Introduction

For a long time, donors and practitioners have used micro-finance activities to alleviate poverty by creating income and jobs. It was based on an assumption that by integrating the poor into the economic circuit, micro-finance was automatically promoting development.

In recent years, donors are becoming more concerned about the quality of their interventions and, with the experience they have gained on the limits and possible negative effects of micro-finance, the need for more impact measurement tools has arisen.

Reliable Impact Assessments (IA) can provide both donors and practitioners with evidence that interventions have a positive effect and that financial support is justified. At the same time, practitioners can assess to what degree, under what conditions, and through which mechanisms they can reach the poor.

This tendency has been reinforced by the work of some organisations like CGAP, AIMS/USAID and others who have been developing “Impact Assessments” (IA) methods, as well as, promoting discussion and meetings. In the same way, the Micro Credit Summit has been leading research on how to identify the poorest and how to assess the impact of micro-finance programmes.

Why Impact Assessment is important in Micro-finance?

The measurement of impact is particularly relevant for poverty-alleviation programmes. It is important to identify the range of factors which contribute to the creation of poverty, and which must therefore be addressed to achieve sustainable solutions to poverty.

IA will inform donors on the degree in which their support to MFIs is contributing to poverty alleviation and whether their financial aid is justified.

IA can help to improve programme performance through a better understanding of clients specific needs. However, it is important to distinguish between programme performance and programme impact.

Programme performance is achieving institutional objectives such as expanding outreach, maintaining high portfolio quality an achieving financial sustainability.

Programme impact is focused on development goals; in other words, to what extent micro-finance programmes contribute to the alleviation of poverty.

Difficulties: Constraints of Impact Assessments

Impact Assessment may be defined as “an inquiry to estimate the value, degree and/or conditions of change that can be plausibly associated micro-finance intervention”. This method is small in size and more limited in scope than an impact research. Generally, it compares impact variables at two points in time and cover sample groups.

Impact studies try to understand the process of intervention and the value of its impact rather than measure statistically every change produced. Impact Assessment is a learning process whereby success and problems are highlighted and lessons learnt are recorded.

Measuring socio-economic indicators is difficult, costly and subjective. The challenge of impact measurement studies is to improve the credibility and efficiency of micro-finance programmes.

What are the Experiences on Impact Assessments in Micro-finance?

Among the many approaches to assess the impact of an intervention through micro-finance two should be mentioned:

1. Assessing the coverage of micro-finance services
   The effectiveness of an intervention can be assessed by measuring the volume of transaction, their changes over a significant time period and the quality of the services provided.
   
2. Assessing the impact of the programme on the client's quality of live
   This method tries to analyse changes in income, health, education, quality of food consumed, investment in own enterprise, empowerment of women, etc.

Conditions for Cost Effect Approaches

Impact Assessments studies evaluate some qualitative indicators that are difficult to quantify. Many of these methods would be difficult to implement as they are both time consuming and costly.

The following table shows the conditions for a lower-cost Impact Assessment:

Table 1: Guidelines for a lower- cost IA

Objectives	Main Audience	Level of Reliability	Main Method	Other methods	Costs	Time scale

What Methods can be used?

Impact measurement can be carried out using surveys, self assessment groups, client feedback, etc. The following figure shows the levels, indicators and variables commonly used for low-cost impact assessments:

Findings from Impact Assessments experiences…

In general, it was found that:

The poor have undoubtedly benefited from micro-finance services in several ways, for example in growing levels of health care and education expenditures, better income, better quality of nutrition, although the impact was less important for the very poorest because the opportunities for investment are more restricted.

Micro-finance institutions do not serve the very poorest

• Research indicates that households with improved access to credit are better able to benefit from technology, increase their incomes, and improve food expenditures and calorie intake than those who do not have access to credit.
  
• Micro-finance services lead to better nutrition.
  
• In Bangladesh, studies indicate that BRAC has had significant positive effects on school enrolment, asset holdings of households, and food consumption.
  
• In Bangladesh, household participation in credit operations had an effect on the weights of pre-school children.
  
• Research in Kenya has shown that credit access contributes to increased expenditure on education
  
• In Bangladesh, credit access provided by both the Grameen Bank and BRAC have had a positive impact on women's empowerment and contraceptive use. On the other hand, some women benefit less from credit than men. Sometimes, women do not control the credit they get. It is often used by the husband.
  
• In Ghana, studies indicate that the combination of credit with education services in women's groups resulted in higher non-farm income, improved household food security, and improved nutrition, health care and education for children.
  
• Studies have shown that through micro-finance the poor gain confidence and become familiar with financial institutions. Savings for the poor create an opportunity to face urgency needs and build up collateral for loans.
  
• Some research, which focused on micro-finance and gender, has found that providing financial services to poor women helps to increase not only their income but also their confidence, mobility and access to markets, their independence and willingness to take decisions.
  
• In Dogon (Mali), the Caisse Villageoise system is not only an “organisation for financial services delivery”. It has become a part of the social and cultural dimension of the village. At least 50% (in some cases 80-90%) of the inhabitants of the village participate actively in Caisse's activities. This system has increased the spirit of solidarity in the village.
  
• However, not all effects are positive, studies in Peru have shown that if parents are under pressure to repay a loan, and a child could work for wages, parents are likely to withdraw the child from school.

On Institutional Performance

• IA can help to: define objectives and strategies and produce guidelines for good practice for micro-finance programs;
  
• Evaluate the appropriateness of the strategic choice;
  
• Contribute to the design and delivery of appropriate products that respond to clients' needs;
  
• Reassure investors concerned not only with financial returns but also social returns; this information can used to justify their investment decisions;
  
• Establish credibility;
  
• Define the target group;
  
• Reduce clients' turnover;
  
• Improve portfolio quality;
  
• Favour outreach;

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Horizon Local 1997 - 99
http://www.globenet.org/horizon-local/