Microfinance Results Depend A Lot On Where Borrowers Live

A recent study of microfinance borrowers shows that, on the whole, their loans led to improvements in their standard of living. But the impact also depended on the region and country those people inhabit.

That’s according to research by impact measurement firm 60 Decibels, which surveyed 18,000 or so clients of 72 microfinance institutions (MFIs) in India, Latin America and the Caribbean and Southeast Asia.

To elaborate on those findings, Calum Scott, global impact director of nonprofit Opportunity International Australia, provided additional insights into the nine MFIs included in the survey that are supported by Opportunity International.

India

In India, where 60 Decibels researchers surveyed 2,022 clients of eight MFAs, respondents were less likely to say they “very much increased” their income (15%), possibly because they tended to have a more difficult time growing their businesses. Also, these ventures increased the number of people they employ (9%) less than in other countries. That’s partly due to the fact that ventures in India typically are solo ventures. “They’re usually one-person businesses, less likely to employ anyone, anyway,” says Scott, whose organization focuses on poverty alleviation.

Borrowers in India were also more likely to cut down on their food consumption to meet repayments than other areas.

Scott points to Cashpor, an MFI in northern India as a good example. The second largest MFI in Opportunity International’s network with 1 million loan clients, it operates in northern India in largely remote rural communities where a high portion of their clients live in extreme poverty. While these borrowers use their loans for business purposes, the enterprises are smaller than those based in other regions covered in the survey that are not as poor.

Probably because the regions served by Cashpor are so poor, a high number of respondents—over half of clients—reported that their loan had increased the number of “quality meals”, one of four dimensions related to improvements in household welfare. The others include spending on children’s education and home improvements and access to healthcare.

At the same time, although less well-off than clients in other countries, respondents reported a big change in household improvements. “They started from a different level than those in other regions, but still experienced improvements,” says Scott.

Latin America and the Caribbean

The survey looked at 2,960 clients of 13 MFIs in nine countries. According to the report, those MFIs are relatively less likely to work with clients living in extreme poverty.

According to Scott, borrowers from the three MFIs working with Opportunity International in the region reported a bigger increase in the impact of their loans on their business and a larger percentage said they’d increased employment compared to the two MFIs working with Opportunity International in India that were included in the survey. But, while they reported an increase in quality meals, the increase was less than in India. One MFI partner reported that about half of clients said there was no change, and half cited a small increase.

The survey also zeroed in on the matter of resilience with two questions: One asked how easy it would be to meet a major emergency expense, a measurement used by the World Bank to assess the vulnerability of people in poverty, according to Scott. The other zeroed in on whether services received from their microfinance lender had contributed to those results. According to Scott, one MFI based in the Dominican Republic said it was much easier to meet a sudden expense, a much higher number than other Opportunity International partners. “That suggests the MFIs’ services are making them more resilient,” says Scott.

He also suspects the response results, in least in part, from the relative affluence of those clients. “If you have some reserves to begin with, you might be more likely to be able to meet a major expense, whereas, in India, finding that amount of money would be almost impossible.”

Southeast Asia

Researchers interviewed 2,276 clients of nine MFIs in four countries. Respondents there were the least likely to report business growth thanks to their loans than in other regions, with smaller improvements in household incomes.

But, according to Scott, clients of the two MFIs he works with that were included in the survey, both in Indonesia, reported better healthcare-related outcomes. In one case, 93% of clients said they were able to increase their spend on healthcare thanks to services received and, in another, 87% of respondents reported they were better able to access healthcare. They also cited an improvement in their quality of life.