The objective of this study is to determine the relationship between the economic impactof village banking and the income/expenditure levels of different client bases, with thehypothesis that impact will be greatest for poorer client bases. T-tests and Regressionanalyses were carried out on data compiled from client interviews in nine FINCAaffiliates to determine whether FINCA membership has a statistically significant impacton expenditure. Results were compared across the nine affiliates studied and were alsodivided into three groups based on median expenditure levels. The results from individualaffiliates were inconclusive, but the results from the affiliate groups provided convincingevidence that impact is greatest in poorer countries. Recommendations include targetingexpansion activity to the world’s poorest countries and undertaking further research toisolate the role of clients’ well-being in determining impact.
Village banking, which was conceived and introduced with the goal of alleviatingpoverty, has grown into the most widespread form of microfinance in the world
Over thecourse of the last twenty three years, village banking has proven itself to be a sustainableway of providing capital to the world’s poor, with particular emphasis on the poorest of the poor. However, it is not clear under what conditions the village banking method hasthe greatest impact.The aim of this study is to detect a correlation between impact and theincome/expenditure levels of different groups of clients; it is not intended to be a regionalstudy. It is hoped that studying nine different affiliates from Africa, Latin America,Eastern Europe and Central Asia acts as a control on country factors. Nevertheless,country factors are bound to emerge during the study and will be explored in the analysis.Also, this is an impact assessment of village banking, which is meant to target the poorand poorest of the poor, and not of microfinance as a whole.It is clear that FINCA clients benefit from village banking. The fact that the vast majorityof clients repay their loans with interest and stay in the program clearly demonstrates thatthey derive benefit from their membership. However, this analysis focuses on economicimpact, which attempts to find a causal link between FINCA membership andincome/expenditure levels, which are a good indicator of clients’ overall well-being.More specifically, this study assesses the relative economic impact of FINCAmembership among client bases of varying incomes, and determines if there is acorrelation between the impact of membership and the overall well-being of clients.Based on the idea that income derived from a FINCA loan will have a larger impact onthose clients with smaller incomes to begin with, it is hypothesized that poorer clientbases are impacted the most by FINCA membership. This impact is far from assured inpractice however, as numerous other factors, such as disease, geographic isolation, andbusiness environment, can affect impact.2