experiments and general purpose surveys.

Study findings rely mainly on RCT and pipeline studies, of the nearly 3000 studies examined. Findings indicate that most microfinance impact evaluations:

• Investigate group lending and credit only interventions;
• Do not reflect the sector’s diversity;
• Do give scope for conclusions on the sector’s impact as a whole and on women;
• Suffer from weak methodologies and inadequate data, adversely affecting their reliability.

The paper concludes that policy conclusions that support microfinance may lead to misconceptions about actual program effects and may divert attention away from the search for interventions that may be more pro-poor. It recommends that the development community engage constructively with evaluation techniques so that more reliable evidence of impact can be provided.

The full report can be accessed here.