60 Decibels Global Microfinance Index reveals new findings in landmark 2023 report based on 32,000 customer interviews and 1M+ unique data points

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Oct 03, 2023, 00:00 ET

89% of clients say their quality of life has improved because of their microfinance experience.
Clients who have been with their financial service provider longer are more likely to 'strongly agree' that their lives and household welfare have improved. 4 in 10 of longer-tenure clients report "significant improvements" compared to 3 in 10 of shorter-tenure clients.
Clients who access additional services from the financial service provider beyond their loan report 1.5x stronger individual, business, and household outcomes.
Group loan clients report higher Net Promoter Score (62) than individual clients (47). People who borrow together are more likely to understand loan terms, and withstand unexpected financial shocks, than those who borrow on their own.

LONDON, Oct. 3, 2023 /PRNewswire/ -- Microfinance improves borrowers' quality of life, helps to build gender equality, and invest for the future. These are some of the findings of the 60 Decibels Microfinance Index 2023, published today.

Based on interviews with over 32,000 microfinance clients in 32 countries, the 2023 index has gathered over 1 million data points. The survey represents over 84 million microfinance borrowers, equivalent to around 40% of the global total.

Key findings

This second Microfinance Index shines a light on the ways microfinance is helping improve the lives of some of the world's most marginalized communities. Key insights include:

1. Clients who have been with their financial service provider (FSP) longer are more likely to 'strongly agree' that their lives and household welfare have improved.

Around 22% of longer-tenured clients reported significant improvement in their spending on home improvements; eating better quality and quantity of meals at home; and increased spending on their childrens' education. By comparison, 16% of shorter-tenure clients reported similar improvements.

Longer-tenured clients were also more likely to report improved resilience to financial shocks. Nearly 3 in 10 longer-tenure clients report significant improvement in their ability to face an emergency expense because of their financial service provider, compared to 2 in 10 shorter-tenured clients. The compounded benefits of such associations are evident across various household metrics, and reveal the transformative power of long-term engagement with financial service providers.

2. Clients who access additional services from the FSP beyond their loan report stronger individual, business, and household outcomes.

Of those surveyed, clients who accessed any services in addition to credit from the FSP in the last six months reported more substantial improvements in quality of life, business income, ability to manage finances, savings, and confidence compared to those who do not.

At the household level, clients who access both non-financial and financial services in addition to their loan from the FSP are more likely to report very much improved quality of life (53% of those who accessed both vs. 31% who accessed only credit), increased savings balance (36% vs. 16%), ability to manage finance (48% vs. 28%), and confidence in their abilities (53% vs 32%).

The trend is similar for business-level outcomes – nearly double the amount of clients who access both additional services are more likely to report 'very much increased' income compared to clients who access only credit, saying the same.

These findings support the thesis that offering bundled, or any, additional services beyond credit to clients, has the ability to significantly improve social performance outcomes for clients in quality of life, confidence, savings, and ability to manage finances. Two-thirds of the FSPs in the dataset currently offer both financial and non-financial services to clients in addition to credit.

3. Clients with group loans report a significantly higher Net Promoter Score^® (62) for their FSP than clients with individual loans (47).

The data suggests the group lending approach has some significant advantages over individual lending, particularly in client satisfaction, loan terms and understanding, and financial resilience. Group loan clients were also more likely to report that they have a better understanding of loan terms, and stronger financial resilience.

Group loan clients more so than individual loan clients reported that their ability to face an emergency expense has improved because of their financial service provider (82% vs 71%).

Group loan clients also reported a better understanding of their loan fees, penalties, and conditions compared to individual loan clients (93% versus 87%); and were more likely to say that FSP agents treat them fairly (73% versus 65%).

This data remained consistent across all three regions analyzed: suggesting group loans have a greater impact on clients than individual loans, no matter the geography.

There are many consistencies with the 2022 60dB including that the majority of women continue to report their households and businesses have improved because of microfinance. Now, there is additional data on the impact financial service providers have on women, individually.

83% of women report improvements in their confidence because of their financial service provider, and 67% report improved financial decision making. The improvements that women report are marginally greater than men.

Despite the overall positive impact reported by microfinance clients, there are 1 in 4 clients who reported their loan repayments are a burden - with a handful reporting that they are a heavy burden. Loan repayment burden is strongly linked to clients' worry about finances and their household food consumption - those who say their loan repayments are a burden are more likely to report reducing their household food consumption and say their concern around their finances has increased.

"These data set a new standard around how we can understand what social performance means for microfinance institutions and their investors," said 60 Decibels CEO Sasha Dichter. "By speaking directly to 30,000 clients who represent tens of millions of borrowers, we can see what is working, at scale, and also to point out where accepted wisdom does not align with what customers are telling us about their lives. By listening better—in a standardized, consistent way—and comparing like-to-like performance of FSPs, we can get better data that helps serve clients, improve products, and, ultimately, improve lives."

"Results from this survey are a validation of our work. The 60 Decibels survey has been done very professionally and we enjoyed being part of this process," said Nitesh Kumar Sinha, Vice President – Operations Risk Management at Svasti Microfinance, a top performer in this year's Index. "Capturing client outcomes data internally comes with its own challenges including that of validation. Having someone like 60 Decibels conduct the survey and ask questions directly helps us understand the impact of our programs and it will help us improve our products and services."

About the MFI Index

The 60 Decibels Microfinance (MFI) Index is a groundbreaking financial inclusion initiative that exists to measure and benchmark the impact of the microfinance industry – providing high-quality, comparable social performance data for Africa, Asia and Latin America.

This year the index includes data from more than 114 participating FSPs and is supported by 32 Partners, including Abler Nordic, Accion, Advans Group, ASN Impact Investors, Baobab Group, BRAC, Ceniarth Group, Developing World Markets, Enabling Qapital, FinnFund, FMO, Global Partnerships, Gojo, Grameen Crédit Agricole Foundation, HOPE International, International Solidarity for Development and Investment (SIDI), Invest In Visions, Kiva, MCE Social Capital, Mercy Corps, Opportunity International, Pro Mujer, Proparco, Social Performance Task Force (SPTF), Triodos Investment Management, Symbiotics, Temasek Trust, Tipping Point Fund on Impact Investing, TripleJump, Vision Fund International, and WaterEquity. The financial service providers assessed in the 2023 dataset collectively serve more than 84 million clients in 32 countries.

Building on findings from 2022, the report provides detailed data on how different aspects of microfinance (such as lending methodology, wraparound services, and client tenure) influence individual and household outcomes. It also provides a deeper understanding of client protection, giving insight into the current risk of overindebtedness and client treatment globally (along with more detailed data on key markets like Cambodia). Finally it provides new data on agency to understand the impact of financial service providers on decision-making and confidence, particularly for women.

Download the 2023 Microfinance Index report here

Editors Note

Net Promoter Score^® (NPS^®) is one of the most widely-respected measures of customer satisfaction and loyalty. The scale goes from -100 to 100, with above 0 considered to be good, above 50 is great and above 70 is excellent.

Contact: Victoria Medina; Robin Grainger,
victoria.medina@fourteenforty.uk
robin.grainger@fourteenforty.uk

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SOURCE 60 Decibels