By Arvind Ashta & Anuradha Basu,

Microfinance Focus, January 9, 2012: We’re exhausted by the emotions of this day we spent in the field visit on Deepalaya’s SHGs where, contrary to media reports, women were happy. Perhaps the difference is that Deepalaya is an NGO with a deep mission of helping the poor and the challenged. As a result, their staff is happy that their lives are useful and that the recipients treat them as angels (farishta) who have helped change their lives. Perhaps for-profit institutions who are obsessed in ensuring that they break even and respond to shareholder pressure cannot achieve this, but we would need to make the research more comprehensive and with less survivor bias before we could make a pronouncement on this. This debate on social performance, especially the difficulty in meeting and measuring social returns, has been the recurrent theme highlighted in the ITEM-3 microfinance conference in New Delhi organized by the Burgundy School of Business.

Perhaps a main objection to the extant research on social performance is that they use financial and operational metrics to serve as indicators of social performance. The most evident example of the futility of such measures is research that uses average loan size to measure depth of outreach, where the hypothesis is that lower loan size means greater depth of outreach (some would suggest even greater impact). The logical culmination of this train of thought would be that as loan sizes go to zero, microfinance depth of outreach (and impact) goes to infinity! Thus, at this extreme level we should stop microfinance! It is evident to us that to measure social performance we cannot use such measures.

Many social rating agencies then give up and focus on the process of delivery as the measure of social performance. This again is based on efficiency and not effectiveness. They argue that in any case impact is not measurable so at least we should have donors and investors focusing on efficiency of their vehicle of intervention.

The brief field visit of this case study (Deepalaya) shows that non-financial benefits, both psychological and social, of women empowerment, such as gaining self-confidence, the raising of the burkha, participating in economic decisions within the family, daring to enter a bank,  and even signing their name and entering into legal contracts, have materialized. Most important, the women pointed out that owing to better awareness, they have put their daughters back into school. All these benefits of the loans are in addition to economic  benefits. The ability to open a shop, start a business, become financially self-sufficient, supplement their husband's income. We doubt if so many hundreds of women would have spent their Saturday preparing to greet us if they did not feel a deep gratitude to Deepalaya. From this, as a thought, we would like to see more research which is studying such measures, before and after microfinance interventions, with appropriate control samples, to report their findings to develop the social performance and impact literature. Our thanks therefore to Deepalaya for the time they spent in organizing this visit and our good wishes for their future success. It is clear that academics could get useful thoughts by such associations with practitioners in conferences.

Can the gain be reciprocal too and can practitioners gain from academic conferences? A number of the papers presented at the conference were on technology. After the microfinance conference, Deepalaya, which has a little less than 10,000 borrowers, would like to examine a SaaS solution to its microfinance needs. Moreover, at this time of crisis, with a freeze of donor funds, Deepalaya is examining ways it could access other kinds of financing to be able to serve more people. Can peer to peer online lending be a solution? Such online lending operators often reach out to tier 3 operations ignored by mainstream investors. Would such operators like to lend to Indian NGOs for on-lending to Self Help Groups?

The continued success of such conferences, which associate academic researchers and microfinance practitioners, depends on the willingness to pool in resources to make the event a memorable and useful experience for all. I would like to thank Microfinance Focus for disseminating the proceedings of these conferences to its wider audience. The next conference (ITEM-4) would take place in 2013 in Dijon or Paris.

About the Authors

Arvind Ashta is Holder of the Banque Populaire Chair in Microfinance,Burgundy School of Business, Dijon, France and Anuradha Basu is Director of the Silicon Valley Center for Entrepreneurship San Jose State University, College of Business.

(Disclaimer: The opinions expressed are solely those of the author and do not necessarily represent opinion of Microfinance Focus. Microfinance Focus does not take any responsibility for correctness of the data presented by contributors.)