Burgess COMMENTARY

Peter Burgess

Enhancing the impact of microfinance Craig Churchill via LinkedIn Fri, Feb 20, 2015 at 1:19 PM Reply-To: Craig Churchill via LinkedIn To: Peter Burgess

Craig Churchill Chief, Social Finance Programme at International Labour Organization

Dear Colleague

I thought you might be interested to some recent research from the ILO that illustrates how MFIs can enhance the impact that they are having with micro and small businesses: http://www.ilo.org/global/about-the-ilo/newsroom/features/WCMS_345001/lang--en/index.htm

This report highlights the findings from 16 MFIs that sought to improve Decent Work among their clients, such as improving occupational safety and health, reducing child labour, and encouraging the formalization of informal businesses.

Enjoy!

Craig

Microfinance for Decent Work – Enhancing the impact of microfinance: Evidence from an action research programme

Type: Report Date issued: 17 February 2015 Authors: Social Finance Programme and University of Mannheim

English: Microfinance for Decent Work – Enhancing the impact of microfinance: Evidence from an action research programme, pdf 5.9 MB español: Microfinance for Decent Work – Enhancing the impact of microfinance: Evidence from an action research programme, ‎pdf 6.4 MB‎ français: Microfinance for Decent Work – Enhancing the impact of microfinance: Evidence from an action research programme, ‎pdf 6.1 MB‎

Many entrepreneurs in the informal economy, and the employees that work in those businesses, are often exposed to difficult and dangerous working conditions.

The tools used to identify, prevent and rectify such conditions in the formal economy – including social dialogue between employers and employees, labour inspection and other applications of labour law – generally do not apply to the unregistered enterprises such as the ones cited. Alternative approaches are required to help these entrepreneurs, but what can be done, and how?

New ILO research backs up the idea of reaching and helping these businesses through microfinance institutions (MFIs). Microfinance for Decent Work – Enhancing the impact of microfinance: Evidence from an action research programme was led by the ILO’s Social Finance Programme in collaboration with the University of Mannheim in Germany.

In many emerging markets, MFIs have significant outreach, providing financial services to thousands, if not millions of small and micro enterprises. Since their primary relationship with these entrepreneurs often involves an enterprise loan, they were able to use that leverage to improve conditions in the business.

From 2008 to 2012 the ILO collaborated with 16 microfinance institutions to test a range of approaches to foster social impact through the delivery of innovative financial and non-financial services. Eliminating child labour, fostering the formalization of enterprises, reducing vulnerability and enhancing business performance through improved working conditions – these are decent work objectives that MFIs addressed in the framework of the “Microfinance for Decent Work” (MF4DW) action research programme.

The results highlighted one key message: that MFIs can achieve desired results if they identify an issue and then focus on that area to help their clients.

RE: Enhancing the impact of microfinance
To:Craig Churchill
February 20, 2015 3:48 PM

Dear Craig

As you probably recall from when you were in New York some time back, I have a passion for metrics ... but I am not very convinced that the metrics around most of the initiatives in emergency and development situations has much validity and therefore not much utility. In the end, the research seems to get summarized in a couple of stories about a couple of things that have worked.

My hope is that sooner rather than later we will start to look at progress and performance from the perspective of the place and the people in the place, rather than from the perspective of the project or other initiative. When we look at humanitarian and development performance from the perspective of place, the result of money and effort seems to be inconsequential. This is the challenge that has to be addressed.

In my view ... which I have held for more than two decades, is that the project form of organization is wrong for development ... rather something that engages people in a place and is measured by resources deployed against progress of place. The best microfinance organizations do this ... in my view it was at the core of the Grameen success 30 years ago, but largely highjacked by the finance computation of some of the microfinance intermediaries.

The nice thing about place is that it is relatively easy to verify. Place does not move. The problem is that most projects have had almost imperceptible impact on most places even though the funds have been consumed. What, in fact, were the funds used for?

All the best

Peter
TrueValueMetrics.org

RE: Enhancing the impact of microfinance
Craig Churchill
February 23, 2015 2:57 AM

Thanks Peter. I would certainly welcome your feedback after you have had a chance to look at the report.

kind regards,

Craig