Assessing Impact of

Microfinance

Group Members
Sapna Cathrine
Anthony
Neha Sinha
Mukesh Kumar
Jha
Satyendra
10/05/09 Chandra Pandey
MICROFINANCE 1
 Microfinance
• Microfinance is defined as the
provision of saving, credit and other
financial services and products of
small amount to the poor for enabling
them to raise their income level and
improve living.
• The institution that provides these
services to the poor is called as
Microfinance Institution.
10/05/09 MICROFINANCE 2
 Why poor need credit
• In Stuart Rutherford’s recent book The Poor and Their Money,
he cites several types of needs Lifecycle Needs: such as
weddings, funerals, childbirth, education, homebuilding,
widowhood, old age.

• Personal Emergencies: such as sickness, injury,

unemployment, theft, harassment or death.

• Disasters: such as fires, floods, cyclones and man-made

events like war or bulldozing of dwellings.

• Investment Opportunities: expanding a business, buying land

or equipment, improving housing, securing a job (which often
requires paying a large bribe), etc.

10/05/09 MICROFINANCE 3
10/05/09 MICROFINANCE 4
Meaning of impact Assessment :
Impact assessment is the process that seeks to determine if any intervention has
had the desired outcome.

Microfinance impact analysis is the process by which one determine the effects of
microfinance as an intervention

• Impact assessment is a critical element in further improving micro-finance services

and promoting innovation.

• To know the outreach of MFIs

• Whether the services reached to the poor in sustainable manner i.e. improved
their socioeconomic condition or not

10/05/09 MICROFINANCE 5
 When should be impact be assessed

• Impact Assessment before intervention

• Impact Assessment after intervention

• Impact Assessment During Intervention

10/05/09 MICROFINANCE 6
Users of Microfinance Impact Assessment

• Microfinance Practitioners

• Donors

• Policymakers

• Academics

10/05/09 MICROFINANCE 7
 Kinds of Impact
Economic impacts
It can be at the level of economy itself. A large MFI
reaching hundreds of thousands of clients may expect
or aim at impact in terms of changes in economic
growth in a region or sector.

Sociopolitical or cultural impacts

To know the shift in socioeconomic status of a
particular sub sector.
Personal or Psychological Impacts
Microfinance can have impact on borrower’s sense of
self.

10/05/09 MICROFINANCE 8
 Impact of Microfinance on women

• Increasing women’s income level

• Control over income leading to greater
levels of economic independence.
• Enhancing perceptions of women’s
contribution to household income and
family welfare
• Increasing women’s participation in
household and decision making.
• Access and control over assets.

10/05/09 MICROFINANCE 9
 Impact of Microfinance

• At the household level.

• At the individual level.

• At the enterprise level.

10/05/09 MICROFINANCE 10
 Impact Proxies
Client oriented impact
Willingness to pay
analysis
•The magnitude of impact
is hard to determine
•Intra-household effects
are not captured •The dilemma of the human
•Long-term development subject as a “Dynamic
impact(poverty reduction) target.”
is unclear

10/05/09 MICROFINANCE 11
 Methods of Impact Assessment

• Qualitative Approaches.

• Quantitative Approaches.

10/05/09 MICROFINANCE 12
 1. Qualitative Approaches
 Intensivity: a continuous or regular presence
among client over time.

 Structured observation

 Triangulation

 Open-endedness.

 Focus group.

10/05/09 MICROFINANCE 13
 Qualitative Approaches
 Social mapping and modeling.

 Seasonality maps or calendars

 Daily time – use analysis

 Participatory linkage

 Venn Diagrams

 Wealth Ranking
10/05/09 MICROFINANCE 14
 Quantitative Approaches

 Experimental Methods.

 Quasi –Experimental methods.

 Non- Experimental methods.

Doc.
10/05/09 MICROFINANCE 15
 Choice of unit of analysis

• The client as a client

• The client as an individual

• The enterprise

• The house hold economic portfolio

10/05/09 MICROFINANCE 16
 Case study of
Bandhan
“Hope for the poor”

10/05/09 MICROFINANCE 17
 Bandhan
• Bandhan is a microfinance Instituiton operating in West
Bengal since 2001. The organisation is registered under the
west Bengal Socities Registration Act, 1961.
• It started its microfinance operations in july 2002 with
technical support from Association for Social
Advancement(ASA), Bangladesh.
• Bandhan was set up to address the dual objective of poverty
alleviation and women empowerment.The microfinance
activities are carried on by Bandhan Financial Services Pvt.
Ltd. (BFSPL), incorporated under the Companies Act, 1956
and also registered as a Non Banking Financial Company
(NBFC) with the Reserve Bank of India (RBI).

10/05/09 MICROFINANCE 18
 Performance of Bandhan
Particulars 2002-03 2003-04 2004-05
Branches 2 10 54
Districts 2 5 8
Blocks 3 15 93
Panchayat 12 91 374
Villages 61 290 1,635
Staff 12 46 234
SHG formed 135 581 2,956
Women 2,029 9,282 51,586
members
Growth of the 11 500 611
Year ( %)2

Source: Karmakar, K.G., Microfinance in India

10/05/09 MICROFINANCE 19
Bandhan as on August 2009
No. of states :12
No. of branches : 943
No. of members :18,42,546
No. of staff : 5,511
Loan disbursed this month : Rs. 190 Crores

Loan outstanding : Rs. 850 Crores

Source: www.bandhanmf.org

10/05/09 MICROFINANCE 20
Name of the Funding Agency / Banks
• ABN - AMRO Bank Axis Bank
• Bank of India Central Bank of India
• Friends of Women's World Banking, India HDFC Bank
ICICI Bank IDBI Bank
• Indian Bank Indian Overseas bank.
• NABARD. Punjab National Bank
• Rashtriya Mahila Kosh SIDBI
• Standard Chartered State Bank Of India
• Bank Of Baroda United Bank of India
• Insurance: Life Insurance Corporation of India (LIC)
• Donors
• Consultative Group to Assist the Poor (CGAP)- an affiliate of World Bank
• Ford Foundation
• Freedom from Hunger (FFH)
• Unitus

10/05/09 MICROFINANCE 21
Lending Policy suitable for poor's
Micro Loan Product
• Group of 10-20 poor women.
• loans are disbursed individually.
• Attendance of minimum two successive weekly group meetings.
• Assessment done by the staff & approval by the Branch Manager.
Client Profile:
• Landless and asset less women
• Monthly income less than Rs. 2,500 in rural areas & Rs. 3,500 in urban areas
• Individuals owning less than 50 decimal (0.5 acre) of land
Product Features:
• The first loan is between Rs. 1,000 - 7,000 for the rural areas and between
Rs. 1,000 - 10,000 for the urban areas
• Tenure of the micro loan is 1 year, repayment in weekly installments.

10/05/09 MICROFINANCE 22
• Micro Enterprise Program:
• Launched in January 2006 to cater to the needs of business
expansion which demands a higher loan cycle, on realizing that
certain members required this service.
Criteria
• Bandhan members who have completed at least one loan cycle
• Those who possess capital equivalent to value of loan amount
• Existing micro-enterprise which must generate employment
opportunity for at least one poor person
Features
• The first loan ranges from Rs. 20,000 – Rs. 50,000
• These are one year loans and repaid in 45 equal installments

10/05/09 MICROFINANCE 23
Impact (Success Story):
Sima Mukherjee (32) lives with her son and husband.  
They had a small stationery goods shop before she took a loan
from Bandhan. Sudden death of her father-in-law brought
restiveness in their family because the pension that her father-in-
law used to get was a major portion of their family income.
She heard about Bandhan from her sister and took a loan of Rs.
3,000 in the year 2005 and started distributorship of Apna 
Chanachur (fries).  Receiving Rs. 6,000 as her 2nd loan, in the
year 2006, she invested half of that in her existing business while
the rest amount was utilized in starting up of a new business of
‘soya nuggets’. In the year 2007, with her 3rd loan of Rs. 10,000
she expanded her businessMICROFINANCE
10/05/09 and took distributorship of MPS food
24

products.
• A prominent transformation was visible in her lifestyle. She could give admission to her son
in an English school, and a football coaching, also could provide a private tutor.
She was in a position to take a bigger loan and a stable income allowed her to apply for a
bigger loan under Micro Enterprise Program (MEP). With the MEP loan of Rs.30, 000 she
wisely began   distributorship of Parle – G food products (basically biscuits). The current
loan of Rs.40,000 has been utilized in her existing business only. She is now engaged in the
distributorship of Parle – G, Apna Chanachur, Feel Good Soya Nuggets. She is possessing a
carrying van and employing a driver and sales man for the same. After meeting all
expenses her monthly net profit stands at Rs. 16,000 –Rs. 18,000. She is looking forward to
take another loan from Bandhan once she finishes this one.
•

10/05/09 MICROFINANCE 25
 References
• Karmakar, K.G.,2008, “ Microfinance In India, Sage
Publication Pvt. Ltd., New Delhi
• www.bandhanmg.org

10/05/09 MICROFINANCE 26
10/05/09 MICROFINANCE 27