Some lenders of small amounts of money are using sophisticated tools to see if they’re spurring change
It’s easy for any lender to count the money loaned out, the number of borrowers, the repayment rate and so on.
But there’s a harder-to-measure question facing microlenders around the world. Their mandate isn’t simply to lend money and make sure repayments come in on time. It is also — and more importantly — to be agents of social change.
So these agencies and their backers really need to know if they’re doing long-term good.
Having looked for and found microcredit success stories in several diverse parts of the world, I’m convinced many agencies do great good. Everyone I’ve met in the business can point to heartening examples.
But anecdotal evidence is of limited use. Without solid statistical backup, it’s impossible to be sure if showcased successes are the exception or the rule. And, even if it has many successes, how does a given agency’s performance compare with its past track record or the job done by others in the field?
Well, some microlenders are beginning to use some sophisticated tools to track social indicators in order to find out.
For example, two years ago Oikocredit, a Netherlandsbased agency with more than $500 million loaned to 17 million borrowers in 70 countries, launched a large-scale but simple survey of clients of several of its representative partner agencies to look at their lives.
Follow-up surveys are about to begin to track the changes from the baseline, but the findings should be telling.
Ylse van der Schoot, Oikocredit’s director of investor relations, told me last week during her visit to Vancouver, where the agency’s B.C. division recruits investors, that the questions differ a bit in each country where the survey has been done in order to reflect cultural realities and norms.
In general, the surveys looks at things such as family assets, food security, housing and age-appropriate schooling for children. (One of the 10 questions asked in the Philippines is whether a family has a karaoke machine, which is so culturally entrenched as to be seen as a near-necessity — like video games for kids in Canada.)
Depending on the degree to which answers in the second survey show better, worse or unchanged results, the strengths or weaknesses of the various partner agencies should become clear. And, van der Schoot notes, Oikocredit will know where and how it should work with its partners for improvements, or even stop funding a particular group.
I’m struck by how, on a small scale, these measures parallel those proposed by Nobel Prizewinning economist Amartya Sen as a way to track progress in the developing world.
Conventional economic indicators — national or per capita GDP, GNP, GNI and the like — have flaws but are still quite useful in an economy like ours. But in a place where many people rely on subsistence and high degree of non-cash transactions, they become less useful and, at times, so distorting as to hide the real truth.
When a poor country builds a new hydro dam, for example, all the conventional indicators will likely rise smartly. But there’s no way to know if the benefits fall short of, equal or exceed the losses to subsistence farmers or others living hand-to-mouth off the land.
So Sen proposed looking at what portion of a population has a fair range of what he calls entitlements and capabilities. Entitlements are basic — to eat, to not die of preventable disease and so on. Capabilities are more sophisticated. The question is whether you could have them if you chose — an education, for example, or the ability to participate meaningfully in the life of your community.
In rich countries like ours, virtually everyone has a full complement of both, and these measures can’t indicate much about our progress or its lack. But in many poor countries, they could be telling, indeed.
As will Oikocredit’s assessment of its clients’ progress — at least, I hope and expect it will be progress — toward attaining a few of the things that we Canadians take for granted. Plus karaoke machines which, thankfully, I and most of my neighbours don’t have.
By Don Cayo, Vancouver Sun November 8, 2010