Impact Evaluation for Microfinance: Review of Methodological Issues

TABLE OF CONTENTS
INTRODUCTION: WHY EVALUATE?....................................................................................................1
I. DEFINITION OF MICROFINANCE..................................................................................................3
A. KEY CHARACTERISTICS OF MICROFINANCE ...........................................................................................3
B. LIABILITY STRUCTURE OF MICROFINANCE LOANS .................................................................................5
C. “OTHER” MICROFINANCE SERVICES.......................................................................................................6
II. TYPES OF POLICIES TO EVALUATE.............................................................................................6
A. PROGRAM IMPACT EVALUATIONS ..........................................................................................................7
B. PRODUCT OR PROCESS IMPACT EVALUATIONS .......................................................................................8
C. POLICY EVALUATIONS............................................................................................................................9
III. METHODOLOGICAL APPROACHES ...........................................................................................10
A. RANDOMIZED CONTROLLED TRIALS FOR PROGRAM EVALUATION.......................................................10
Experimental Credit Scoring..................................................................................................... 10
Randomized Program Placement.............................................................................................. 12
Encouragement Designs............................................................................................................ 13
Ethical Considerations of Randomized Evaluations ................................................................. 14
B. QUASI-EXPERIMENTAL METHODOLOGIES FOR PROGRAM EVALUATION ...............................................14
C. RANDOMIZED CONTROLLED TRIALS FOR PRODUCT AND PROCESS INNOVATIONS ................................17
D. OTHER CONSIDERATIONS .....................................................................................................................19
Determining Sample Size........................................................................................................... 19
Dropouts.................................................................................................................................... 20
Targeting ................................................................................................................................... 20
Intensity of Treatment................................................................................................................ 21
IV. IMPACT INDICATORS .....................................................................................................................21
A. ENTERPRISE INCOME ............................................................................................................................21
B. CONSUMPTION OR INCOME LEVELS (POVERTY)....................................................................................22
C. CONSUMPTION SMOOTHING..................................................................................................................22
D. WIDER IMPACTS ...................................................................................................................................23
E. SPILLOVERS ..........................................................................................................................................23
F. IMPACT ON THE MFI..............................................................................................................................24
G. TIMING OF MEASUREMENT...................................................................................................................25
CONCLUSION: OUTSTANDING ISSUES FOR EVALUATION ........................................................26
BIBLIOGRAPHY .......................................................................................................................................28