European Microfinance Week 2015

PRESENTATIONS 

Maha KERAMANE opened this session by stressing the importance of efficiency and how in order to maximise efficiency, institutions need to measure their impact. She then introduced the panellists. 

Laura FOOSE started her presentation by stating that the most important part about collecting data is systematic use in order to make coherent decisions on products and services. She added that the microfinance industry today has a lot of outreach and output data, but not much outcome and impact data. She explained that the purpose of the SPTF Outcomes Working Group (OWG) is to develop practical guidelines for credible measurement, analysis, and reporting on outcomes by drawing on experience with different approaches and tools. 

Foose explained that the first area the OWG is working in is identifying a core set of indicators in primary outcome areas: economic poverty, assets and housing, and business. When a set of core indicators is ready, the OWG will host webinars to share initial findings and solicit feedback. She invited those interested to participate in the webinars. The final document should be ready for publication by mid-2016. She explained that the framework which the OWG is using to develop these indicators is linked to the health outcomes performance indicators program that was used by Freedom from Hunger (FFH). Three basic criteria were established to identify indicators: feasibility, usability, and reliability. She added it is also important to find indicators that show change over time. 

The indicators that were selected by FFH were tested in Peru, Philippines and India. Foose provided the main lessons learned from FFH’s project. She stated that standardisation of indicators may be difficult. During the FFH project standardisation was attempted across multiple contexts but this showed that it may be easier to standardise the dimensions instead of the specific indicators, since dimensions (e.g. context, type of organisation, motivation, and poverty levels of clients) are important factors that influence which indicators are most relevant in each case. Interpretation of results should be done with great caution as they are context specific. 

Robin GRAVESTEIJN presented Oikocredit’s Client Outcome Program. This program is accompanying MFI partners with technical support in tracking and managing their poverty and employment mission by using management information system (MIS) data. Oikocredit is analysing client level datasets to track and explain outcomes and capacitates staff of MFIs to analyse and use the data. He added that Oikocredit does not collect any data, but uses already available data collected by the institutions. He emphasized that institutions can use information on poverty outreach for product development or for tracking their mission. 

He then introduced his forthcoming discussion paper: Effects of microcredit on the poverty of borrowers using the PPI: Evidence from two Asian MFIs. For the purpose of this research, he used data from two MFIs; together representing a sample of more than 600,000 clients. One of the findings was that both MFIs experienced rapid growth but simultaneously a very high customer exit. Less than 50 percent of their clients would stay with the MFI for more than three years. When the MFIs became aware of this they decided to conduct a customer satisfaction study and hired an SPM Manager. The main outcome of the paper is that microcredit has a small but positive significant effect on poverty reduction for active borrowers for both MFIs. 

LAPO, a microfinance bank in Nigeria received funding from the Agence Français de Développement (AFD) to finance affordable housing for low income populations, including improvement, enlargement and construction of housing. MicroFinanza Rating developed a measurement system to track program outcome. Lucia SPAGGIARI showed the various outcomes they had looked at: the percentage of clients upgrading from tenants to owners; the number of households that got their own toilet; the number of households with safer conditions; and the percentage of dwellings with improved roofing. She added that these outcomes could potentially lead to the following impact: higher social status and increased self-fulfilment, higher hygiene practices and improved health status, higher safety and improved quality of living standards. 

Spaggiari mentioned that measuring outcomes in housing can be more cost-effective than in other areas such as consumption, poverty and income, because housing is very tangible and easier to measure when compared to other indicators, more attributable and it is often finalised in a reasonably short period of time. She remarked that although microcredit can be a useful financial tool, we should be careful in assuming that it is a poverty alleviation tool. Various rigorous randomized control trials (RCTs) have shown that microcredit can lead to higher earnings from self-employment, higher protection against income shocks, better risk management, and decreased asset selling when hit by a negative shock. However, there is no proof of impact on increased income, on increased female decision-making, and on increased school attendance. Spaggiari closed her presentation by stating that she is not advocating the use of RCTs for all microfinance institutions, but encourages others to take the lessons learned from RCT to focus the design of the systems to measure change on the type of impact that microfinance can have, versus the type of impact that microfinance would like to have. 

DISCUSSION

Keramane asked the panellists whether the sector needs to review its expectations or whether we should use the lessons learned from the impact evaluation studies in order to design better products which can improve microfinance as a poverty alleviation tool. Foose mentioned that we should identify appropriate indicators which do not only focus on poverty alleviation as a long-term goal, but also on the short- and medium-term. Gravesteijn mentioned that many organisations are still unfamiliar with the importance of using data analysis when launching new products. He also stressed that there is an issue with knowledge management as many organisations who perform data analysis do not share the information within their institution. Spaggiari remarked that we should either improve products to meet the goal of poverty alleviation or reset expectations and be transparent. 

A question from the audience was on financial vulnerability and whether it is part of the studies. Many clients of microfinance are trapped in a vicious cycle of over-indebtedness. Gravesteijn said that over-indebtedness is difficult to measure for MFIs as in many cases, clients have multiple loans from different MFIs and use one to pay another. He said that the institutions can look at other indicators that show increased vulnerability and are easier to track, for example changes in marital status. Foose added that financial vulnerability could be included in economic poverty outcome indicators. Gravesteijn added that propensity score matching studies can help identify financial vulnerability. 

Another question from the audience was on standardisation of indicators. Many MFIs have their own indicators. Should those institutions start using the standardised indicators? Foose explained that as long as the indicators used by an MFI are useful, they should keep on using them. Standardisation of indicators is mainly for those who have not started using indicators yet. The session concluded with Florian Grohs of Oikocredit comparing Gravesteijn’s results with those from the RCTs. The former showing a small and significant effect of microcredit on poverty reduction while the latter show no impact. Spaggiari remarked that there is a difference between impact and outcome. Impact implies attribution while outcome implies association. However, she added we should not stop using outcomes as an internal management tool as they are more cost-effective to measure and more usable, while the impact measurement will probably remain the only credible way of demonstrating the effect of microfinance to external stakeholders.