88% of microfinance borrowers agree their quality of life has improved. 34% say quality of life is “very much improved”
Microfinance is improving quality of life, increasing the resilience of low-income customers to withstand economic shocks, and reaching people without prior access to financial services without creating over indebtedness. These are key findings of the world’s first microfinance social performance report based entirely on customer voice, the 60 Decibels Microfinance Index, published today. By conducting interviews with almost 18,000 microfinance clients across 41 countries, the 60 Decibels Microfinance Index provides a ground-up perspective on the lives of 25 million microfinance clients, representing 15% of the global market.
The report confirms that MFIs are promoting women’s economic empowerment. Microfinance institutions often focus on the most vulnerable populations, including women, people living in rural areas, and people living in poverty. Of the customers surveyed by 60 Decibels, 67% are women and 30% live below the $3.20/day World Bank Poverty line. Over half of clients represented in this research (58%) are accessing a loan for the first time through the microfinance institution. Women and lower income clients are also more likely to be first time microfinance borrowers.
This research provides new evidence that supports the core premise of microfinance: that clients can put loans to productive use in their businesses, and that business improvements will translate to improved household well-being. Furthermore, while the majority of clients report improvements in their quality of life because of the MFI loan, a full one-third of clients place themselves in the top ‘very much improved’ quality of life category, a strong endorsement that these marginalised clients feel their lives are changing for the better thanks to their access to microfinance.
Microfinance has repeatedly faced scrutiny, as there is risk that vulnerable populations will be hurt, not helped, by being given loans. However, 60 Decibels found that 3 in 4 clients report their loan repayments are ‘not a problem’ and they ‘strongly agree’ to understanding their loan terms and conditions. In fact, across all regions, more women than men agreed their loan repayments were ‘not a problem’ (73% of women compared with 67% of men). This finding is consistent with women borrowers traditionally demonstrating higher repayment rates compared to men. That said, the report also finds that 6% of borrowers report their payments to be a ‘heavy burden,’ and it’s important that microfinance take steps to ensure that these borrowers don’t fall into heavy debt.
Access to microfinance loans helps borrowers withstand economic shocks – such as emergency expenses – though women remain more vulnerable. 1 in 3 of the clients in the 60dB MFI Index would find it difficult to cover an emergency expense of 1/20th of Gross National Income per capita, compared to 1 in 2 globally, according to Findex. 70% of clients credit the MFI with helping them face major expenses. 37% of women clients would find it ‘very’ or ‘slightly’ difficult to fund an emergency expense, compared to 26% of male clients.
Sasha Dichter, CEO of 60 Decibels, said: “MFIs play a vital role in improving well-being to clients in developing countries. However, until now, their managers and investors have not been able to see what ‘good’ social performance looks like, or which MFIs are creating the best outcomes. By listening directly to microfinance clients around the globe, with a standard approach that allows for comparison, we are empowering these investors and managers to better deliver social impact and target improvements where they are needed most.”
“The 60 Decibels Microfinance Index provides unambiguous evidence that MFIs can change lives for the better. More importantly, it shows what performance benchmarking could look like covering all microfinance institutions, everywhere – providing everyone with clear, actionable insight for getting from good to great.”
Microfinance refers to financial services provided to low-income individuals or those without access to typical banking services, helping them to start or grow small businesses.
Financial resilience is the ability of individuals or households to withstand financial shocks, such as unexpected expenses or loss of income, while maintaining their financial stability.
Social impact refers to the effect of an organization's actions on the well-being of the community and society at large, including economic, environmental, and social outcomes.
Economic empowerment is the process of increasing the economic strength of individuals or communities, often through access to financial resources, education, and opportunities.
A microfinance institution (MFI) is an organization that provides financial services, such as loans and savings, to low-income individuals or communities, often focusing on underserved populations.
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