Third Step in the Microfinance Theory of Change: Manage the Business for Major ROI?

The classic microfinance theory of change involves three steps the poor person must take to make this theory true: 1. Take a loan from (or save with) a microfinance institution (or similar entity) 2. Invest the money in a viable business 3. Manage the business to yield major return on the investment. I closed the last post of Theme Three (# 22) with David Roodman’s observation that microen read more...

Nested Initiatives to Promote Evidence-based Practice in Microfinance

I return briefly to Theme One, especially posts #2 and #3, in which I discussed the origins and purposes of the Smart Campaign, the Social Performance Task Force (SPTF) and the Seal of Excellence for Poverty Outreach and Transformation in Microfinance.  Thanks in part to the Microfinance CEO Working Group, and because of their kindred spirits and broadly overlapping constituencies, these three i read more...

Second Step in the Microfinance Theory of Change: Loan Use Part II

My inquiry of the Microfinance Gateway Library yielded around 300 papers that refer to loan use. Without reading all of them all the way through, I found only the following offer some useful data to add to the three studies I reported in my previous post (#21). Bolivia – commerce 34%; animals for family 31%; consumption 30%; fattening animals 19%; inputs for agriculture or livestock-rearing 1 read more...

Second Step in the Microfinance Theory of Change: Invest in a Viable Business – Do They?

The classic microfinance theory of change involves three steps the poor person must take to make this theory true: 1. Take a loan from (or save with) a microfinance institution (or similar entity) 2. Invest the money in a viable business 3. Manage the business to yield major return on the investment. My last post (# 20) found that many, perhaps most, of the poor do not take Step 1. Still, a ve read more...

First Step in the Microfinance Theory of Change: Take a Loan or Save – Do They?

The classic microfinance theory of change is simple: a poor person goes to a microfinance provider and takes a loan (or saves the same amount) to start or expand a microenterprise which yields enough net revenue to repay the loan with major interest and still have sufficient profit to increase personal or household income enough to raise the person’s standard of living. There are three key st read more...

What Proportion of the Poor are Capital-constrained Entrepreneurs?

Finally it is time to move on from Theme Two, having decided from currently available evidence that when microfinance providers enter the scene, the poor benefit—at minimum—from gaining access to a greater variety of options for financing their consumption needs, their investment opportunities and their response to major costs, both predictable and unpredictable. Does the microfinance opti read more...

Constructing a Theory of Change Diagram for Freedom from Hunger

The plan for The Evidence Project is to construct a theory of change for Freedom from Hunger from the conclusions drawn from each of the Themes as they are covered. I also want to provide some indication of the apparent strength of the supporting evidence and the apparent strength of each of the proposed cause-and-effect linkages in the “benefits diagram,” as we call it at Freedom from Hunger. read more...

What Does the Evidence Mean for Freedom from Hunger?

Over the past two months, I have been asking whether the poor get a better deal from microfinance compared to the alternatives.  Lynne Davidson Jarrell has provided us her perspective on the main points of the ten or so posts. What does this mean for Freedom from Hunger? Now I must make this discussion valuable to my employer, Freedom from Hunger, by focusing on what all this tells us abou read more...

Theme Two Wrap Up: Do the Poor Get a Better Deal from Microfinance Providers?

by Lynne Davidson Jarrell I asked Lynne to summarize the posts under Theme Two, from her perspective rather than mine.  Note that she points to the posts relevant to each topic she covers (the numbers are hyperlinks).  Each post on this blog is assigned a unique number in chronological order of posting, and all the posts for each theme are listed by number and title on the right side of this read more...

Online Discussions on the Value of Discipline and of Groups

The last three posts explored how some costs of microfinance participation could turn out to be benefits to the poor.  Specifically, discipline and groups may be structured to become features the poor actually welcome. Earlier this month of May, there were two online discussions that offer further support for this notion. Regarding discipline, MicroLinks’ After Hours Seminar #61, "Matchin read more...