What indicators can be used to measure the impact of microfinance?
Microcredit and its umbrella term microfinance significantly increased their
popularity over the last years. Though some negative issues especially with
respect to overindebtedness and high interest rates are discussed as well,
microfinance is seen as an effective and innovative measure for alleviating
poverty. But what is the outcome of microfinance? Does it really alleviate
poverty? Does it outplay other measures of development aid? Which impact
is most important (Hermes, Lensink, 2007b)?
This paper describes concepts and studies that intend to measure the
impact of microfinance. We will describe and exemplarily use methods of
outreach measurement on the basis of mixmarket.org data. Outreach measurement
is used in many studies on the impact of microfinance. In addition
to this we will describe social cost-benefit analysis and we will introduce and
discuss the social return on investment (SROI) concept as an alternative concept for measuring the impact of microfinance.
The concepts will be applied to an imaginary microfinance institution, MicroImpact, to test
whether and how they are applicable and what advantages and drawback of
the concepts are. Let us start with a short description of microfinance and
microcredit and its intended impacts. We will use the term microfinance for
a group of products and services such as micro-loans, microcredit, or microsavings.
Microcredit is used as a synonym for micro-loans.