While my compatriots compete to get on the podium in
This afternoon, most of the desks are empty; many of my colleagues have gone on a journey, for either private or professional purposes. And I wonder if this wanderlust foreshadows my own future. Although I understand people suffering from jet lags and feeling uprooted (you can’t call it “holidays” to do
As a consequence, the microfinance market needs to rise up to challenges unknown to well-developed markets and this affects research and product design: how do you want to compare results from South America, Africa and
Last week I could provide my own two cents to this project: I had the opportunity to present my results that I have accumulated during my work. On the agenda: which MFIs could be potential clients for our funds? How can we improve upon our selection criteria for new clients? And how can one measure social performance? Especially the last topic provoked a serious discussion and helped me to gain new insights.
There are many caveats to using numbers of average loan balances (ALB) as a simple proxy for social impact. At least, comparisons across regions have to be taken with a pinch of salt, even if you standardize your indicator (either by transforming it to an absolute poverty indicator by using PPP or by converting it into a measure of relative poverty by dividing by GNI per capita). The correlation between the proxy and the real poverty reduction is not likely to be linear, as the latter depends largely on the context. In
Nevertheless, based on tables displaying raising ALB records, people continue to condemn this “mission drift”. Using my sample from the MIX market, I checked the evolution for the years 2005 till 2007. When you take the ratio in ALB of two consecutive years (2005 / 2006 & 2006 / 2007) you get for both time periods an average of more or less 0.9, meaning that the ALB increases over time. This seems to support the idea of a mission drift. But not necessarily: If the client pool hasn’t changed, these numbers could actually be a good sign: one explanation could be that borrowers are in fact getting richer. And if the MFIs have really moved their target to richer people, the above explained argument could justify and even endorse this development.
To clarify some of these questions it would be revealing to regress macro variables (GDP growth, HDI, college enrolment rates, employment rate…) on MF indicators. In some well-developed microfinance economies (like
There’s still much research to do in the field of microfinance. Me too, following my internship with BlueOrchard, I would like to continue on this track: In fall I will get back to university to finish my last year of studies; in my degree dissertation I want to focus on microinsurance linked to microlending and how it could help people escaping from the poverty trap. Traditional economic theory predicts the existence of multiple – bad and good - equilibria of economic growth. A “big push”, for instance in form of coordinated government intervention, is necessary to put the economy on the right path. In my opinion, microinsurance could facilitate this process because it has the promise to unlock credits and to promote financial access. But this is still to be demonstrated – in a theoretical and a practical manner.