What 18,000 Clients Say About Their Microfinance Experience

For the last five years, 60 Decibels has been working with many of the world’s leading microfinance investors, gathering comparable, customer-level outcomes data. Based on this experience, and in partnership with 19 leading microfinance networks and investors, 60 Decibels set a more ambitious goal: to develop a standard set of social performance indicators for microfinance lenders, and to gather this data at scale across the industry.

Earlier this month, 60 Decibels published the results from this yearlong effort in which we surveyed 18,000 microfinance clients being served by 72 microfinance organizations. The collected data represent the lived experience of 25 million MFI customers from the 72 MFIs in 41 countries and is the largest comparable customer-level data set in microfinance to date. The 60 Decibels Microfinance Index captures client-level outcomes across five dimensions of impact that matter to microfinance institutions: access, business impact, household impact, financial management, and financial resilience. 

What did we find?

Some of the findings were not entirely new, but still validating for the microfinance sector. For example, 58 percent of clients we spoke to say that before they took out a loan at their microfinance institution, they did not have access to any similar product elsewhere. Decades after the birth of microfinance, this finding indicates the continuing importance of MFIs in providing first access to financial inclusion for the un- and underserved. 

Another affirming finding was that one in three of surveyed clients say their quality of life had “very much improved” because of the MFI, demonstrating the clients’ own perceptions of an important positive impact on their lives.  As a follow up, we asked those clients who indicated an improvement in their quality of life an open-ended question about why their quality of life has changed because of the MFI. Unprompted, the top response, from a quarter of those surveyed, cited their increased ability to invest in or grow their business, over an increased ability to cover household expenses or an increase in income. 

Insights around microfinance lending

Particularly noteworthy, and of interest for financial service providers, are findings which help us understand how outcomes can vary by the type of services that the MFIs offered their clients. Here we share three key insights from this research:

1. The advantages of group lending. Group lending is better at reaching poor clients, more likely to reach women, and more likely to attract customers who are accessing a microfinance loan for the first time.  Clients of MFIs with primarily group loans are also more likely to say they understood their loan terms and conditions (72 percent compared to 67 percent of clients of MFIs with primarily individual loans) and that their repayments are “not a problem” (78 versus 69 percent).

What does this mean for microfinance? Group lending has a valuable role to play in financial inclusion. While individual lending may be more efficient—and increasingly popular—its growth needs to be moderated so that the most marginalized are not excluded.

2. The benefits of loans used for business purposes. We saw a greater positive impact on clients’ businesses, households, financial management and financial resilience for clients who say they used at least a part of their MFI loan for a business purpose (any income-generating activity). 

Outcomes by Loan Use: 

What does this mean for microfinance? While there is certainly a place for non-business loans, either for specific uses like home repairs, or for general consumption or emergencies, in general, MFIs should encourage loans for business purposes. 

3. Ambiguous outcomes from offering non-financial services. In addition to financial services, nearly half of the MFIs in our Index say they also offer non-financial services such as financial management training, health services, and others. One might expect these MFIs to have stronger positive outcomes because of the additional support they offer their clients. However, across all five dimensions of impact that we measured, these MFIs did not outperform the ones that do not offer these services. In fact, for some indicators, clients of these MFIs report worse outcomes overall; for example, 69 percent of clients with access to non-financial services report “never” reducing food consumption to meet repayments, compared to 76 percent of clients with financial services only.  

What does this mean for microfinance? It is important to note that some of the top performing MFIs in our Index do offer non-financial services to their clients, so the answer here likely lies in the quality and relevance of these services, not whether or not they are offered. There are also instances of MFIs who previously offered non-financial services but currently do not due to COVID-19, and these were categorized as not offering non-financial services. Some longer-tenured clients may have benefited from such services in the past.

In addition, this finding has an important methodological note: one limitation of the 2021-2022 60dB MFI Index is that, due to the client-level data we had access to from MFIs, we were only able to segment data at the MFI level. This means that we could not capture access to or use of non-financial services at the individual client level; we only know if the MFI offers these services to their clients. For the 2022-2023 Microfinance Index cohort, 60 Decibels plans to segment the data at the client level, rather than enterprise level, to allow us to dig into this data further. 

There’s lots more to explore, and we’re just getting started! The 72 microfinance institutions included in this year’s 60dB MFI Index have taken a giant leap in measuring their comparative impact performance.  And we’d love to see more MFIs join this initiative to measure their social performance and to put client voices at the center of their work.