1. Microfinance: Learning What Works, What Does Not, And Why

2. How do we Reach 1 Billion? Is it flexibility? Is it price? Is it institutional? Massive untapped market: Why are so many yet to be reached?

3. What’s the Secret? How do we Design Effective Microfinance? How do we: Create the most impact? – increase incomes, improve health, education Reach more clients? Reach poorer clients? Increase savings balances? Improve client retention? Improve profitability? The answer is: We Don’t Really Know Yet

4. We Have a Lot to Learn Example: Interest rates are very high – In the US, we call this usury and regulate it. – Abroad, we call this charity and donate to it. Impact: How do interest rates affect impact? Outreach: Can we target only those clients who are likely to benefit (likely to earn high returns)? Business: Can we lower interest rates and make more profit?

5. Example: Credit with Education Why do many microenterprises plateau? How can we help them grow? Is credit with education a solution?

6. Who do You Trust? Well-known microfinance leader A: – “The poor do not need us to teach them how to survive; they already know. So rather than waste our time teaching them new skills, we try to make maximum use of their existing skills.” Well-known microfinance leader B: – “Group-based lending/saving services provide an unusual opportunity to provide transformative educational experiences along with financial services.”

7. There is No Magic Solution Learning what works in microfinance requires methodical experimentation across settings Not guesswork based on anecdotes We need high-quality research methods to produce reliable results Randomized controlled trials are the most reliable research methodology.

8. Evaluation is for Managers! Evaluation is for microfinance programs, not annual reports Evaluation is much more than “does the program help people?” We use rigorous evaluations to learn which products and services work best by trying out different versions and seeing which are most effective – most impact, most profitable, etc.

9. R&D Key question for donors/investors: How do we leverage our investments to maximize social welfare, while maintaining private returns? R&D can help figure out how to tap that market profitably. Make sure the approach, if successful, gets replicated and scaled.

10. Why Randomize: Example from Get out the Vote MethodEstimated Impact Reached vs. Not Reached10.8 pp

11. Why Randomize: Example from Get out the Vote MethodEstimated Impact Reached vs. Not Reached10.8 pp Regression: Control for differences between the groups 6.1 pp

12. Why Randomize: Example from Get out the Vote MethodEstimated Impact Reached vs. Not Reached10.8 pp Regression: Control for differences between the groups 6.1 pp Also control for voting history4.5 pp

13. Why Randomize: Example from Get out the Vote MethodEstimated Impact Reached vs. Not Reached10.8 pp Regression: Control for differences between the groups 6.1 pp Also control for voting history4.5 pp Matching similar voters2.8 pp

14. Why Randomize: Example from Get out the Vote MethodEstimated Impact Reached vs. Not Reached10.8 pp Regression: Control for differences between the groups 6.1 pp Also control for voting history4.5 pp Matching similar voters2.8 pp Randomized Experiment0.4 pp, statistically insignificant

15. How to Randomize: Experimental Credit Scoring ?  x applicants scored 0-100 0 100 TC 0

16. Credit Scoring: Findings What is the impact of consumer credit? – Positive effect on employment, wages and hunger – 7 percentage-point reduction in poverty level Marginal loans are profitable for the lender

17. How to Randomize: Group vs. Individual Liability

18. Group vs. Individual Liability: Findings 150 joint-liability centers: – 75 randomly assigned to convert to individual liability – 75 randomly assigned to remain as-is Outcomes: – No change in repayment – No change in savings – Higher client retention – More new members joined

19. Innovations: Product Development Randomize different versions of a product/service to find the best version Peru: Teaching Entrepreneurship Credit with Education YesNo Voluntary Yes 34 101 No 104

20. Teaching Entrepreneurship: Findings Strong benefits for both the client and the institution. Repayment higher Client retention up Clients’ sales higher Profitable to offer free education

21. Current Work Replication Price Behavioral Savings: using psychology to help clients save more Insurance – Health insurance – Crop price insurance Targeting the Ultra Poor