Special Research Topic
Poverty and Development

Project: Improving the evidence on the impact of microfinance: An experimental study of microfinance-plus interventions in three countries

Project Duration

01/2018 - 12/2022 (current)

Commissioned by

Opportunity International

Project Team (RWI)

Prof. Dr. Nathan Fiala (Chief), Lise Masselus

Cooperation

University of Connecticut, USA; Innovations for Poverty Action, Myanmar; Vision Fund Myanmar; Innovations for Poverty Action, Paraguay; Fundación Paraguaya; Innovation for Poverty Action, Ghana; Sinapi Aba, Ghana

Summary

Microfinance has a long and complicated history with policy makers and researchers. Many initial proponents argued that lack of access to formal finance was a critical part of why people remained poor in developing countries. However, initial reviews of impacts did not show transformative changes for people beyond a few anecdotal stories. The large promises of microfinance solving world poverty were not panning out. Decades after the beginning of the microfinance movement, there is still little conclusive evidence on the impact of microfinance on the lives of the poor. A recent exploration of experimental studies of microfinance by Dahal and Fiala (2018) shows that most studies suffer from serious power and design issues. These issues are so large that it is not possible to draw meaningful conclusions about the impact of microfinance, either for or against. This project plans to address these issues by conducting experimental tests of microfinance-plus programming in three countries. The microfinance models tested in past studies were minimalist microfinance models. The microfinance industry has recently evolved to include more services beyond credit, such as savings, money transfer, payment services, insurance services, financial education, as well as more elaborate support such as health education, housing stability or improvements, agricultural extension services and market linkages, technical training, social and values-related counselling and peer support. The microfinance institutions in our study are mission-driven, client-centric institutions that practice strong poverty outreach and client-protection, while nevertheless striving for financial viability. The study will seek to improve on the design of previous experiments in several ways. However, the main goal will be to increase statistical power. The study will employ a third-party subscription model to identify potential microfinance clients before a baseline survey is conducted. This design is expected to substantially improve take-up differentials between treatment and control communities.

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