Third Step: Manage the Business for Major ROI—Part VI—Freedom from Hunger Studies

Continuing the quest for evidence of enough return on investment in income-generating activities (IGAs) to increase household income.

Drawing from the paper written a decade ago by my Freedom from Hunger colleagues Barbara MkNelly and Mona McCord, this post focuses on results of four studies conducted by Freedom from Hunger in the 1990s—in coastal Ghana, the altiplano of Bolivia and the Sahelian zone of Burkina Faso and Mali. Here I summarize “key learnings” relevant to the Third Step of the classic microfinance theory of change.


  • Loan activities reflect the livelihood strategies and traditional work of women in the program area. In West Africa, Credit with Education loans were typically invested in women’s own IGAs for trading and food processing. In Bolivia, loans were commonly used for animal-raising and family rather than women’s own IGAs.
  • Loans, especially early ones, are commonly used to expand an existing income-generating activity. In all areas, the ability to expand the scale of an activity was identified as the predominant initial effect of access to loans and the principal link to increased income.
  • Over time, loans are used to diversify income by adding new products or undertaking new activities. This pattern was seen in all of the study sites. In Ghana, participants were significantly more likely than non-participants to have engaged in several IGAs in the last four weeks. In Mali, Bolivia and Burkina, in-depth interviews revealed how participants divided their loan across several IGAs or other uses.
  • Cash credit allows women to buy more inputs, often at lower unit costs. In Ghana, buying inputs with cash rather than on a credit basis enhanced participants’ bargaining power and their profit margin. In the Sahel, where food prices are highly variable over the year, it was common for Credit with Education participants to buy bulk foodstuff at low, post-harvest prices.
  • A certain amount of each loan is channeled directly to consumption. In Bolivia, as many as one in three borrowers used at least part of their loans for family needs. In Mali, 2-year participants commonly used loans to purchase clothing.
  • Loans were also used to augment assets. In Bolivia, it was common for Credit with Education participants to use their loans to buy animals for the family, and in Burkina Faso, many participants invested in equipment and items for their IGAs.

Collecting information based on recall about income, expenditure and profit is notoriously difficult, but it can be done with fair confidence if the recall period is short. Few women respondents actually kept accounting records, so the recall period in the Ghana and Bolivia studies was limited to four weeks preceding the survey. Women were allowed to report costs and earnings in a time period meaningful to their business—per week or biweekly, etc. For uniformity, the cost and revenue information was converted to monthly estimates. In order to attach a level of confidence to the specific results, interviewers rated each respondent in terms of their ability to recall the information.

Forty-five percent of the women interviewed in Ghana provided “profit” estimates after deducting the amount they had spent on food for their families. Women engage in IGAs so that they can better feed and care for their families. Therefore, they consider their “profit” to be the amount remaining after IGA expenses and the cost of feeding the family. Their conceptualization of “profit” highlights the considerable integration and interaction of the welfare of women’s IGAs with the welfare of their families.


  • Although not a complete picture of household income, Credit with Education participants in Ghana and Bolivia exhibited a significant increase in IGA earnings between the baseline and follow-up rounds relative to women not in the program. In Burkina Faso, participants also reported increased IGA earnings.
  • Although significant improvements were evident, a striking feature was the relatively small amount of IGA earnings. On average, monthly nonfarm earnings for Credit with Education participants were approximately US$42 in Ghana, $30 in Bolivia (family) and even lower in the Sahelian programs, where loans are typically smaller.
  • There was great variability in IGA returns across participants and even within the same Credit Associations (= village banks). Some participants in Ghana and Bolivia were earning $200 per month, while 10–25 percent earned less than $10 per month. A woman’s loan-use strategy, resource endowment and the commercial development of the community most likely influenced the degree of economic benefit she enjoyed.
  • The remoteness of certain program communities and their limited commercial opportunities is likely to be a major factor mediating impacts for clients, especially on the altiplano of Bolivia and in the Sahelian countries.


  • Participation in Credit with Education influences clients’ ability to build assets indirectly through IGA earnings and directly through loan use (especially to buy animals in Bolivia) and program policy (requiring the building of their own savings).
  • A major impact was seen in all sites on participants’ own savings. Similar to IGA returns, there was great variability across participants in the amount of their savings.
  • In Mali, impact on consumer goods and business assets was related to duration of program participation and was evident after two years. In Burkina Faso, despite the relatively small scale of women’s IGAs, many clients made significant investments in items such as cooking pots, storage containers and their marketing site.


  • There were significant increases in participants’ per capita spending on clothing in general in Bolivia and clothing for children in Ghana. In Bolivia, participants were also significantly more likely to have spent at least some amount on medical care over the last 12 months than residents in control communities.
  • Program participation was not associated with significant impacts on per capita food expenditures in total or for any specific category of food, although in Bolivia, participants were significantly more likely to spend at least some amount in the last week on meat/fish.
  • Program participation was not associated with significant impacts on expenditures for schooling or housing improvements.


  • Credit with Education client households, especially the poorest among them, are extremely vulnerable to “shocks,” particularly illness, and “production shocks”—higher-than-expected input prices, lower-than-¬expected output prices and loss of crop or livestock.
  • Credit with Education services help client households better avoid economic and seasonal shocks by diversifying their income-earning strategies and through the health education.
  • Clients’ increased income, savings and assets also help households cope with economic and seasonal shocks when they occur.
  • In Mali and Ghana, program participation was associated with reduced food insecurity in terms of those reporting a “hungry season” and the duration of this period.

I withhold commentary until the next post. Meanwhile, just absorb these findings and formulate your own conclusions.


This site uses cookies in accordance with our Privacy Policy.
To continue browsing our site and consent to our use of data from cookies,
click "I understand."

more information

The cookie settings on this website are set to "allow cookies" to give you the best browsing experience possible. If you continue to use this website without changing your cookie settings or you click "Accept" below then you are consenting to this.