1. Social Performance and Impact
Measurement in Microfinance:
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Johannes Majewski, GTZ
Hanover, 17th of June 2010
Measurement in Microfinance:
The story behind

2. What is Microfinance?
Microfinance refers to the provision of financial
services encompassing loans, savings, insurance,
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services encompassing loans, savings, insurance,
remittances to low-income clients, including
consumers and the self-employed, who traditionally
lack access to (semi-) formal providers.

3. From the 50s to the 70s: subsidizing farmers‘ activities
Assumption
• Credit is
required to
finance input
in order to
manage the
green
revolution
Approach
• Provision of
directed
subsidized
credits to poor
farmers
• Creation of
special
Results
• Poor famers
lacked access
to credit
• Erosion of
capital base of
rural and
development
banks due to
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revolution
adequately but
framers are to
poor to pay
market interest
rates
special
cooperatives
and Agricultural
development
banks
• Implementation
of lending
quotas
banks due to
poor loan
recovery and
low interest
rates
• High
transaction
costs and
administrative
complexities
made lending
difficult

4. The 80s and 90s: Moving attention to the financial
institutions
The new paradigm: The financial systems approach highlighting the
need of sustainable institutions through looking on the whole financial
systems
Development:
The 80s: social approaches are still dominating the sector
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The 90s: commercial microfinance is increasing scale
Controversial discussion on commercial versus social goals

5. Beginning of the new century: A decade for the clients
Rising interest by investors in microfinance
Almost 100 MIVs managing over 5 billion USD as assets
Securitization of subordinated microfinance credit
The case of Compartamos
Did we overdo it with
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New attention for the client:
Ability of the client to take informed decisions (Financial capability)
Protection the interests of the clients
Review of social performance of financial service providers
Did we overdo it with
commercialization ?

6. Social Performance: An overview
SP refers to the effective translation of an institution‘s social mission
goals into practice in line with accepted social values. Major concerns:
Managing for results
Understanding client needs
Reporting to external stakeholders
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Reporting to external stakeholders
SPM = Process to monitor processes and use information to improve
overall organizational social performance
Ratings and regulation to foster compliance with social performance
criteria

7. Impact Assessment: A new approach
Unclear impacts of MF over the past decades have led to discussion
concerning the most feasible approach
Limitations of past studies as it was extremely hard to use a correlation to
prove a causation when studying complex social systems
New method of impact study: randomized controlled trials (RCTs):
Randomly offering some people financial services, while withholding it
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Randomly offering some people financial services, while withholding it
from others

8. Impact of microfinance: careful judgement
First results of impact assessment encouraging:
Several studies show increase in household income, improvement in asset
position, increase in savings, increase in employment, increase in
consumption expenditure and poverty reduction etc.
Lessons learnt:
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Lessons learnt:
Money is fungible
Microfinance is not a one fits all solution for poverty eradication
Proper cash flow management is crucial for the poor
Still more research required

9. Thank you for your attention!
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GTZ Financial Systems Development
Thank you for your attention!
Johannes Majewski
Johannes.Majewski@gtz.de