Human Faces of Microfinance Impact
by L. Jarrell, B. Gray , M. Gash, and C. Dunford in 2011
World Region: Global
Freedom from Hunger has done rigorous research, including randomized control trials, and partnered directly and indirectly with research institutions and experts across the globe to measure the impact of their particular microfinance program design, Credit with Education, and its variants, such as Saving for Change. They know the importance of scientifically valid research to make the case for sustained allocation of resources to a development intervention. The results from their studies have lent support to some claims of impact and failed to support others. FFH embraced the revealed weaknesses and took action to make important improvements in its partners' microfinance products and services.
There are at least two problems with depending solely on rigorous research. First, randomized control trials are too costly, complicated and time-consuming to be used as a regular monitoring method in development programs. For organizations like Freedom from Hunger, it is important to know how microfinance clients are succeeding or not succeeding (even if it is hard to know whether microfinance is truly the primary cause). FFH needs to feed timely information back into design and implementation decisions. In short, the organization needs lower-cost yet valid methods to create a feedback loop from microfinance clients to microfinance designers, managers and investors.
The second problem comes from the nature of the information generated by randomized control trials. They typically involve highly structured interviews of clients and non-clients, with rigid questions and response choices that anticipate the changes that we expect from microfinance participation. In other words, the interview and subsequent analysis is designed to confirm (more accurately: to refute) a priori hypotheses about impact. But the whole story of this individual or that family is evident from the data? What else is happening in her or his life that wasn't expectected?
In short, a mix of evaluation methods is needed to triangulate to the “truth” to create a more complete picture of client experience than any one method can provide. Moreover, different audiences and different purposes require different methods. Randomized control trials help to understand, controlling for all human differences, whether microfinance alone can account for change in the well-being of a client. But this method does not shed enough light on how microfinance creates change in the context of whole lives, families and communities. To help explain how microfinance creates change, “impact stories,” involving open-ended questions, careful listening and free-flowing follow-up of the answers, can complement more structured interview techniques to capture a more complete picture of impact.
Personal stories have been dismissed as “anecdotes” rather than valued “data.” Is the story typical or atypical? The answer would be straightforward if the people featured were randomly selected from the microfinance clients rather than cherry-picked to document exceptional success or failure to suit widespread preconceptions. This is not so hard to do.
Since 2007, Freedom from Hunger has been developing and testing an “impact stories” methodology to discover client experiences that are representative of the whole clientele of a microfinance institution (MFI) or even multiple institutions, ranging from wild success to dismal failure or whatever is happening in between among these people. The key steps are to randomly select clients for story collection and to collect these client stories with a systematic yet open-ended interview process that allows the client to tell as much of the full story as she or he is willing to share. Drawbacks are the dependence on the client being forthcoming and truthful (a challenge shared by more structured interviewing as well) and the ability to extract useful information systematically and without bias from complex, unpredictable stories.
FFH's goal is to interview people who have just recently joined a microfinance program and then find these same people about three years later (whether or not they are still participating in the program) to learn what has happened in their lives in the intervening period. This method provides a “longitudinal” (before and after) story of impact. “Mature” clients are also interviewed, who have been participating for at least six months. This allows for a retrospective story of impact and an early opportunity to test the ability to extract useful information from the story to see what is possible to learn about impact.
Here FFH presents what they have learned so far about microfinance clients by talking to them about their life stories in three geographic areas in which microfinance is most oriented toward poverty alleviation—Latin America, sub-Saharan Africa and South Asia. They also explore how this data can help them better understand and evaluate the impacts of value-added microfinance.