This year, the findings of a study of financial inclusion undertaken by IDS and the University of East Anglia (UEA) contributed to a major investigation by the US Government Accountability Office (GAO) into the US Government’s multi-million-dollar microenterprise and microfinance development programming. The GAO’s recommendations herald an important step forward in policy dialogue, towards greater realism about using financial services for international development and social policy.
IDS research is helping to shape development donors’ policy on social protection and the role of financial inclusion in them, by contributing to more realistic understandings of the benefits for women and poor people globally.
The U.S. Agency for International Development (USAID) has spent hundreds of millions of dollars each year on microenterprise and microfinance development efforts in developing countries. The aim is to for greater access to financial services to increase people’s incomes, assets, skills and productivity. However, after more than 30 years of donor investment, there is scant evidence that microfinance interventions have had a lasting impact on poverty alleviation, as a major evidence review co-led by IDS showed.
This evidence review contributed significantly to an investigation by the US Government Accountability Office (GAO) into the US Government’s microenterprise and microfinance development efforts to support women and the very poor. The GAO assessment drew on and echoed the findings of the systemic review of financial inclusion impacts delivered by the Institute of Development Studies (IDS) and the University of East Anglia (UEA) as part of the Centre for Development Impact (CDI).
The GAO concluded that the evidence ‘generally pointed to small, if any, sustained effects of assistance to micro, small, and medium-sized enterprises [MSMEs]’ and that there is an ‘association between microfinance programs and improvements in measures of women’s health and empowerment, but […] methodological challenges limit the ability to draw conclusions about the effects of these assistance programs for MSMEs’.
Instead of focusing on pure microfinance efforts, the GAO recommends a focus on the Graduation Approach to break the poverty cycle, which IDS researchers (including those from the IDS-led Centre for Social Protection), and long-term partners BRAC, have advocated for decades.
The research has contributed to an important shift in policy dialogue, away from a traditional emphasis on supporting women to work their way out of poverty via microenterprise loans, which we now know has limited impact, and towards a reconsideration of social services that provide long lasting support and enable vulnerable people to protect themselves and their livelihoods.
Further, the research has contributed to the global knowledge pool of methodological innovations in impact evaluation, enhanced the capacity of other researchers in the field, and informed journalistic investigations on the topic.
Innovations in research synthesis
The IDS-UEA research, which was a meta-study of other review studies, represents a methodological innovation in research synthesis and is emblematic of the mixed methods research that IDS has established.
By interrogating both qualitative and quantitative evidence, and examining the theory of change behind various financial inclusion interventions, the IDS and UEA researchers drew together the widest-ever pool of impact evidence on financial services for the poor.
The research project was developed with funders 3ie (International Initiative for Impact Evaluation) over a period of nearly three years. With a focus on linking theory to evidence from around the world on financial inclusion, it was the first ‘review of reviews’ ever to be completed in international development.
This work, and the communications activities related to it, has opened up the scope for reviews of this type to be done in other areas, for example on livelihoods approaches or poverty graduation models. The methodological lessons from this pioneering study can be applied by other researchers who will adopt or develop the meta-reviewing method further.
Sharing knowledge and building capacity
The IDS-UEA systematic review of reviews was launched at an event in April 2019 to a packed audience at the London School of Health and Tropical Medicine and organised by 3IE.
Since then, the research and the methods that underpin it have garnered interest from a wide range of development professionals and the media. These include members of the European Research Conference on Microfinance, the German Institute of Economic Research (DIW), the ISEAS/Yusof Shafak Institute in Singapore and several UK business schools.
The research also attracted the attention of CGIAR, who in September 2021 published an ‘evidence explainer’ about it on the CGIAR GENDER resource hub. Then in Spring 2022, the Lancet referenced the research in an article on child and adolescent health and development.
Building on longstanding connections, the authors have provided evidence to Bloomberg journalists who, following a multi-country investigation, published a series of exposé articles in May 2022 highlighting to a global audience the complexities of microfinance and its darker sides.
The mixed methods concepts have been shared with cadres of professional development learners as part of IDS short courses on impact evaluation.
The research was enabled through established links with researchers at the Centre for Development Impact, an initiative in which IDS, UEA and Itad are core partners. Four junior researchers based at UEA supported the study as research assistants and built their capacity in research synthesis methods.
