Latest Findings from Randomized Evaluations of Microfinance

1-Feb-2012    Interested in learning more on the impact of micro savings on business investment and creation, consumption, and household well-being?

Perhaps one of the greatest contributions from these first randomized evaluations of microcredit will be to help reset expectations. Far from offering the last word on the impact of microfinance, the existing evidence instead offers a foundation for learning what works, for whom, and under what circumstances so that products and delivery approaches can be better used and adjusted to meet the needs of poor people.

This paper summarizes the latest research findings from a new body of empirical evidence that uses randomized evaluations, similar to those used in medical trials, to compare how one group responds to access to specific new financial services against how a comparable group fares without those services. This paper goes back a couple of years to the first studies that used this approach, and summarizes a series of research studies presented at the October 2010 Microfinance Impact and Innovation Conference in New York. These studies evaluated product design for a range of financial services, including credit, savings, and insurance. The studies discussed here were undertaken by research affiliates of Innovations for Poverty Action (IPA), the Financial Access Initiative (FAI), and the Abdul Latif Jameel Poverty Action Lab (J-PAL) at the Massachusetts Institute of Technology; they are all randomized evaluations unless otherwise specified.

Part 1 of this paper reviews the main results from randomized evaluations that measure the impact of microcredit and microsavings on business investment and creation, consumption, and household well-being. Part 2 presents evidence from evaluations of products and delivery design. Part 3 discusses the evidence on microinsurance product.



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