The miracle of microfinance? Evidence from the Spandana evaluation
June 16, 2010
Speaker: Justin Oliver
Over 150 million people access microfinance services globally. But the jury is still out about whether microfinance improves the lives of the poor.
"While the bulk of the development community looks at microfinance as a panacea to the problem of poverty, this study brings more realistic expectations into the discourse,” said Justin Oliver, Executive Director of the Centre for Micro Finance at IFMR Chennai, during his presentation of the findings of the first randomized evaluation of Spandana microcredit intervention in the slums of Hyderabad, India.
Spandana is the fifth largest Microfinance institution in the world. While no effect of access to microcredit on average monthly expenditure per capita was found 15 to 18 months after lending began, expenditure on durable goods increased in treatment areas. The number of businesses also increased by one third. However, there was no impact on health, education, or women’s decision making outcomes.
of microfinance in this case increased seriousness in terms of how people spent
their money,” said Oliver. During the discussion, Dr. Vegard Iversen from the
Institute of Development Policy and Management in Manchester stressed that the
absence of discernible microcredit impacts on average per capita consumption
expenditure and basic well-being indicators like - child illness shocks and
aggregate health expenditure within the household, education enrollment or
expenses or female decision-making power within the household - should not come
as a great surprise.
“Both the choice of location like Hyderabad and the very careful ‘screening’ of eligible microfinance customers and candidate settlement areas carried out by Spandana would result in target groups with comparatively high initial figures. For education, this is illustrated by the enrollment of 98 % among 7-11 year olds,” said Iversen.
“Compared to a rural setting with thinner credit markets, lower human development benchmarks and less mobility among potential customers, the present study would plausibly underestimate poverty and human development impacts while the impact on enterprise establishment would be expected to be lower,” he added.