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Critical analysis of methods to evaluate the impact of microfinance

François CAJOT student laureate

°1978 Belgium
Degree in Management Sciences, Université de Liège, Belgium, 2004

Analyse critique de méthodes d’évaluation de l’impact de la microfinance

One of the key issues in the debate in this year of 2005, which has been designated the ‘Year of Microcredit’ by the United Nations, is the vital issue of the impact of programmes and organizations active in this sector. In practical terms, microfinance treads a difficult path between two constraints: financial equilibrium (necessary to the development of the institutions) and the social impact on the populations involved (the reason why these institutions were set up in the first place).
The work of François Cajot is a very interesting synthesis of this problem, produced moreover at a very opportune moment. Indeed, after first emphasizing all the constraints and problems involved in the evaluation of the microfinance institutions, he presents a very clear synthesis of the tools and methods that are available. Recognizing that these methods generally only bring partial satisfaction, he then presents a European research project that is currently in the process of developing the Social Performance Index for these microfinance institutions. The concept is simple: given that it is often difficult to identify the real impact on the customers/beneficiaries of the financial services offered by the microfinance institutions, this method aims to establish criteria that should be applied to the organizations themselves in order to determine whether they have a profile that is likely to generate a positive impact on their customers/beneficiaries or not. Highlighting the strengths and weaknesses of the different approaches, François Cajot then takes a step back and compares all the methods on the basis of operational criteria. From this analysis, he then puts forward proposals for the future as he concludes that ‘microfinance can therefore not be correctly evaluated with one isolated approach. It should, on the contrary, benefit by cross analysis of the different methods of impact evaluation, set out in this dissertation’.

Report by Prof. Marc Labie, Warocqué Faculty of Economic Sciences, Université de Mons-Hainaut, Belgium