Integrating the poorest into microfinance: An impact assessment

Principal Researchers: Profs. Esther Duflo and Abhijit Banerjee (MIT)
Partner Organization: Bandhan, West Bengal and Consultative Group to Assist the Poor (CGAP)

Project Publications: December 2007, Abhijit Banerjee, Esther Duflo, Raghabendra Chattopadhyay and Jeremy Shapiro. Targeting Efficiency: How Well Can we Identify the Poor?

It has been observed that the benefits accruing to microfinance borrowers tend to be less apparent among the poorest of the poor, and that microfinance services do not often reach them. The expansion of microfinance and its potential to improve the economic condition of very poor recipients may be more effective if interventions are first taken to prepare the poorest of the poor to successfully participate in regular microfinance programs. Working with Bandhan, an MFI based in Kolkata, CMF is testing this idea and evaluating the impact of a program designed to improve the economic situation of the “hard-core” poor, and prepare them to become microfinance clients. The initial phase of this intervention, supported by CGAP, will provide grants of 100 U.S. dollars to ultra poor beneficiaries. The grants are to be used to begin or expand a small-scale enterprise. In addition, beneficiaries will be allotted a fund which they may draw upon to cover health expenditures. Following the grant disbursal, beneficiaries will receive 24 months of regular business training after which they will become eligible to participate in Bandhan’s microfinance programs.

The objective of this study is to assess the impact of the grant and the subsequent enterprise development on social and economic outcomes: income, assets, school attendance of children, health and food security. This study will also provide some evidence regarding the success of this program of “graduating” the ultra poor to microfinance. After identification of about 600 potentially eligible individuals, a baseline survey will be conducted among them. To permit a rigorous impact assessment, half of them will then be randomly selected to receive the program in the first phase. A post survey will take place after 24 months among all the eligible individuals, irrespective of whether they receive the program or not.

CMF Research Associate: Abhay Agarwal

See some related CMF documents:
# Project proposal [pdf, 133KB]
# Integrating the Poorest into Microfinance: An Impact Assessment (Eye on Microfinance, Issue 6)
# How to Target the Poorest? Jyoti Mukhopadhyay in September 2009 Issue of Microfinance Focus