Can microfinance actually help people? New research provides a definitive YES

July 28, 2022

By: Jessica Leigh Lebos

Kiva is happy to share the release of the 60 Decibels Microfinance Index, the world's first microfinance social performance report based entirely on data from the people it serves.

Improved quality of life, increased incomes, better resilience against economic shock—the results confirm the positive social impact of microfinance, with no better source for this information than the clients themselves.

Over 18,000 microfinance customers across 41 countries participated in interviews for the study conducted by 60 Decibels, an independent impact measurement company that collects data to turn it into actionable resources. The Microfinance Index gives an essential view on the lives of 25 million people who utilize financial services through microfinance institutions (MFIs) around the globe.

Kiva is one of 21 founding partners that tasked 60 Decibels with assessing how microfinance affects individuals, a crucial investment that helps us learn how our clients are being impacted by the loans raised through Kiva. This comprehensive client outcome study also reveals key insights to help our partners provide improved products and services, allowing microfinance to create a better, bigger impact going forward.

Key findings, straight from the clients

"The 60 Decibels Microfinance Index provides unambiguous evidence that MFIs can change lives for the better.”

Microfinance improves lives

88 percent of borrowers interviewed for the study agreed their quality of life has improved since accessing loans and other financial services—and 34 percent say their quality of life has "very much improved."

Clients were also asked to tell in their own words why they believed their quality of life had improved since accessing MFI services, revealing three major themes:

25 percent said an increased ability to invest in and grow their businesses
19 percent said an increased ability to afford household expenses and bills
17 percent said a general increase in income improved their lives

Learn more about how microfinance makes a positive impact here.

Microfinance raises household revenue

73 percent of index participants reported increased household incomes, and those who used microloans to grow their businesses were significantly more likely to report positive household outcomes.

“The loan has helped me increase my income. This allowed me to move my child from a public school to a private school, where she will get a better education. I am also able to save a little more,” shared one respondent in the study.

Microfinance promotes access

Microfinance is helping clients get access to funding that wouldn't be available to them elsewhere. More than half of those surveyed were first time borrowers. Women and low-income clients made up an even higher ratio.

Microfinance is promoting economic empowerment for women

A microloan gave Josephine the opportunity to create a living for herself through her poultry business.

67 percent of the customers who participated in the Index are women, 30 percent of whom live below the poverty line of US$3.20 a day. Of the total, 58 percent have accessed a loan for the first time through an MFI. Women in the study also reported greater income increases than men.

Read more: How microfinance providers can improve outcomes for women entrepreneurs

Microfinance helps cushion economic shock

70 percent of MFI clients credit access to loans with helping them face major expenses. One in three Index clients said they would find it difficult to cover an emergency expense, compared to 1 in 2 globally.

Microfinance can expand access to credit without causing overindebtedness

7 in 10 clients report their loan repayments are “not a problem” and “strongly agree'' that they understand loan terms and conditions, a testament to client education and disclosure efforts by participating MFIs.

Read more about client protection and overindebtedness here.

Microloans help businesses

Clients who use at least part of their loans to invest in a new or existing business report bigger improvements in financial management ability and resilience—and are also more likely to say they could more easily cover an emergency expense.

Kiva partnerships in the spotlight

With a microloan, John grew his farming business and saw higher crop yields.

Of the 72 MFIs included in the index, a total of 14 work with Kiva—nine as Field Partners who share loans to be funded on the site, and five as part of Kiva Capital, our global impact investment fund platform.

The marketplace partners included in the report account for 10 percent of the total amount of Kiva borrowers per year, providing a direct view of the impact of Kiva loans and broadening our understanding of how to serve individual clients.

The Kiva partners included in the index include:

Actionable insights—getting from ‘good’ to ‘great’

Going forward, MFIs can refer to the Microfinance Index as a definitive and valuable resource to serve their customers and create a bigger, better impact on their lives.

"MFIs play a vital role in improving the well-being of clients in developing countries. However, until now, their managers and investors have not been able to see what 'good' social performance looks like, or which MFIs are creating the best outcomes,” said Sasha Dichter, CEO of 60 Decibels.

“By listening directly to microfinance clients around the globe, with a standard approach that allows for comparison, we are empowering these investors and managers to better deliver social impact and target improvements where they are needed most."

Though the microfinance movement has gained momentum and evolved in the last 50 years, there has been no collated data of its customers’ voices or comprehensive proof of its effectiveness—until now.

"The 60 Decibels Microfinance Index provides unambiguous evidence that MFIs can change lives for the better,” Dichter continues.

“More importantly, it shows what performance benchmarking could look like covering all microfinance institutions, everywhere—providing everyone with clear, actionable insight for getting from good to great."

Read the full 60 Decibels Microfinance Index report here.