How Can Impact Assessment Take Into Account Wider Social and Economic Impacts?

How does microfinance interact with other systems?
The paper suggests that the wider impacts of microfinance interventions are of importance yet there is less clarity in how their impacts can be effectively assessed. Evidence on wider impacts tends to be weak, circumstantial and not well researched and the paper examines how decision-making might better take account of successes and failures, and of the intended and unintended consequences of microfinance operationsWider impacts demonstrated have shown interactions:
  • Through the labor market: poor people taken on by expanding microfinance borrowers may as a consequence be taken upward across the poverty line;
  • Through the capital market: the intervention of a microfinance institution may make existing lending institutions in the market (e.g. private moneylenders) lower their interest rates to compete, with beneficial effects on borrowers from institutions other than the one being studied;
  • Through the markets for goods consumed by poor people: when microfinance induces an increase in supply, and hence a cheapening in the price, of goods consumed by poor people (e.g. food, by spreading the green revolution), households other than those of borrowers will benefit;
  • Through production linkages: an expansion of livelihoods (agricultural or otherwise) induced by microfinance will lead to the formation of rural industries and services, income changes among non-borrower households on clients' participation in social and political processes and also on social relations within households and neighborhoods.

About this Publication

By McGregor, J., Simanowitz, A., Johnson, S. & Mosley, P.