This paper discusses various impact evaluation, monitoring and social performance assessment tools used in microfinance. It examines the suitability of randomized controlled trials (RCTs) methodology to microfinance.
The paper notes that qualitative and quantitative methods have been used for data gathering and analysis to understand changes in client lives resulting from microfinance programs. RCT, a quantitative experimental methodology widely used in medical and drug trials, has been gaining popularity in social sciences. The paper identifies advantages and disadvantages of RCT as a monitoring and evaluation tool in microfinance. It suggests that RCTs can be most useful:
- In refining products and testing right mix of services;
- In serving as a cost effective alternative for MFIs with sufficient internal data systems;
- In revealing usage patterns and behaviour;
- In assessing mean impact;
- In eliminating selection bias.
The paper observes that RCTs are a significant investment and require a long lasting partnership between the practitioner and researcher. It states that since only three controlled trials have been completed in microfinance, more evidence is required to understand the impact of microfinance on financial inclusion.