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There are two main motivations of adding social services to the provision of microfinance
services. First, the provision of services such as business training or livelihood counseling can
benefit households by providing enhanced skills relating to important aspects of production,
marketing, and financial management. This directly benefits the MFI as increased productivity
of households improves repayment rates and reduces risk. A second and complementary
motivation is that microfinance, because of its large outreach, can be an effective and sustainable
delivery channel for services which have high social impact and benefits, for example simple
health interventions. This is consistent with the overall objective of most MFIs, which is to
contribute to poverty reduction and development of their clients.
There are currently few rigorous evaluations measuring the relative impact of microfinance
only and "microfinance plus" on client well-being. Given the growing pressure on NGOs and
MFIs to reach operational and financial sustainability to scale up services so as to reach a
greater number of poor, it is imperative for MFIs, NGOs, donors, and policy makers to know the
benefits of social interventions which could be undertaken along with microfinance.
3.1 Evaluating business training for microfinance clients with
SEWA Bank 24
here are
currently few
rigorous
evaluations
measuring the
relative impact
of microfinance
only and
"microfinance
plus" on client
well-being
It may be a useful investment for microfinance organizations to provide basic business and
financial skills training in order to assist microfinance clients to run their businesses more
efficiently. Such interventions may also improve repayment and benefit the organization.
This study examines the impact of business and financial skills training for self-employed
women in Ahmedebad. The intervention is based on training courses currently used by SEWA
Bank 25 . SEWA Bank has found that its training has helped participants, not only because it
transfers skills to them, but because it is empowering them to realize that they can run a
business and can/should take a longer-term view. This evaluation study will test these ideas
by collecting survey data 6 months to 1 year after the training to measure profits, business
investments, and other outcomes, while comparing a treatment and control group. In addition,
a main focus of the study is to measure the differential effect when women are trained alongside
friends and neighbors. For a randomly selected subset of the treated group, their close peers
will also be invited. The hypothesis is that there is a social dimension to learning: women
might be more (or less) engaged during the training if they are with a friend. Also, as
important they might be more likely to implement the skills afterwards and change aspects of
their business 26 .
4. Financial and organizational issues
The full potential of innovations in product design can only be realized if the organization
has the capacity to implement and manage products properly. The high growth rates seen in
the sector today must be matched with strengthened management focus and operational
systems. The success of microfinance with respect to high repayment rates is largely explained
by features such as door step services and close monitoring. These mechanisms and MFI staff
incentives result in high transaction costs, the main component of the relatively high interest
rates charged by the MFIs. In some parts of the country, there is growing concern that these
interest rates are unjustified and usurious. In-depth research is needed to understand what
are driving costs and how internal processes and policies may reduce these costs. The Centre's
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