Measuring the Impact of Microfinance
As part of an outreach effort, I am working to help the Grameen Foundation get the word out about a recently published paper that it commissioned. The Foundation , as this white paper illustrates, makes it a priority to take an objective look at the impact of its work in the field of microfinance in order to better understand where it is most successful, and determine areas where it can improve. The paper was authored by Kathleen Odell, a professor at the Dominican University Brennan School of Business, and is titled “Measuring the Impact of Microfinance: Taking Another Look.”
Though it was commissioned by Grameen, Professor Odell’s paper does not offer a particularly positive depiction of microfinance. Instead, she examines the body of microfinance research published between 2005 and 2010 and concludes that, although microfinance does contribute to the growth of microbusinesses, it has not been found to have other widespread socially beneficial effects. Microfinance is not the magic bullet solution to poverty that some of us might have hoped it would be.
Professor Odell’s paper raises another important and increasingly relevant issue: the immense contrast between academic papers and the press. Her work, compared to popular media, does not endeavor to create a gripping story. She fails to construct heroes or villains and presents no simple, clear cut answers to the questions surrounding microfinance. Sadly, this type of objective analysis, examining each aspect of the question, differentiating between statistically significant and insignificant results, is diametrically opposed to the brand of writing found in most newspapers and magazines. A New York Times article, published in April of this year, broadly characterized microfinance as a profit maximizing financial service aimed at taking advantage of the poor. It is articles like this one that cater to the general resentment towards lending institutions in the wake of the financial crisis, and, thus, make irresponsibly generalized statements about an entire field by singling out just one or two microfinance institutions with questionable practices.
All in all, I highly recommend reading Professor Odell’s paper. She describes quite clearly the difficulties inherent in measuring social change, and the experimental models necessary for studies to clarify exactly what microfinance does. If anything, her paper seeks to inspire the right type of thinking with respect to microfinance, and though it does not answer all of our questions, it certainly raises some important ones.
You can find Professor Odell’s paper here and the New York Times article here.