Micro-leasing, micro-credit and micro-savings are three financial inclusion interventions which have the potential to transform the lives of those with limited access to financial services. In theory they have the potential to enable investment in income generating activities, consumption smoothing and financial planning. In December 2011 a working group of the United Nations Capital Development Fund (UNCDF) even explored microfinance as a tool for social protection through savings. In practice however, for a long time, we lacked convincing objective evidence of the impacts of these interventions, either negative or positive. While early evaluations suggested these interventions were promising, most recent evidence is less clear-cut about their effects. Furthermore, while they have been advocated as tools to enable women greater economic empowerment, we do not know whether interventions that specifically target female entrepreneurs are more or less effective. The results of the first randomised controlled trials (RCTs) on microcredit in Manila and Hyderabad in 2009 challenged the idea that microfinance reduces poverty (Banerjee et al. 2009a, Karlan and Zinman 2011). In addition to the scientific discussion of the nature of available evidence about the impact of microfinance, whether positive or negative, or indeed the absence of any evidence either way, microfinance has also received much negative media attention over the last few years which has raised the profile of the debate and increased the pressure to address the question of the effectiveness of microfinance.
Specifically there are unanswered questions about the success of micro-leasing, micro-credit and micro-savings in enabling poor clients to engage in economic opportunities, which include starting a business or extending/growing an existing enterprise, for example opening a market stall, or sowing a cash crop. There are further questions about the extent to which these opportunities are meaningful in terms of financial outcomes. We do not know how, for whom, and in what circumstances these interventions are successful (or not), nor whether specifically targeting women is more or less effective for combating economic gender inequalities than more mainstream interventions.
The review set out to address these questions using systematic review methodology which employs a replicable, rigorous and structured approach to identifying, selecting and synthesising good quality relevant evidence on any given topic. In addition to reviewing the evidence of impact, the authors developed a theory of change, also called a causal pathway. The authors identified over 14,000 citations that were assessed against the inclusion criteria and reduced to 84 relevant studies. From these 17 were judged to be of good enough quality for inclusion in this review. The varied nature of the evidence made it difficult to draw conclusions; however, it is clear that both micro-credit and micro-savings can reduce poverty but do not in all circumstances, nor for all clients.
Stewart, R.; Van Rooyen, C.; Korth, M.; Chereni, A.; Rebelo Da Silva, N.; de Wet, T. Do micro-credit, micro-savings and micro-leasing serve as effective financial inclusion interventions enabling poor people, and especially women, to engage in meaningful economic opportunities in low- and middle-income countries? A systematic review of the evidence. EPPI-Centre, Social Science Research Unit, Institute of Education, University of London, London, UK (2012) 216 pp. ISBN 978-1-907345-37-1