Evaluating the impact of microfinance….and a Rolex recipe

By James Allman-Gulino, KF11 Uganda

Do microfinance loans actually improve the lives of borrowers? This is an enormous question, and one that’s notoriously difficult to measure.  In an earlier post on social performance, I mentioned some of the issues involved with trying to obtain such a metric (chiefly: it’s expensive, it may ignore hard-to-measure social benefits of borrowing, and it’s tough to isolate microfinance loans as the sole reason a borrower’s income increases/decreases).  But despite those challenges, if microfinance is to be used as a choice means of getting individuals out of poverty, we would hope that statistical evaluations reinforce that it measurably benefits borrowers.

Well, in the wake of microfinance’s growth as a commonplace “development intervention”, more and more studies have attempted to measure just this benefit (or lack thereof).  A broad survey of these studies that was commissioned by the Grameen Foundation USA in 2005 can be found here.  It should be noted that despite the survey’s stated pledge to objective review the existing studies, the Grameen Foundation is an organization committed to using microfinance to “defeat global poverty,” which obviously shows their preexisting belief in microfinance’s positive impact.  Nevertheless, the survey found several common threads in microfinance studies to date, namely that:

  • Annual household incomes/expenditures of microfinance borrowers were typically higher than that of non-borrowers, by amounts of 20% or more.
  • Positive effects of microfinance lending were almost exclusive to female clients; studies found that lending to males tended to have a zero net effect or even a negative effect on household income.
  • Data were ambiguous as to whether microfinance was most beneficial to clients who were categorized as the “less poor” or those that were the “poorest of the poor.”
  • Microfinance lending often had positive corollary effects on families’ nutrition or borrowers’ empowerment (if they were women).

The pertinent microfinance studies thus certainly seem to support the assertion that it improves household outcomes for borrowers.  So we’re all good, right?  Not so fast.  Some of the newer microfinance studies that use randomized control trials (RCT), a statistical method used to isolate a single variable’s (i.e., microfinance) effect on an outcome like change in income, paint a less rosy picture.  David Roodman, a frequent microfinance skeptic, wrote this convenient summary article about the findings of recent RCT studies.  Several of the studies found that microfinance lending led to lower poverty rates and greater investment in borrowers’ businesses.  However, other studies found that microfinance had minimal positive effect on income and spending, and displayed little of the “multiplier effect” in communities/districts with access to microfinance lending versus those without access.

So, what can we say about microfinance’s impact on the lives and incomes of borrowers?  Though I’ve condensed a huge debate into a (very) short blog post, existing statistical studies  still seem to reinforce that microfinance does in fact have a positive effect on borrowers’ outcomes, particularly when loans go to women and are administered by microfinance institutions (MFIs) with responsible practices.  This is another key reason why Kiva has decided to promote its Field Partners’ collection of data about their social performance through the CERISE tool; MFIs that effectively avoid client over-indebtedness, empower clients with financial literacy trainings or other services, and specifically target women borrowers, are more likely to help clients translate microfinance loans into positive changes in their incomes.  However, the variability of some of these statistical studies shows that microfinance funders like Kiva can’t just assume that loans will automatically translate into improvements in the lives of borrowers.  There is a continued need (even if it may be expensive and difficult) to try to evaluate how well microfinance helps poor entrepreneurs lift themselves out of poverty, and in what situations it may be less successful.

Wait...this isn't impact evaluation?

So…because this post might be a bit dry for some, I also wanted to go a totally different direction and include a recipe for one of the most common street foods of Kampala.  August was Food Month on Kiva, and several Kiva Fellows put up cool local food recipes for their blog posts (check out the entries from Sam Kendall, EB Moore, and Kelsey Quam); naturally I’m a few days late, but still wanted to follow in their footsteps.  So, below is a basic recipe for a Ugandan “Rolex.” The Rolex is a quick and easy snack that is sold by vendors all over Kampala; it utilizes some of Uganda’s most prolific crops (tomatoes, onions, and cabbage), but you can put in whatever produce you like.  Enjoy!


1 chapatti (a corn/flour tortilla can be substituted)

2 eggs

Pinch of salt

Splash of milk

Cooking oil

Shredded cabbage (around ¼ cup)

1 small tomato, chopped

Chopped red onion (around ¼ cup)


Heat cooking oil to high temperature in a frying pan or skillet.  Briefly toss in chapatti, lightly browning each side, then remove.  Crack eggs and mix with salt, milk, cabbage, tomato, and red onion.  Fry the egg/vegetable mixture in the pan, creating what amounts to a very thin omelet.  Remove from heat and roll the omelet up in the browned chapatti, as shown above.

About the author

James Allman-Gulino