ARE MICROCREDIT and savings programs effective? These areas represent two interesting case studies of impact evaluation in the Philippines, highlights of which were presented in a seminar last Sept. 10 as part of the activities commemorating the 11th Development Policy Research Month.
There is conflicting evidence on the impact of microfinance in the developing world, and the results are also mixed when it comes to the Philippines, said Mark Miller, deputy country director of research nonprofit Innovations for Poverty Action (IPA)–Philippines.
In 2010, IPA partnered with First Macro Bank of Pateros for an evaluation of the latter’s credit program, using experimental credit scoring. One of the main findings was that after loan takeout, profits increased but only for male entrepreneurs, Miller said during the seminar titled “Impact Evaluation: Why It Matters”, organized by the Philippine Institute for Development Studies and IPA-Philippines, held at the Romulo Hall of NEDA sa Makati Building.
“The effects of the loan were also stronger for higher-income entrepreneurs. These entrepreneurs had already started their business well, and they benefit more. But the loans did not serve well for starting businesses,” he added.
Miller noted that businesses that had obtained loans subsequently laid off employees. This meant these businesses had to shed workers to be able to grow.
IPA has been conducting research in the Philippines since 2003, focused on financial capability, peace, and governance. Recently, it has started research studies on small and medium enterprises and migration, particularly remittances.
Miller also discussed IPA’s study on commitment savings, a program that requires depositors not to withdraw money from their accounts until their saving goals are met.
Results showed that the total amount saved by depositors increased by 82 percent. Female clients also purchased 20 percent more durable items, such as refrigerators, from their savings.
“More impatient clients are more likely to commit to save. They realize their weaknesses and know they need help in order to save,” Miller noted.
Meanwhile, monthly text messages sent to program participants as reminders of their savings commitments increased savings by six percent.
While the results, particularly for microcredit, seem counterintuitive, these are important in finding out not just what programs work, but also for whom they work best, Miller said.