Microfinance and poverty in sub-Saharan Africa: golden ... · sub-Saharan Africa: golden bullet or poisoned chalice? 3ie-LIDC Symposium: Does microfinance lift people out of poverty?

Ruth Stewart, Carina van Rooyen and Thea de Wet

Microfinance and poverty in sub-Saharan Africa: golden bullet or poisoned chalice?

3ie-LIDC Symposium: Does microfinance lift people out of poverty?

29th June 2011

UJ/EPPI/UJ systematic review

• Published protocol

• Extensive searching

• Screening (2 stages)

• Coding

• Quality appraisal

• Data extraction

• Synthesis

• Causal chain development

Microfinance

Sub-Saharan Africa

Comparative evaluations of the impact on the poor

4

Details of the 15 included studies

• 4 randomised controlled trials*

2 quasi-experimental studies

9 with/without studies

• 11 = microcredit, 2 = savings, 2 = combined credit and savings

• Ethiopia, Ghana, Kenya, Malawi, Madagascar, Rwanda, South Africa, Tanzania (Zanzibar), Uganda and Zimbabwe

• Rural and urban initiatives

*Ashraf et al 2008, Pronyk et al 2008, Dupas and Robinson 2008, Ssewamala et al 2010

5

6

RCTs

Micro-savings 2

Micro-credit 2

Micro-credit &savings

-

What did this mean for the scope of the evidence-base?

RCTs Quasi-exp With/without

Micro-savings 2 - -

Micro-credit 2 1 8


- 1 1

RCTs Quasi-exp

Micro-savings 2 -

Micro-credit 2 1


- 1

Findings – is microfinance effective?financial outcomes

Outcomes Credit Combined Savings

Savings YESinvoluntary

+ (1)

YES+ (1)

YES+ (2)

Expenditure & Assets

YES+ (4)

MAYBEMixed (2)

MAYBEMixed (1)

Incomes* MAYBE+ (3), Mixed (1)

No evidence available

NO effect(1)

* Trend to negative impacts over time

7

Findings – is microfinance effective?Non-financial outcomes


Education MAYBE (gender difference)+(2), Mixed (2), –(1), no effect (1)

NO-(1) no effect (1)

YES+(1)

Women’s empowerment

MAYBE+(1) Mixed(2) no effect (1)

no evidence no evidence

Health MAYBE+(4) Mixed(1)

YES+(1)

YES+(2)

Food securityand nutrition

MAYBE+(2) Mixed(2) No effect (1)

YES+(1)

YES+(1)

Housing YES+(1)

YES+(2)

no evidence

Job creation MAYBE+(1), no effect (1)


Social cohesion no evidence no evidence no evidence8

“Credit is like a fire: it is useful to cook your sadzabut if you are careless, it will burn your hut.”

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Causal pathway analysis

10

What we now think is happening

1. Invest in

immediate future:

a. Business

b. Productive assets

c. Adult education

d. Workers’ health & nutrition

Micro-credit

Given to individuals or groups

Scope for increased income via business

or employment

Able to repay loan and avoid increase

in debt

Able to save

Spend money differently

Social cohesion


Long-term benefits

Micro-savings

2. Consumptive spending with

scope for productivity:

a. Add on housing

b. Assets which retain value

Improved capabilities

Better able to deal with shocks

3. Invest in long-term future:

a. Children’s education

b. Children’s health and nutrition

4. Consumptive spending (non-

productive):

Assets which do not retain value

Actual increased income

Actual decreased income

Default on loan, lose collateral

and/or forced to borrow more

Use other MFI

FOR CREDIT CLIENTS ONLYInability to repay loan

Determined by external factors:

Entrepreneurial ability

Appropriateness of business in context

Competition from other MFI clients

Gender and power relations

Use same MFI

11


1. Invest in

immediate future:

a. Business


c. Adult education


Micro-credit



or employment


in debt

Able to save


Social cohesion


Long-term benefits

Micro-savings



a. Add on housing








productive):






Use other MFI







Use same MFI

12


Micro-credit



Social cohesion


Micro-savings

13


1. Invest in

immediate future:

a. Business


c. Adult education


Micro-credit



or employment


in debt

Able to save


Social cohesion


Long-term benefits

Micro-savings



a. Add on housing








productive):






Use other MFI







Use same MFI

14

1. Invest in

immediate future:

a. Business


c. Adult education




Able to

Spend money differentlyLong-term

benefits



a. Add on housing








productive):


Actual increased


15


1. Invest in

immediate future:

a. Business


c. Adult education


Micro-credit



or employment


in debt

Able to save


Social cohesion


Long-term benefits

Micro-savings



a. Add on housing








productive):






Use other MFI







Use same MFI

16

1. Invest in

immediate future:

a. Business


c. Adult education



Scope for increased income

via business or employment

Able to repay loan and avoid

increase in debt

Able to save


Consumptive spending

with scope

productivity:

a. Add on housing

b. Assets which retain












17

1. Invest in

immediate future:

Micro-credit


Able to repay loan and avoid

increase in debt

Able to save


Microsavings

2. Consumptive spending


Actual decreased

income


and/or forced to borrow

more

Use other MFI

Use same MFI

18


1. Invest in

immediate future:

a. Business


c. Adult education


Micro-credit



or employment


in debt

Able to save


Social cohesion


Long-term benefits

Micro-savings



a. Add on housing








productive):






Use other MFI







Use same MFI

19

We recommend…

Microfinance (especially credit) is only rolled out with caution, and focussed more carefully on those who are most likely to benefit

The rhetoric is scaled back and wild claims challenged

More and better impact evaluations of microfinance (especially savings)

Ongoing discussion of how to deliver pragmatic systematic reviews for international development

20

21

Stewart et al (2011)

Maren’s

revie

w

Stewart et al (2010)

Micro-credit Micro-savings Micro-leasing

Sub-Saharan

Africa

The rest of the world

Vaess

en

revie

w (

ongoin

g)

Where do we go next?

Thank you

[email protected]

22

Findings – is microfinance effective?financial outcomes (all studies)



+ (1)

YES+ (1)

YES+ (2)


YES+ (4)

MAYBEMixed (2)

MAYBEMixed (1)

Incomes* MAYBE+ (3), Mixed (1)


NO effect(1)


23

Findings – is microfinance effective?financial outcomes (trials only)

Outcomes Credit Savings


+ (1)

YES+ (2)


YES+ (1)

VARIEDMixed (1)

Incomes* VARIED+ (1), Mixed (1)

NO-(1)


24

YES+ (1)

VARIEDMixed (1)


Savings No evidence available

YES+ (1)

YES+ (2)


YES+ (1)

MAYBEMixed (1)

MAYBEMixed (1)

Incomes* YES+ (2)


NO effect(1)

Findings – is microfinance effective?financial outcomes (RCTs only)

Outcomes Credit Savings


+ (1)

YES+ (2)


No evidenceVARIEDMixed (1)

Incomes* VARIEDMixed (1)

NO-(1)

25


Savings No evidence available


YES+ (2)




MAYBEMixed (1)

Incomes* YES+(1)


NO effect(1)


Findings – is microfinance effective?Non-financial outcomes (all studies)


Education MAYBE (gender difference)+(2), Mixed (2), –(1), no effect

(1)

NO-(1) no effect (1)

YES+(1)


MAYBE+(1) Mixed(2) no effect (1)


Health MAYBE+(4) Mixed(1)

YES+(1)

YES+(2)


MAYBE+(2) Mixed(2) No effect (1)

YES+(1)

YES+(1)

Housing YES+(1)

YES+(2)

no evidence

Job creation MAYBE+(1), no effect (1)



Findings – is microfinance effective?Non-financial outcomes (trials only)


Education MAYBE (gender difference)Mixed (1)

NO-(1)

YES+(1)


MAYBEMixed(2)


Health YES+(2)

no evidence YES+(2)


YES+(1)

no evidence YES+(1)

Housing no evidence YES+(1)

no evidence

Job creation NONo effect (1)


Social cohesion no evidence no evidence no evidence

Findings – is microfinance effective?Non-financial outcomes (RCTs only)


Education no evidence no evidence YES+(1)


MAYBEMixed(1)


Health YES+(1)

no evidence YES+(2)

Food security and Nutrition

no evidence no evidence YES+(1)

Housing no evidence no evidence no evidence

Job creation no evidence no evidence no evidence


Documents

Microfinance and poverty in sub-Saharan Africa: golden ... · sub-Saharan Africa: golden bullet or poisoned chalice? 3ie-LIDC Symposium: Does microfinance lift people out of poverty?