Wider Impacts of Microfinance Institutions: Towards Defining the Scope and Methodology

The paper discusses the theme of wider implications of the interventions of microfinance institutions (MFIs). The study argues that conventional impact studies:

• Underestimate the total impact of microfinance intervention;
• Do not take into account several positive externalities.

The paper discusses this problem and suggests two alternative approaches to define the scope of wider impact. It proposes:

• Examination of multi-dimensional engagements of individuals/households at meso and macro levels;
• Assessment of subsequent changes at the meso and macro levels.

Further, the paper lays out a basic conceptual framework for assessing wider impacts of microfinance institutions (MFIs):

• Examination of wider impacts in cultural, economic, social and political domains, with each of these domain having a counterpart at the narrow micro-level i.e. individual, enterprise or household level;
• Assessment of wider impacts on each of these domains at the local, regional and national level;
• Inclusion of a list of themes under each impact domain.

The paper also provides a schematic categorization of the various intervention areas of MFIs and links these to the wider impact domains. Finally, the paper suggests some exercises that may be undertaken to study certain important areas of wider impacts in the specific context of microfinance.