About the Project
Measuring the impact of financial services in the developing world has been a point of great debate in the field of international development. While previous assessment research has shown impacts to be generally positive, the extent of the impact often does not match the enthusiastic rhetoric of the field, and even negative effects have been documented. The studies also have shown that microfinance programs tend to reach households just above or below the poverty line, rather than the extreme poor--i.e. those in greatest need of poverty alleviation. At the same time, multiple studies have suggested that there are pathways to improved outreach--better ways of reaching poorer households--using innovative products, services, and delivery systems.
With grant funding from the Bill & Melinda Gates Foundation, the IRIS Center and its partner Microfinance Opportunities, will examine the impact of innovations undertaken by several organizations supported by the Foundation. The project employs a newly-developed framework that focuses on the impact of these innovative financial services for the poor at the level of the client's household, his/her enterprise, and the institution.
Research Programs
Below is a brief overview of each of the Gates-funded grants addressed by this project. Please see each organization's website for further information. We engage with each of the grantees in an iterative process in designing the research. As such, the following research descriptions may change.
Aga Khan Agency for Microfinance: the design and delivery of new types of microinsurance and savings services in Pakistan. Research questions include:
- Is the AKAM business model for providing hospital insurance to low-income people financially viable over the long term?
- Is the AKAM hospital insurance business model (including underwriting, marketing, selling, administering, claims control and processing, and coverage for quality hospital care) scalable and replicable?
- Does the AKAM hospital insurance business model reduce the vulnerability of low-income households?
Opportunity International: the expansion to rural areas using new delivery channels such as mobile banks and point of service (POS) devices to offer savings, credit, and payment and transfer services in Malawi. Research questions include:
- Who accesses formal and informal financial services?
- What is the net value added to OIBM and its clients: Has the innovation helped provide more effective formal financial services for existing users of financial services? Has it increased uptake of formal financial services by previous non-users?
- If value addition occurred, why? Is it due to a reduction in transaction costs, and/or improvement in welfare--such as an increase in asset levels, better food security and ability to manage household related shocks--and better household participatory decision making?
Pro Mujer: the introduction of tailored products (an entrepreneur loan, an agro-commercial loan, and a youth product) to new markets in Peru. Research questions include:
- Can financial products and services tailored to specific market segments increase the breadth and depth of outreach of Pro Mujer Peru?
- Can financial products and services tailored to specific market segments increase the sustainability of Pro Mujer Peru as an institution?
Freedom from Hunger: the introduction of health protection services designed to complement existing financial products and health education. Since Freedom from Hunger's grant includes a substantial impact assessment component, the IRIS Center and Microfinance Opportunities are reviewing the design of the research and methodology.
Research Methods
Research Design: The project's research design emphasizes the entire causal pathway to impact. This assessment uses qualitative and quantitative methods to explore not only whether impacts occur, but how and why they occur. Specifically, it looks at how people use financial services and how such use affects the impact on clients, households, and enterprises. The assessment covers a wide variety of innovations, countries, and levels of analysis.
The project features a mixed-methods approach, employing qualitative and quantitative methods with experimental, quasi-experimental, and non-experimental designs. The method selection and sampling design are based on field conditions, including the financial service provider's business model. The research methods work in complementary relationships to deliver a profound understanding of the effects of financial services.
Below is a brief description of each research tool currently in use or under design:
Financial Landscape: Employs focus group discussions and individual interviews to document the range of financial service options in the service area. Offers insights into the value proposition of the innovation. Conducted at two points in time, before and several years after the innovation is introduced.
Welfare Outreach Survey: Uses customized survey (based on the PAT), to examine the depth of outreach (level of absolute poverty) to clients who receive the innovations compared to non-clients who do not receive the innovation. Conducted at two points in time, when the innovation is first launched and again several years later.
Product Use: Employs interviews to examine how financial service clients use a particular innovation in the management of households and/or businesses, suggesting likely impacts of innovation in risk management and consumption smoothing.
Financial Diaries: Applies weekly surveys of household transactions over 1-2 years, tracking decisions about how these households earn, spend, save, and borrow money. Captures critical day-to-day dynamics of transaction patterns after the introduction of innovation.
Impact Survey: Employs surveys with a panel design to examine the impact of microfinance innovations on the client, household, and enterprise, using treatment and control groups, as appropriate for each innovation.
Enabling Environment Study: Examines external variables that affect the outcomes of grantee microfinance activities. Includes such influences as specific governance and cultural factors directly affecting the innovation, as well as political stability, macroeconomic policies, and governance quality.
