Session Title:
Measuring Success at the Base of the Pyramid
Measuring Success at the Base of the Pyramid
Date of talk or publication:
2005
2005
Speaker Name / Title:
Christopher Crane & Marc Epstein
Christopher Crane & Marc Epstein
Organization:
Opportunity International & Rice University
Opportunity International & Rice University
Description:
Microfinance has been used as a tool for alleviating global poverty for about 40 years. Billions of dollars have been loaned and the success stories are impressive. But, though microfinance institutions have made many important contributions, the precise nature of these contributions is less clear. Moreover, the question of whether microfinance might be a vehicle through which even greater and more critical contributions to global poverty alleviation might be made wants further research. Two primary sets of questions motivated the present research:
1. What are the primary determinants of success for microfinance institutions? This question addresses why microfinance has been more successful in some cases than in others. Is it the political or business environment? Is it the microfinance institution’s leadership? Is it the organization’s strategy, structure, or management systems? Is it the characteristics of the borrowers? Better articulation of the key drivers of success might improve the performance of microfinance and its access to additional capital for growth.
2. What are the appropriate measures of success? To answer this question entails answering many other questions. Is the primary goal of microfinance institutions to provide the poor with access to capital? Or is it to provide additional income for the poor? Is it necessary that borrowers not only increase their income but also improve their living conditions (i.e., housing, nutrition, education for their children, and so forth)?
Existing evidence on the contribution of microfinance is mixed. Is it (a) that microfinance has a minor impact at best, or (b) that the research methods have been inadequate, or (c) that the wrong variables are being measured, or (d) that the variables are not being measured well? For much of its history, microfinance has primarily been conducted as an act of faith. If microfinance is to become a larger force in alleviating global poverty and provide more scalability, better evidence of the payoffs of microfinance investments and of the impact on both the economic and social welfare of the borrowers is required. Hence, this paper attempts to carefully specify the antecedents and consequences of investments in microfinance, examine the nature and amount of existing contribution, and consider how to enhance the contribution of microfinance to the alleviation of global poverty by thoroughly reviewing the literature, examining prior impact studies and data, interviewing senior officers at Opportunity International, and analyzing data and field interviews of microfinance activities in Ghana. The present research has yielded a microfinance contribution model that articulates the antecedents and consequences of investments in microfinance in order to identify both the key success factors and key performance indicators of microfinance success. The model includes a specification of the performance drivers and set of measures for the inputs and processes that lead to success, as well as measures for both outputs and outcomes.
Microfinance has been used as a tool for alleviating global poverty for about 40 years. Billions of dollars have been loaned and the success stories are impressive. But, though microfinance institutions have made many important contributions, the precise nature of these contributions is less clear. Moreover, the question of whether microfinance might be a vehicle through which even greater and more critical contributions to global poverty alleviation might be made wants further research. Two primary sets of questions motivated the present research:
1. What are the primary determinants of success for microfinance institutions? This question addresses why microfinance has been more successful in some cases than in others. Is it the political or business environment? Is it the microfinance institution’s leadership? Is it the organization’s strategy, structure, or management systems? Is it the characteristics of the borrowers? Better articulation of the key drivers of success might improve the performance of microfinance and its access to additional capital for growth.
2. What are the appropriate measures of success? To answer this question entails answering many other questions. Is the primary goal of microfinance institutions to provide the poor with access to capital? Or is it to provide additional income for the poor? Is it necessary that borrowers not only increase their income but also improve their living conditions (i.e., housing, nutrition, education for their children, and so forth)?
Existing evidence on the contribution of microfinance is mixed. Is it (a) that microfinance has a minor impact at best, or (b) that the research methods have been inadequate, or (c) that the wrong variables are being measured, or (d) that the variables are not being measured well? For much of its history, microfinance has primarily been conducted as an act of faith. If microfinance is to become a larger force in alleviating global poverty and provide more scalability, better evidence of the payoffs of microfinance investments and of the impact on both the economic and social welfare of the borrowers is required. Hence, this paper attempts to carefully specify the antecedents and consequences of investments in microfinance, examine the nature and amount of existing contribution, and consider how to enhance the contribution of microfinance to the alleviation of global poverty by thoroughly reviewing the literature, examining prior impact studies and data, interviewing senior officers at Opportunity International, and analyzing data and field interviews of microfinance activities in Ghana. The present research has yielded a microfinance contribution model that articulates the antecedents and consequences of investments in microfinance in order to identify both the key success factors and key performance indicators of microfinance success. The model includes a specification of the performance drivers and set of measures for the inputs and processes that lead to success, as well as measures for both outputs and outcomes.
