Impact Measurement Resources for Microfinance Institutions

[TRASI]

In a recent PhilanTopic post, Amit Shah writes about the issues and challenges facing social entrepreneurs and the world of microfinance. Shah had a chance to speak with key figures at the Toronto International Microfinance Summit (TIMS) and includes these conversations in his post. One participant, project manager at Community Enterprise Solutions, Beck Pryor discussed the pressing need for understanding the impact of a microloan and how it is used. An excerpt of his comment follows; for the entire response, you can read Shah's post here.

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:

• GIRAFE by Planet Rating - a rating tool that evaluates MFIs in six areas: 1) governance, 2) information, 3) risk management, 4) activities and services, 5) financing and liquidity, and 6) efficiency and probability.
• MicroRate by MicroRate - a social rating that measures the level of social return on an investment based on the "social results" and "social commitment" of the MFI.
• Movement Above the US Dollar a Day Threshold by Microcredit Summit Campaign - a methodology that attempts to capture MFI clients' movement out of poverty through surveys, existing data, and the development of a poverty scorecard.
• Progress Out of Poverty Index by Grameen Foundation - a 10-question survey that is integrated into loan applications to determine and gauge MFI clients' movement relative to poverty.
• SEEP Client Exit Survey by SEEP - a survey that focuses on when and why clients leave the program administered as an exit interview.
  

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!