Is Impact Impact?
Probably one of the biggest issues facing microfinance today is that of impact. To what extent has microfinance actually affected global poverty? In what ways can its impact be measured, and how sustainable is it? Will it continue to grow? Though I agree that understanding impact is crucial and developing social impact studies and matrices is a valuable undertaking, I question the ability we have to concretely measure the more soft-data effects. How does one quantify the feeling of being better off?
One of the main responsibilities of Kiva fellows is to assist with the journaling process of our MFIs. With no interest rates, journals are the only tangible ROI for Kiva lenders. They are intended to show the progress of the clients’ businesses and essentially attempt to convey the impact of the loans on the clients’ lives. This opportunity to witness impact first-hand is probably what excited me most about this experience. Having now worked in Cambodia with CREDIT MFI for almost two months now, the interviews I have had with clients for these journals have done a tremendous amount to inform my own attempts to answer these questions.
With the clients I have met, repairs and construction, buying motorbikes, purchasing inventory, tools and equipment for their businesses, and paying for basic household amenities make up the overwhelming majority of loan usages. Those that are able to generate greater income after applying the loans tend to reinvest in their businesses, pay for their children’s education, and try to set aside a savings. Most hope for higher education and a better standard of living for their children.
In many ways, I find all of these motivations, applications, and hopes to be not unlike those of individual borrowers in the States. Mortgage payments, student loans, and start-up capital for businesses are what come to my mind when I think about why people I know borrow money from banks at home.
What strikes me is that at its root, microfinance is a singularly simple concept. “Small finance”– providing access to reasonable financial services in denominations that are proportional to the income and needs of the very poor. A concept that is so bizarrely basic that it is has become revolutionary. Yet we wouldn’t expect access to loans to prevent bankruptcy or to guarantee upward income mobility at home. It would be equally foolish to expect total global poverty alleviation at the hands of microfinance.
What microfinance does do is provide financial access to those who exist outside of mainstream financial systems. This “normalizing” effect can serve as a powerful catalyst and tool. It is what makes the concept revolutionary and the implementation necessary –regardless of the tangible social impact that we are able to measure out of it./>