Paper

The Future of Microfinance Impact Assessment

Understanding the evolution of microfinance impact assessment
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This paper applies a futurist’s perspective to understand how microfinance impact assessment may evolve along a continuum.

The paper describes three different mindsets that occur in a sequence along a continuum of increasing complexity, each including and transcending the preceding mindset. They are:

  • Deterministic mindset derived from Newton’s laws of mechanics and focused on finding causal links between inputs and outputs, which is useful for testing immediate and quantitative impact;
  • Probabilistic mindset that addresses chaos, uncertainty and surprise found in complex systems, which is appropriate for testing longer-term social and economic development in communities where microfinance is available;
  • Integral mindset that integrates subjective processes into objective systems described at the probabilistic level, and represents a higher, futuristic evolution of impact assessment.

The paper highlights the paradox in microfinance impact assessment resulting from a mismatch between programs and the methods used to assess their impact. The sector must accelerate evolution of impact assessment in order to systematically capture the more complex impacts of microfinance.