Impact analysis

Much donor funding and policy-making targeted at rural financial institutions has been based on the belief that financial services in rural areas form a key tool in the development process. Indeed, many microfinance institutions are set up with the stated goal of poverty reduction.

As with all policies, plans and projects, however, it is crucial to understand and analyse whether the aims and objectives declared at the outset are being achieved. A variety of indicators can be used in such an assessment to determine the impact from a range of perspectives including economic, social, environmental, micro- and macro-level. In addition, such analysis is not only important for understanding the current impact, but can also form a key part of the policy learning process and feed into the design and implementation of future development strategies.

In this section of the site, therefore, we provide information for policy-makers who wish to determine the impact of their framework or strategies that have been designed to promote rural financial institutions as well as other areas of rural development.

Library Resources

resource title type year resource
Financial inclusion and health: How the financial services industry is responding to health risks Brief 2018

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For development experts working on financial inclusion, ensuring that low-income households have bank accounts and can access loans is not a sufficient objective. Financial inclusion – the provision of affordable financial services to low-income segments of society – is really a means to an end. Access to financial services by itself does not contribute to development, but rather it depends on how those financial instruments are used.

The effects of cash transfers on adult labor market outcomes Report 2018

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The basic economic model of labor supply has a very clear prediction of what should be expected when an adult receives an unexpected cash windfall: they should work less and earn less. This intuition underlies concerns that many types of cash transfers, ranging from government benefits to migrant remittances, will undermine work ethics and make recipients lazy. This paper discusses a range of additional channels to this simple labor-leisure trade-off that can make this intuition misleading in low- and middle-income countries, including missing markets, price effects from conditions attached to transfers, and dynamic and general equilibrium effects. The paper uses this as a lens through which to examine the evidence on the adult labor market impacts of a wide range of cash transfer programs: government transfers, charitable giving and humanitarian transfers, remittances, cash assistance for job search, cash transfers for business start-up, and bundled interventions. Overall, cash transfers that are made without an explicit employment focus (such as conditional and unconditional cash transfers and remittances) tend to result in little to no change in adult labor. The main exceptions are transfers to the elderly and some refugees, who reduce work. In contrast, transfers made for job search assistance or business start-up tend to increase adult labor supply and earnings, with the likely main channels being the alleviation of liquidity and risk constraints

The 1.5 Billion People Question : Food, Vouchers, or Cash Transfers? Book 2018

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Most of the people in low and middle-income countries covered by social protection receive assistance in the form of in-kind food. The origin of such support is rooted in countries’ historical pursuit of three interconnected objectives, namely attaining self-sufficiency in food, managing domestic food prices, and providing income support to the poor. This volume sheds light on the complex, bumpy and non-linear process of how some flagship food-based social protection programs have evolved over time, and how they currently work. In particular, it lays out the broad trends in reforms, including a growing move from in-kind modalities to cash transfers, from universality to targeting, and from agriculture to social protection. Case studies from Egypt, India, Indonesia, Mexico, Sri Lanka, and United States document the specific experiences of managing the process of reform and implementation, including enhancing our understanding of the opportunities and challenges with different social protection transfer modalities.

Author Alderman Harold; Gentilini Ugo; Yemtsov Ruslan
Publisher World Bank Group
Number of Pages 341 pp.
Primary Language English (en)
Region / Country Global
Keywords Cash transfers, Social protection, Income support
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Climate: The Financial Challenge Book 2017

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This book is the first volume that describes and deciphers the extraordinary changes that have affected green finance over the last two years following COP21. For a long time, many financial players considered that climate finance was a business for specialised teams, and some of them still do. This book is for them: it endeavours to show how finance professionals can rethink their professions and integrate the climate challenge. It is also for those who look at finance with a wary eye, especially because of its clearly established responsibility in the 2008 crisis. [The authors] are convinced that the financial sector can help build a sustainable future and holds many of the keys to a successful transition toward a low-carbon economy. First of all, this work sets out the global financial equation to be solved: to finance the transition, it is less a matter of mobilising new capital than of redirecting existing and available capital. Then it explains why, despite the public policies that are being set up more or less everywhere, this reorientation has not reached the pace needed to achieve the 2°C target by the end of the century. The third chapter describes how the financial sphere gradually became aware of climate change issues, and describes the tools developed by its various professions to address those issues. The resulting panorama shows that climate finance tools already exist. The fourth part tells the story of the two years lead-ing up to the Paris Conference on Climate, COP21, by showing how various financial players progressively developed their thinking and their positions. But now, after Paris, everything still remains to be done and the book closes with a description of what is at stake and what levers for action are available for the future.

Author Pierre Ducret; Maria Scolan
Publisher AFD
Primary Language English (en)
Region / Country Global
Keywords Long-Term Finance, Access To Finance, Legal & Regulatory Environment
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Generating Returns through Development Finance 2014: Impact Investment Report Report 2015

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This is Finance in Motion’s first Impact Investment Report and it coincides with the 5th anniversary of our foundation. This report provides an overview of the market for impact investments and highlights the different aspects of impact investments made by Finance in Motion. It highlights the achievements of FIM’s impact funds including European Fund for Southeast Europe, Green for Growth Fund, the SANAD fund for MSME, and eco.business.Impact investments can be made in both emerging and developed markets. Finance in Motion has deliberately chosen to specialize in impact investments in emerging markets, i. e. in the field of development finance. Investments in emerging markets differ fundamentally from those in developed markets with regard to their political, legal and economic risk profiles, but also in terms of investee profiles. The risk levels are inherently higher, which increases investor reticence in this space. Compounding the development challenge is the fact that these markets suffer from persistent lack of the long-term capital crucial to investments and development.

Investing for Impact: A strategy of choice for African policy makers Report 2014

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Over the last decade, the main driver of economic progress across the African continent has arguably not been Official Development Assistance flows but growth, underpinned by private sector activity. This trend is set to continue, with private capital forecast to be the most important source of long-term finance. At the same time, an increase in the levels of social inequality and environmental degradation in many African countries has underscored the importance of a more inclusive model of progress.

Impact investment is a strategy to align the power of private markets to the social and environmental development needs of society at-large. From 2012-13, The Rockefeller Foundation, through its Impact Investing initiative, funded research in five Sub-Saharan African countries with the aim of understanding the barriers for impact investing across Africa, as well as recommending national policies to encourage the growth of the industry.

This report synthesises the findings of that work and, through numerous case studies drawn from across Africa, aims to show how impact investing can be a powerful tool for tackling societal challenges, and can be complementary to the more traditional tools of public funding and philanthropy.

The report offers 10 actionable recommendations to guide African policymakers to maximise the societal potential of investment in their respective countries. These are:

1. TASK FORCE: government to establish an impact investing taskforce to explore country-specific potential of impact investing

2. CATALYTIC CAPITAL: government investment to stimulate the growth of domestic impact investment funds

3. REGIONAL SME EXCHANGE: government sponsorship for the development of a regional SME exchange to provide liquidity for exits

4. DO OR EXPLAIN: government to expect institutional investors to articulate social and environmental impacts, as this is an area of importance

5. FLEXIBLE REGULATION: government regulation to allow institutional investors to invest in impact-driven enterprises

6. CASE BY CASE ANAYSIS: government review of fiscal frameworks and fiscal incentives to promote investment in high-impact enterprises and ensure policy coherence.

7. PRIORITY PROCURMENT: create a competitive advantage for high-impact enterprises

8. INVESTMENT READINESS FUNDING: provide government funding for investment-readiness.

9. GUARANTEE PROGRAMME: enable impactful enterprises to demonstrate their creditworthiness

10.  NEW CORPORATE FORMS: ensure legal forms are suited to impact-driven enterprises’ requirements.

Author Bridges IMPACT+ | AVCA
Publisher Bridge Ventures
London, United Kingdom
Number of Pages 21 pp.
Primary Language English (en)
Region / Country Global
Keywords Investment, Impact Analysis, Guarantee Scheme
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Impact Assessment of Credit Programme for the Tenant Farmers Report 2014

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BRAC designed an innovative project titled BorgaChashi Unnayan Prakalpa  (BCUP) or Tenant Farmers Development Project to provide credit and extension services to small scale tenant farmers who are usually not reachable by the conventional microcredit and formal banking system. The purpose of this report is to describe what the baseline results reveal about farmers in Bangladesh that work land owned by others through various tenant arrangements. The report highlights the similarities and differences between BCUP clients and non-client tenant farmers and provides extensive information on their socioeconomic profile and their livelihood context. It also highlights their the current credit market conditions and the credit needs. The report is an introduction to an on-going impact evaluation of the BCUP.

Where Do Impact Investing and Microfinance Meet? Brief 2013 English (en)

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Impact investing is a new investment category that has been getting a lot of play in the past few years. This Brief presents the results of CGAP research on impact investing and how it relates to the micro, small, and medium size (MSME) investment space. One key finding is that microfinance investments through microfinance investment vehicles (MIVs) and small and medium enterprise (SME) funds make up a significant share of investment activity covered by this term.

impact investing brief  -  English (en)

Literature Review on the Impact of Microinsurance Paper 2013 English (en)

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Research paper #35 provides a selective overview of the current state of research on the impact of microinsurance. Its key purpose is to explore the role played by insurance in developing countries. In reviewing the most recent literature about the impact of microinsurance in developing countries, special attention is given to the issue of statistical identification of the impact, and to the need of highlighting the channels through which microinsurance affects the outcomes. Although the effects of microinsurance are heterogeneous across the studies reviewed, this review shows that micro-insurance seems to achieve markedly positive results under specific provisions.

research paper  -  English (en)

Fast Siamt 1.0 - Building a Common Framework for Impact Assessment Report 2011

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Fast Siamt 1.0 - Building a Common Framework for Impact Assessment -  is the result of a nine month consultation process involving more than 60 experts in sustainable SME finance and impact assessment around the world. The Report describes the background and content of a frame- work for measuring the social, environmental and economic impact of investments in SMEs that are active in sustainable agricultural value chains (cultivation and basic transformation of agricultural crops and commodities).

Impact Investment: Understanding Financial and Social Impact of Investments in East African Agricultural Businesses Paper 2010

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The challenge for impact investors, if they are to continue to capture increased and varied sources of liquidity, is to demonstrate that the investment model is sustainable, that it creates strong businesses, it provides positive social impact and that the returns to investors are competitive. 

On the face of it, this seems understandable and perfectly reasonable. However, gaining the necessary information is easier said than done. Impact investors, like other alternative asset classes, work in an environment where returns are guarded secretly and only revealed to current and potential investors, at a point in time, usually during fund raisings. Therefore this paucity of information creates, from an outsider’s perspective, an incomplete picture of the asset class as a whole. 

By comparison to other alternative asset classes, the impact investment model is still immature and financial return claims not yet proven. Investments are made gradually and investee companies take time to realize value. It will require some shaking out yet to prove that the model is sustainable. 

Quantifying positive social impact is both complex and cumbersome. There are many stakeholders involved, such as suppliers, customers and ancillary businesses. A seed business, for example, may supply hundreds of thousands of farmers, providing each with enhanced yields; employ hundreds of staff; be supplied by a considerable number of outgrowers; and create profit for ancillary businesses such as equipment and fertilizer providers, driving the broader development of its industry or value chain. The only way to categorically evaluate the financial benefit from all the activity would be to interview all of the related stakeholders. The time and resource required makes the task almost impossible. 

 This latest study is a continuation of that work and aims to support the thesis that investment in agricultural small and medium sized businesses (SMEs) can: 

– create robust, sustainable companies, delivering consistent growth 

– strengthen agricultural sub-sectors across Africa 

– produce positive social return for smallholders, employees, suppliers and regional economies 

– generate competitive risk adjusted returns to PCP and its investors; in turn, positively impact extremely high numbers of people 

Rice inventory credit in Madagascar: conditions of access and diversity of rationales around an hybrid financial and marketing service Case Study 2009

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The Malagasy rural finance network CECAM has been offering an innovative individual rice inventory credit to its members since 1993. Starting from the acknowledgement that the inventory credit is a hybrid product, which involves a mix of in kind and in cash flows and stocks, a mix of credit and savings features, and linkages with the local rice market, this papers sets out to inquire how it is accessed, used, and inserted in the strategies of different wealth categories of Cecam members.

This research conducted by E. Bouquet, B. Wampfler et E. Ralison is based on an analysis of quantitative and qualitative data that were collected in several phases during a 4 year impact study conducted by the authors from 2003 to 2007.

Evidence suggests that the Cecam inventory credit is globally well suited to the differentiated needs of poor as well as nonpoor households, because it lowers the access thresholds, it enhances the value of their rice production (be it for consumption or sale) and it allows them to pursue different kinds of strategies (more food security oriented for the poor, more entrepreneurial and diversification oriented for the non poor).

Author Bouquet, E.; Wampfler, B.; Ralison, E.
Number of Pages 24 pp.
Volume / Issue# WP 6
Primary Language English (en)
Region / Country Global, Africa, Southern Africa
Madagascar
Keywords Agricultural Microfinance, Innovation
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Measuring the Social Dividend in WSBI Members’ Activities: Revealing the Hidden Elements Study Guide 2008

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The World Savings Banks Institute (WSBI) has released a Study, developed in partnership with Oxford Policy Management (OPM), on the measurement of the social dividend of its member banks' activities. It focuses on the identification of the "implicit" social return that can be ascribed to the provision of financial services to underserved customer groups and geographical areas.

The Study demonstrates that the business model of savings banks is particularly well-suited to achieving greater outreach, even in remote or less populated regions, and confirms that this broad outreach does not question their overall profitability.

Author Peachey, S., Carpio, A., Roe, A. and Cabello, M.
Publisher Oxford Policy Management
Number of Pages 44 pp.
Primary Language English (en)
Region / Country Global
Keywords Savings, Social Dividend
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Aid Effectiveness in Microfinance: Evaluating Microcredit Projects of the World Bank and the United Nations Development Programme Paper 2006

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This note sets out the results of an in-depth evaluation of the microcredit portfolios of the World Bank and the United Nations Development Programme. The World Bank evaluation reviewed only “lines of credit”, where project resources were used to fund microlending; thus, the study did not only include the Bank’s activities in policy support for governments and technical assistance to MFIs. The UNDP evaluation covered all its microlending projects, but only two of those projects were policy orientated and none of them provided technical assistance only.

The results provide a “disappointing picture”. They show that less than a quarter of the projects that funded microlending were judged successful. The rest failed, or appeared unlikely, to produce long-lasting results – that is, retail institutions and programs that could continue offering clients quality financial services over the longer term without losing their capital and needing continuing infusions of money from governments or development agencies. The cause of the problem is not put down to weak staff at these agencies; instead the study suggests that agency environments and systems do not give their staff the right incentives, information, and resources for microcredit.

The note begins by setting out the scope and methodology of the evaluation before providing an in-depth analysis of the findings. It then discusses in turn each of the root causes associated with the poor results – incentives, information and resources. Finally the note sets out the recommendations.

The conclusions set out core recommendations, which the note argues will also be relevant to other development funding agencies:

  • Credit policies need sanctions to be effective
  • Meaningful reporting of a few core performance indicators will probably improve average credit project performance markedly
  • Generalist core staff who are responsible for microfinance projects need some level of microfinance literacy to do effective work
  • Agencies need to improve mechanisms, incentives, and resources for bringing financial-services expertise to bear on project design and implementation
  • Community-managed revolving loan funds, where the lending is funded mainly by a development agency’s injection of capital and there is no professional management or oversight, should be abandoned as a delivery mechanism, because the odds of success are unacceptably low
  • Development agencies should usually avoid credit projects where a government agency is the retail provider of loans, or where the government is actively involved in designing or supervising the credit delivery system
  • Credit projects tend to perform poorly if their amount is too small to command suitable expertise and management attention. Microfinance components that are embedded in larger projects tend to perform less well, not only because they may attract insufficient expertise and management attention, but also because the project’s other objectives sometimes distort the financial services component
Author Rosenberg, R
Publisher CGAP
Number of Pages 12 pp.
Primary Language English (en)
Region / Country Global
Keywords Microcredit, Agricultural Microfinance, Monitoring And Evaluation
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Measuring the Impact of Microfinance Paper 2005

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This paper states at the outset that after years of struggle, the proponents of impact measurement in the microfinance industry can claim a well-deserved victory. It notes that most industry leaders now take the need to measure impact as given both to prove the effectiveness of microfinance as well as to improve it as well.

The aim of this paper is to improve the level of discourse by surveying the most significant microfinance impact evaluations that have been published as of mid-2005. The paper rightly highlights that the quality and rigor of microfinance impact evaluations vary greatly. It reviews a range of studies from the most rigorous analysis, however, also adds to this from a “middle range” (in quality terms) of evaluations and, where appropriate, more “practitioner-orientated” studies. This is also complimented with guideposts to assist the reader in identifying the reliability of each study discussed.

After a brief introduction to some of the analytical issues involved in microfinance evaluations, the paper begins the literature review and attempts to answer the question: “Does microfinance work?” The next section reviews the contribution of the Assessing the Impact of Microenterprise Services (AIMS) Project evaluations before the paper moves on to discuss evaluations commissioned by MFIs and their funders. The latter part of the paper then considers “wider impacts” such as in the areas of empowerment, nutrition, wages, education and follows this with a evaluation of what is known about which factors lead to greater impact. The concluding section discusses the differences between approaches to the evaluation of impact, and how they might be viewed as complimentary.

Microfinance and Poverty: Evidence Using Panel Data from Bangladesh Paper 2005

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Even though microfinance has been the focus of development and poverty reduction programmes for some time, this paper begins by suggesting that development practitioners still know relatively little about the extent of poverty reduction possible through microfinance activities. The purpose of this article is to examine the impact of microfinance on consumption poverty in Bangladesh using panel data from household surveys for 1991/92 and 1998/99.

Khandker and Pitt (2003) - "The Impact of Group-Based Credit on Poor Households: An Analysis of Panel Data from Bangladesh", World Bank, Washington DC - examined the impacts of microfinance on a number of outcomes using panel household survey from Bangladesh. More specifically, they considered such issues as whether the effects of microfinance are saturated or crowded out over time, whether programs generate externalities, and whether the estimated impacts of microfinance found earlier with cross-section data analysis can be corroborated using an alternative method. They found a declining long-term effect of microfinance as well as the possibility of village saturation from microfinance loans.

This article uses the same household panel data to address related issues, focusing on the poverty reduction impact of microfinance. The paper begins with an assessment of whether household and individual factors such as land and education influence a household's demand for a loan in microfinance schemes where the decisions to borrow are made by a group. It then assesses whether microfinance reduces poverty and, if so, what the limits of poverty reduction through microfinance are. Third, the paper examines the spillover effects of microfinance, to determine whether the program benefits households beyond those that participate.

The results suggest that access to microfinance contributes to poverty reduction, especially for female participants, and to overall poverty reduction at the village level. Microfinance thus helps not only poor participants but also the local economy.

Author Khandker, S
Publisher Oxford University Press
Number of Pages 24 pp.
Primary Language English (en)
Region / Country Global, Asia, Southern Asia
Bangladesh
Keywords Agricultural Microfinance, Impact Assessment, Poverty
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Social Return on Investment and Its Relevance to Microfinance Paper 2005

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The paper begins by stating that social return on investment (SROI) is an emerging concept in economic development. It suggests that the term SROI generally refers to a method of measuring social benefits. It is expressed as social performance as a ratio to an input, typically capital. The note also argues that SROI is likely to become increasingly relevant in microfinance as the industry transitions from donor capital to private investment. In this context, the authors go on to say, SROI is a tool by which MFIs can demonstrate their social value, which is presumed to be important to attract socially responsible investors to participate in microfinance as well as to allocate different levels of socially responsible investment to those MFIs offering varying risk and social/financial return.

Of note, the authors point out that SROI is not impact assessment. They argue that SROI is a broader concept that utilises similar information and similar methods, and includes impact assessment within its framework, but which also includes other concepts, such as monetised outcome and cost-benefit analysis.

This progress note aims to introduce keys concepts of SROI into the microfinance community. It discusses the factors contributing to SROI emerging on the microfinance agenda, explores SROI’s value to microfinance institutions, describes some SROI tools with examples, and suggests next steps for microfinance practitioners in developing/promoting SROI within the microfinance industry.

Issues in Designing Effective Microfinance Impact Assessment Systems Paper 2004

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This paper is based on work conducted by Imp-Act – a three year action-research programme aiming to improve the quality of microfinance services and their impact on poverty. The paper looks specifically at the benefits of designing and implementing effective practitioner focussed client and impact assessment. It considers the type of questions microfinance organisations should be asking in terms of use of impact assessment tools, such as indicators. It makes the point that impact assessment must be context-specific, taking into consideration the type of information to be gathered and the purpose of this information. It also stresses that impact assessment is an ongoing process, rather than a one-off event which benefits neither the clients nor the organisation.

The authors note that a range of quantitative and qualitative research methods have been applied to provide rigorous analyses of the poverty impacts of microfinance. However, there has often been a strong perception amongst practitioners that formal impact assessment studies do not provide the detailed information about clients that mangers need to improve understanding and microfinance organisation practice.

The first part of the paper reviews the recent move in microfinance impact assessment away from narrow, donor-financed impact assessment events, towards more practitioner-focused processes. The second part offers a guide to an impact assessment process that is determined by context and audience, and allows diversity in purpose and the issues that impact assessment can address. The paper states that clarity in these is more likely to result in appropriate selection from a range of approaches and tools available to meet these objectives.

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