The Social Impact of Microfinance and How to Measure it?

How to gauge the social impact of microfinance?
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This responsAbility discussion paper offers a framework to better understand how and where microfinance can offer a social benefit. The paper highlights that microfinance contributes to a positive social impact on three different levels:

  • Personal/household level:
    • Empowerment of women leading to their higher social status, better education and more independence;
    • Ability to cope with economic shocks by means of savings, credit, micro-insurance products;
    • Higher income leading to better access to education, healthcare, sanitary infrastructure, food supply etc.
  • Local community level:
    • Creation of jobs;
    • Higher quality of jobs and more stable income for the community as a whole;
    • Entrepreneurial activities improving economic base and resilience of the community.
  • Regional Level:
    • Creation of jobs at the regional level;
    • Strengthening of the microentreprise sector which is the backbone of economy in many developing countries;
    • Growth of the financial sector.

The paper also lists a number of indicators to measure social impact. These include indicators for:

  • Outreach of microfinance;
  • Empowerment of women;
  • Contribution of microfinance to income and job creation.

The paper concludes that it is important to integrate financial and social performance, since without financial sustainability there is no contribution to social sustainability in the long run.

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