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The news from Andhra Pradesh also comes in the wake of a recent spate of
academic studies on microfinance, questioning the claims that microfinance
consistently moves clients out of poverty. According to Nathanael Goldberg,
policy director at Innovations for Poverty Action (IPA) and an academic
researcher involved with some of these studies, “Randomized evaluations of
microfinance are showing mixed results, with credit clearly not the panacea it
has sometimes been made out to be, and savings looking promising. Both credit
and savings, however, are showing evidence for helping households manage their
financial portfolios: to smooth consumption or invest in enterprises.” 14
The results of these studies have also cast doubt on the methods used to study
impact. One of the chief methods, the randomized control trial (RCT), measures
the impact of an intervention, such as microcredit, by comparing a group of
people who receive a loan with a similar group of people having the same basic
characteristics, but who do not receive a loan. These evaluation methods bring
new rigor to microfinance assessment, but they also have their own weaknesses.
Christopher Dunford, president of Freedom from Hunger, points out “that the
results [from RCTs] are reported in terms of the average experience of borrowers,
which obscures the variety of experience. A large proportion, although still a
minority, are investing their loans in real businesses and often doing very well as
a result. The majority seems to be benefiting only modestly, primarily from the
consumption smoothing effects, and only a small minority is suffering as a result
of borrowing.” 15
Maddeningly, the
anti-poverty impact
evaluation craze is
precariously close to
inflicting an unrealistic
hegemony over
social change. The
profession’s conceit is
that, until an academic
evaluator evaluates
it, every anti-poverty
program is under
suspicion.
— Jonathan Lewis,
MicroCredit Enterprises
Dean Karlan and Jacob Appel wrote More Than Good Intentions 16 to show how
RCTs and behavioral economics can guide decisions about where and how
to invest limited resources to help reduce global poverty. This book has been
praised in Forbes magazine and The Wall Street Journal, but also criticized by
those who think it attributes more discerning powers to academic studies than
their results justify. Jonathan Lewis, founder of MicroCredit Enterprises, writes
in the Huffington Post, “Maddeningly, the anti-poverty impact evaluation craze
is precariously close to inflicting an unrealistic hegemony over social change.
The profession’s conceit is that, until an academic evaluator evaluates it, every
anti-poverty program is under suspicion. In the closed world of evaluation, what
cannot be measured is invisible. What cannot be validated by an evaluator should
not be funded.” 17
Box 4 contains an excerpted review of More than Good Intentions by Guy Stuart,
independent consultant and fellow at the Ash Center, Harvard University, on the
Center for Financial Inclusion Blog, June 14, 2011. 18
14
N. Goldberg, “A Deeper Look at Programs that Work with the Ultra-Poor: From Safety Net Programs to Other Innovations,”
unpublished paper commissioned for the 2011 Global Microcredit Summit, Valladolid, Spain, 11/14–17/11.
15
From Dunford’s comments at a World Affairs Council event, San Francisco, CA, USA, 6/7/11.
See http://www.itsyourworld.org/assnfe/ev.asp?ID=2974&SnID=967198496.
16
http://www.poverty-action.org/book/index.html
17
J. Lewis, “Social Impact Evaluation: Useful? Utopian? (Part 1 of 4),” Huff Post Impact, 6/21/11,
http://www.huffingtonpost.com/jonathan-lewis/social-impact-evaluation-_b_881296.html.
18
G. Stuart, “‘More Than Good Intentions’ by Dean Karlan and Jacob Appel – Book Review by Guy Stuart”
http://centerforfinancialinclusionblog.wordpress.com/2011/06/14/more-than-good-intentions-by-dean-karlan-and-jacobappel-book-review-by-guy-stuart/.
14
STATE OF THE MICROCREDIT SUMMIT CAMPAIGN REPORT 2012