Responsible Investment Management and Advisory Services

Assessing Impact with Client Databases

Triple Jump partnered with EA Consultants to investigate whether and how microfinance institutions (MFIs) can use their existing client databases to better understand the impact of microfinance on end-clients.

Working closely with three Latin American MFIs, Triple Jump and EA Consultants analysed each institution’s impact monitoring databases, assessed their data management processes, and made recommendations.

The three MFIs used for this evaluation are Fundación Paraguaya in Paraguay, IDEPRO in Bolivia and Fundación Génesis Empresarial in Guatemala. The findings are summarised below. The report can be found here: Measuring Social Impact in Microfinance: new insights from client monitoring databases.

Taken together, we see that it is possible to glean useful impact information from existing monitoring databases. Not only can these databases illustrate whether portfolio companies are progressing over time, they also offer helpful insights into typical timing and patterns of progress, informing each MFI’s benchmarking and targeting strategies.

Portfolio companies at all three institutions experienced significant improvements along each MFI’s defined impact indicators. In the case of Fundación Paraguaya, we were able to show that portfolio companies’ progress outpaced trends in the general control group.

Each institution also revealed interesting patterns of progress. For instance, IDEPRO data showed that increased revenues and assets are more common than expansion of staff, and Génesis data revealed that it may take longer than one year for socioeconomic changes to become evident.

An MFI’s motivations for measuring impact, fall into three general categories: to improve accountability to portfolio companies and other stakeholders, to achieve financial sustainability by securing funding and improving retention, and to promote learning and innovation within the organisation and in the sector.  An MFI’s impact measurement strategy should be tailored to these motivations and goals.

Any effective impact tracking strategy must have six crucial elements: institution-wide commitment, a theory of change with a corresponding set of indicators, an efficient data collection process, an effective and flexible storage system, capacity for basic before-after analysis, and an established process for sharing and responding to results.

Impact data collection represents a substantial investment. However, few organisations reap the full benefits from this investment, as only a small proportion of data collected is analysed or utilised to its full potential. Reflecting on the common challenges and bottlenecks of the three institutions in this study, the team identified the following best practices at each stage to maximise the benefits of impact measurement:

DEFINE: The list of impact indicators should be short, and it should closely mirror the MFI’s mission, theory of change, and motivation for impact measurement.
COLLECT: Improved data collection technology has the potential to reduce cost, time burden and error, as does careful consideration of loan officer incentives.
STORE: Databases should allow for easy linkages between datasets and simple exports.
ANALYSE: Good analysis requires appropriate software and human resources, as well as effective communication between analysts and decision makers.
UTILISE: MFIs should be encouraged to utilise their results for internal programme improvement, as well as external promotion and accountability.