KM INSIGHT RESEARCH BRIEF September 2024
Knowledge Management
Assessing the Impact of High-Quality Microfinance Programs
v3
Rigorous research in Myanmar and Paraguay highlights changes in income and assets amidst challenging program implementation contexts. Research Overview The Microfinance Plus Study (2019-2024) conducted by Opportunity International, aimed to assess the impact of highquality microfinance programs on poverty in Uganda, Myanmar, and Paraguay.1 The study used an improved design, compared to past randomized controlled trials (RCTs) published in 2015, by incorporating a robust study design, assessing quality microfinance programs offering “plus” services such as training, and conducting research with strong partners. Despite substantial challenges to field interventions caused by the pandemic and subsequent economic recession, natural disasters, civil war, and/or control group taking up significant number of loans, the study was implemented successfully. And, it captured positive impacts – sometimes quite positive – on income and assets. Key Conclusions The following high-level conclusions emerged from the research: 1. The critical 2015 RCTs can no longer be taken at face-value. The meta-study of those studies conducted as part of this project and the direct results from this study show that those studies are flawed and are a distraction from serious discussions. Those who still refer to them should be invited to read the meta-study at the very least.2 2. Microfinance can have significant positive impact even in difficult contexts. In Myanmar, clients showed 40-52% income increase over the comparison group. In Paraguay, clients experienced a .087 standard deviation increase in assets over the comparison group – a significant, medium-level impact.3 3. However, contextual factors can become too severe to the point that positive impacts cannot be expected. While no country in this study showed negative impacts, they could have if had factors been sufficiently severe. Social restrictions and distance in Paraguay, and climate disasters in Uganda are examples. 4. Discussions of effectiveness going forward must address study design, actual operations, and context. This study made the weaknesses of past studies apparent. We recommend that discussions (whether critical or positive) focus on conditions/factors that make microfinance more, or less, impactful and how to address them. 5. This study highlighted the importance of working with theories of change as practiced or practicable. Past studies do not seem to have engaged such details. The various results from these studies did not undermine the theory of change – even the Uganda study – only further affirmed their efficacy. RESEARCH CONTEXT123 The 2015 Studies. Microfinance provides financial services to poor and financially excluded populations. The development objective is to improve client income and assets, and – through these – to enhance consumption, food security, and access to social services (e.g., education and health), thus reducing poverty. Researchers had begun to measure microfinance's impact on poverty through randomized controlled trials (RCTs); and, in 2015, a journal published a collection of some of these studies.4 These examined the effects of microfinance on borrowers' income, assets, and consumption levels by comparing microfinance clients to a similar “control” group meant not to have access to microfinance.
Staff Training in Paraguay, Pre-Pandemic
1 Unfortunately, due to flooding, locusts, and then drought that caused hardship for farmers in northern Uganda making it difficult to recommend continuing take-up of
services. For these reasons, the Uganda study was closed down early.
2 Mahesh Dahal and Nathan Fiala, “What Do We Know about the Impact of MicroFinance? The Problems of Power and Precision.” World Development (Vol 128: 2020):
https://www.sciencedirect.com/science/article/abs/pii/S0305750X1930422X.
3 Experienced by clients in comparison to control in Years 1-2 in Myanmar and in Year 3 in Paraguay. There were drops experienced in Year 3 in Myanmar and Year 4 in
Paraguay which is discussed elsewhere.
4 Banerjee, A., Karlan, D., & Zinman, J. (2015). Six randomized evaluations of microcredit: Introduction and further steps. American Economic Journal: Applied
Economics, 7(1), 1-21.