Independent Evaluation

Evaluation Presentations

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Microfinance is about providing financial services to poor people. These involve small amounts of money, often less than $100. The role of microfinance has grown since the 1970s: the United Nations proclaimed 2005 The International Year of Microcredit.

ADB first offered microfinance in 1988. By end-2006, it had approved 32 microfinance loan projects and 20 loan projects with microfinance components in 16 countries. This totaled $1,012 million in loans and $6 million in grants.

More than half of ADB's loan projects were approved after 2000, and accounted by end-2006 for two thirds of ADB lending for microcredit.

In 2007, the Operations Evaluation Department in ADB examined how effective ADB's microfinance operations had been in reducing rural poverty and improving the status of women.

Bangladesh, the Philippines, and Uzbekistan were selected for in-depth analysis. Comparison groups were used to define counterfactual outcomes. Econometric techniques were applied to gauge impacts on rural households. Participatory focus group discussions and varied sample surveys of women were conducted.

The study examined the Rural Microenterprise Finance Project (1996) in the Philippines, the Participatory Livestock Development Project (1997), Rural Livelihood Project (1998), and Second Participatory Livestock Development Project (2003) in Bangladesh, and the Small and Microfinance Development Project (2002) in Uzbekistan.

The outreach ranged from low-income to poor households. But, this did not include large numbers of the ultra poor—the focus of three of the five projects. This and the regressive impact noted in the Philippines has implications for ADB targeting of the ultra poor.

Improving the status of women was mainstreamed in project design and implementation, with measurable indicators and targets. The role of women in their respective societies was analyzed beforehand to identify gender issues.

To women, the projects gave a larger role in household cash generation; they also became more involved in making expenditure decisions and generating savings. Their skills were built; their networks and support systems expanded; their ability to earn more income and make business decisions was increased; they acquired assets.

Participating microfinance institutions have important bearing on the targeting of households. Their orientations must match the development goal of project design. Institutions that are highly regulated can limit outreach.

Trying to reach large numbers of the ultra poor with microfinance alone may not be a realistic objective. Special programs may be needed that provide training, health provision, and more general social development for the disadvantaged, as well as grants of assets or credits.

The absence of baseline data is a serious issue for undertaking an impact evaluation. Selected microfinance projects should budget for baseline as well as post-intervention data collection, which would include not only treatment but also control households. However, given their cost, such surveys should not be routinely included in all projects.

Concern for mainstreaming the status of women in the design of projects calls for including gender action plans with activities, targets, indicators, and budgets. Also, gender specialists should be involved in project design, implementation, and monitoring and evaluation.

The study recommended that ADB should adopt a more focused and deliberate approach to targeting; use internationally accepted guidelines and principles for the design of microfinance projects; build staff technical capacity in microfinance, and include plans for rigorous impact evaluations during the formulation of selected microfinance projects.