Microfinance Evaluation Strategies: Notes on Methodology and Findings

Impact evaluations can be used either to estimate the impact of an ent program or to evaluate the effect of a new product or policy. In either ca the fundamental evaluation question is the same: "How are the lives of t participants different relative to how they would have been had the progra product, service or policy not been implemented?" The first parl of Lr question, how are the lives of the participants different, is the easy pa The second part, however 1 is not. It requires measuring the cQunterfactu how their lives would have been had the policy not been implemented. T is the evaluation challenge. One critical difference between a reliable a unreliable evaluation is how well the design allows the researcher to measl this counterfactual. Policymakers typically conduct impact evaluations of programs to dec· how best to allocate scarce resources. However, since most microfinaI institutions (MFIs) aim to be jor-profit institutions that rely OIl priv; investments to finance their activities l some argue that evaluation is unw ranted, a debate discussed in Morduch (2000). At the same time, MFIs, I other businesses, have traditionally focused on quantifying program 0 comesj in this view, as long as clients repay their loans and take new on the program is assumed to be meeting the clients' needs. Even if this is we propose four reasons to evaluate.