Impact Evaluations 2007

Transcription

1 Inter-American Foundation & Fundação Getulio Vargas Impact Evaluations 2007 Centre for Social Policies Fundação Getulio Vargas Rio de Janeiro Brazil

2 A Study of Micro-Credit 11 projects in 3 countries Peru: PU-481, PU-492, PU-493 and PU-507 Mexico: ME-407, ME-419, ME-426 and ME-431 Nicaragua: NC-227, NC230 and NC234

3 Impact Evaluation Aim Define a coherent vision of how to support micro-finance programs consistent with the IAF philosophy and mission

4 IAF Values The sustainability of development rests on people s capacity to control their own circumstances, and sees the enhancement of this capacity as a principal result of the projects it supports.

5 Evaluation Methodology Institutional Assessment Qualitative Interviewing Financial analysis Video

6 Micro-credit is not a panacea, but it can be a viable strategy to reach and help poor people, when the grantee is wellprepared to deal with the immediate dimensions of poverty

7 Categories Fund Performance Group A: weak credit component, poor governance structure, difficulties in recovering loans & covering operational costs, low impacts and weak sustainability. Group B: reasonable growth, learns from experience and applies knowledge to new projects, incorporates new technologies. Group C: sound portfolio, self-sufficiency, growth potential, good outreach.

8 Bias: Scarce financial information.. An early example of the paucity of financial data in development finance is found in the Inter-American Foundation s They know how publicized in 1977 (available from the Superintendent of Documents, US Government Printing Offices, Washington DC 20402, stock no , reprinted in 1986). The foundation reports that, out of 21 projects, sufficient data (are) available on eight projects to make general statements on loan repayment (rates). Twelve projects had been in operation long enough to have expected loan collections, but no data were on hand (pa. 42). Von Psichke, Measuring the performance of small enterprise lenders Kimenyi, Wieland and Von Pischke (1998) Strategic issues in Microfinance, Ashgate.

9 Projects by Fund Performance

10 Top Fund Performers: Financial Return on Assets Portfolio at Risk>30 days Ratio Number of active borrowers Average Loan Balance per Borrower Name Country Total Assets FONDESURCO Peru 2,228, % 2.47% 1,818 1,168 Fundacion Leon 2Nicaragua 6,263, % 6.34% 9, Source: MixMarket.org

11 Top Fund Performers : Financial Accedde, Jalisco, Mexico Index Formula Capital Assets - Passive 18,066 (Millions $) Self-Sufficiency Capital/Assets 17% Solvency Assets/Passive 1.19% Liquidity Current Asset/Current Passive 116% Source: grantee records.

12 Where are the other organizations now?..

13 Project Impacts a) Vulnerability Reduction Access to assets that decrease susceptibility to shocks. In a scenario where the credit-financed investment does not generate a significant net profit then an asset is created which can reduce vulnerability but will not reduce poverty as the loan installment repayment takes place through a reduction in consumption and not from the returns to the investment Source: Hassan Zaman, Assessing the Poverty and Vulnerability Impact of Micro-Credit in Bangladesh: A case study of BRAC, World Bank.

14 Vulnerability Reduction Positive Evidence: PU-481(Omate & Puquina, Peru) Credit to afford production inputs Sale of livestock to afford credit repayment installment

15 Project Impacts B) Poverty Reduction: Increases in income or consumption (i.e. reduction in poverty) can occur if credit is used for an income generating activity and that activity generates returns in excess of the loan installment repayments Source: Hassan Zaman, Assessing the Poverty and Vulnerability Impact of Micro-Credit in Bangladesh: A case study of BRAC, World Bank.

16 Poverty Reduction PU-492: Arapa and Chupa, Peru. Credit to buy and sell animals at a profit. ME-507 (Jalisco, Mexico) Credit as working capital, with a profit that does not compromise future consumption while also improving living standards.

17 Unexpected Negative Results PU-493 Cedes (Abancay, Peru) Sacrifice of the future consumption. Vulnerability after the project: reacting to circumstances. ME-419 Group Knan Choch (Motozintla, Mexico) Poor management of the funds Lack of evidence for the equitable distribution of loans power imbalance.

18 Key Ingredients for Success Clear vision, mission, focus. Good alliances Financial ethos (interest rates, recovery) and skills Division of labor: credit activities distinct from other operations. Transparency: high level of information disclosure Self-critical organizations: re-evaluating strategies.

19 Challenges Beneficiaries aversion to risk Beneficiaries restricted access to good quality land, productive resources and other collateral Poor infrastructure: e.g. lack of irrigation. Resistance to new technologies. Governance and management structure of the organizations

20 A Challenge myth The regulatory framework is paramount to the performance of organizations The Case in Nicaragua: institutions in the same regulatory environment with different performances.

21 Credit Lessons Willingness to borrow is greatly determined by the borrower s land tenure and /or access to other resources. A beneficiary s repayment capacity should not be underestimated negative incentive. Diversification of the portfolio spreading risks so often associated with agricultural activities. Social intermediation costs are worthwhile. Capacity building and technical assistance: sine qua non condition to improve the efficient use of resources..

22 Important Strategies Enhance financial management of beneficiaries: Provision of capacity building and technical assistance. Ensure high repayment rates: Good credit profile assessment prior to the concession of the loan. Improve participation in the productive chain: Organization of producers to reach markets. Lower monitoring costs: take advantage of available information about borrower s repayment capacity.

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25 Create viable institutions can be a project and building strong organizations can be even more important than the swift disbursement of funds. (Schmidt and Zeitinger & Kimenyi, Wileand and Von Pieschke, 1998