Beck Pryor: Another challenge in social entrepreneurship is impact measurement. Finding quantifiable ways to measure the impact of a model or an activity on a target population is integral to the health and growth of an organization: it allows you to test what is working and what is not, it proves to the community that your work is important, and it attracts the attention of donors/investors. But in this work it is often difficult to measure impact. Take the example of a large microfinance institution. Let's say that in a given week this MFI gives out a hundred loans. Its primary goal is to ensure that these loans are paid back. Can the MFI measure its "success" in number of loans administered? Sure. But what does this really mean? If all one hundred of these loans lead to the creation of successful new businesses, then yes, this has been an impactful endeavor. But what if fifty go to non-income-generating activities, such as taking a sick child to the hospital? What if fifty people have to take out another loan to pay back the first? Is the MFI still successful? For the MFI to really understand its impact, it needs to know how each and every loan it administers is used — in both the short and long term. Perhaps this is feasible, perhaps it is not. But if an organization values its impact, and it should, these are important issues to consider.
A quick search in our TRASI database returns 24 resources for measuring the impact of microfinance institutions. (To recreate this search, visit the search page, click on the Microfinance checkbox under Sector, and hit Submit.) Below is an excerpt of some of these resources:
Does your MFI attempt to measure the impact of its loans? Are there specific tools or resources you have used and would recommend? What kinds of challenges has impact measurement (or the lack thereof) posed for you? Share your thoughts with us in the comments section!