Wider impacts of microfinance institutions: towards defining the scope and methodology

Abstract

The theme of wider implications of microfinance institutions' interventions is a relatively uncharted territory, though the term is alluded to quite frequently. The interest in this theme has emerged out of a number of motivations. One important view underlying such motivation is that the total impact of microfinance intervention is being underestimated through the conventional impact studies. It is alleged that the latter do not take into account of the possible positive externalities on spheres beyond households and the subsequent feedback effects on both participant and non-participant households. This assumption, we argue, is driven a conceptualization of total impact consisting of two mutually exclusive impacts--- narrow and wide. Yet, we argue that, what is conventionally termed as 'narrow' impacts can be perceived as a reduced form expression, incorporating all secondary effects arising from households' (participants and non-participants) engagements with various market and non-market institutions. Analytically then, it becomes difficult to pursue the wider impact theme and yet recognize that individuals and households are the expected beneficiaries of all program interventions. The first section in this paper discusses this problem and posits two alternative approaches to define the scope of wider impacts. It is proposed that within a narrower perspective, one may examine individuals' /households' multi-dimensional engagements at meso and macro levels and assess the subsequent changes at these levels. This would be the logical first step towards assessing wider impacts. This is not to undermine the need to assess the feedback effects of 'wider' impacts on households, especially on the poor. However, as discussed in the following sections, a shift in focus away from households to meso/macro levels broadens the scope of wider impact theme. It allows exploring impact pathways and how these interact with wider structures---many such issues do not immediately lead back to households and are yet to be addressed seriously in the existing microfinance impact assessment literature...