16 Sep 2015
This paper seeks to identify the causal effects of expanded access to microcredit on borrowers and communities using six randomized evaluations. The evaluations are based on a variety of sampling, data collection, experimental design, and econometric strategies. The methods are deployed across urban and rural areas of six countries in four continents representing vast disparities in terms of borrower characteristics, loan characteristics, and lender characteristics. The paper finds a consistent pattern of modestly positive, but non-transformative effects of microcredit. Other highlights include:
- Studies do not find clear evidence, or even suggestive evidence, of reductions in poverty or substantial improvements in living standards;
- There is strong evidence suggesting that businesses expand, though the extent of expansion may be limited, and there are hints that profits increase with access to microcredit;
- Analysis shows that it is likely for access to microcredit to have an effect on occupational choice, business scale, consumption choice, female decision power, and improved risk management;
- There is little evidence of harmful effects of microcredit, even with individual lending at high real interest rates;
- Analysis of heterogeneous treatment effects of the studies suggest the possibility of transformative effects on some segments of microlenders’ target populations.
13 May 2015
Since its creation, the European Microfinance Platform has been actively involved in promoting social performance and social responsibility in microfinance.
What is meant by social responsibility is that MFIs are concerned with ensuring that their actions are at least transparent (notion of accountability), that they contribute to developing the financial services on offer and that they have no negative effects on stakeholders (decent work of employees, protection of consumers, protection of the environment, etc.). The notion of social performance encompasses the notion of social responsibility, but the meaning is slightly wider as it also takes into account MFIs’ actions to fulfil a “social and economic mission” in favour of their clients. The concept of social performance is specific to microfinance, it is defined as the effective translation of an MFI’s social mission into practice. This mission is based on four major objectives: serving an increasing number of poor and excluded persons, improving the quality and adaptability of financial services, creating economic and social benefits for clients and improving the social responsibility of an MFI.
In November 2007, during the European Microfinance Week, the issue of ethics and social responsibility in microfinance was identified by the European Microfinance Platform (e-MFP) members as a major issue for the microfinance sector to face within the current challenges of the sector (growth, commercialization, risks of over indebtedness, fight against poverty and vulnerability of clients, etc.). The e-MFP Social Performance Working Group focused in 2008 on the role of the investors in promoting social performance (see European Dialogue N° 1) In this publication, cases of some investors who participated in the e-MFP Social Performance Working Group or at the exchanges organized by the Swiss Development Cooperation in Bern are presented. The case studies of the European Dialogue No.1 provide a rich overview on what social investors actually do to make sure they invest in a socially correct way.