European Microfinance Week: Moving from microfinance to inclusive finance

Last week, GOPA AFC participated in the European Microfinance Week, organized by the European Microfinance Platform (e-MFP) since 2008. As a member of the European Microfinance Platform, we actively participate in this annual event. The conference gathered the inclusive microfinance community to discuss new trends and challenges facing the ecosystem. Various presentations and panels provided insightful observations from practitioners and field experts. Our senior project manager, Celine Serhal, represented GOPA AFC and contributed to these discussions.

Outcome and impact measurement for financial institutions: from impact storytelling to impact data science

One of the most striking topics extensively discussed across various panels was the challenge and tools available to measure and report on the impact of inclusive finance in improving livelihoods and achieving the sustainable development goals (SDGs).

Many participants acknowledged that while output reporting is relatively straightforward for actors in the inclusive finance field, such as financial service providers, outcome and impact measurement are more challenging. These require time and sophisticated tools to accurately attribute outcomes to specific outputs. For example, providing training to MSMEs (output) does not necessarily mean the trainees have acquired the needed skills to make better financial decisions (potential medium-term outcome) or that their financial resilience will increase (potential long-term impact).

Impact measurement and reporting have become increasingly important for financial service providers with social objectives, such as microfinance institutions. Impact-driven investors and donors require clear, verifiable, and comparable data on the social and environmental impacts resulting from their investments. While storytelling is one way that is used extensively by financial institutions to report on impact, there are other qualitative (such as the use of financial diaries, rapid light internal surveys, focus group discussions) and quantitative data methods (MIS data, proxies, quantitative in-depth methods) that are increasingly being deployed in parallel to measure accurately outcomes and long-term impact.

The good news is that within the inclusive finance ecosystem, there is a consensus that impact measurement does not need to be a costly exercise or require academic methods such as randomized control trials. CERISE + SPTF, the leading organization setting standards for social and environmental performance management for financial service providers, advocates for simple, client-friendly, and light data collection methods. They promote perception and satisfaction surveys with clients to understand possible unintended harm from the use of financial products.

During the conference it was interesting to learn about various organizations working on streamlining data collection and supporting financial service providers by verifying their impact and helping them avoid impact-washing. One leading organization in this field is 60 Decibels, an end-to-end impact measurement company that helps financial institutions and impact investors by providing actionable, benchmarked social performance data. They use a lean data approach, collecting high-quality data quickly and cost-effectively through a 15-minute standardized survey with end-users. Moreover, 60 Decibels has a network of trained research assistants in over 50 countries, conducting phone interviews in local languages to gather nuanced and culturally relevant insights. Their client-centric approach focuses on listening to the voices of the people directly impacted by the services of financial providers.

Reflecting on the ideas and trends discussed in the conference, at GOPA AFC we are exploring how to best support our financial service providers, who we are providing with technical assistance, to improve their impact measurement and reporting and make them more attractive to impact investors and donors. For example, in Egypt— with funding from KfW and the EU— we are working with the apex organization MSME Development Agency (MSMEDA) to improve their capacity to measure their impact on job creation from their direct and indirect lending operations. We are also supporting MSMEDA in improving their environmental and social performance management to align with universal standards and best practices.

Financial inclusion for refugees and forcibly displaced people (FDPs): what is currently working and what are the challenges?

The theme of this year's conference centred around “advancing financial inclusion for refugees and forcibly displaced people (FDPs)”. According to UNHCR data, over 120 million people worldwide had been forcibly displaced by persecution, conflict, and human rights violations, as of end of April 2024. The conference aimed to shed light on the challenges and opportunities for financial service providers to develop products specifically targeting FDPs.

Among the participants were various financial institutions pioneering innovative solutions for this underserved and disadvantaged target group. While some participants acknowledged that various financial service providers feel uncomfortable marketing products for refugees due to potential reputational risks, Bdour Alhyari from Microfund for Women in Jordan had a different and interesting observation: She stated that in Jordan, loans are perceived as a burden rather than assistance or benefit, so there was no problem for the financial institution to develop market products for this market segment.

Bdour Alhyari explained the factors that enabled the NGO to expand financing for refugees. Among them is the use of blended finance and guarantees, which are important instruments to de-risk investment in this particular market segment. Moreover, the NGO's management took a long-term perspective and studied the behaviour of refugees and displaced people, realizing that the actual risk of financing this group is not higher than financing any other type of SMEs.

The conference also highlighted a recent study by UNHCR and the Grameen Crédit Agricole Foundation in Uganda, providing valuable insights into the financial behaviours of refugees. The study found that the perceived “flight risk” of refugees is largely overstated. Most refugees did not intend to return to their home countries or relocate, focusing instead on achieving economic independence. The high repayment rates among refugees demonstrated that they are reliable borrowers, with no significant differences in portfolio quality between refugee and host community clients.

GOPA AFC’s work to empower refugee businesses

At GOPA AFC, we have been implementing various projects supporting the financial inclusion of refugees. For example, in Jordan, with funding from GIZ, we worked on supporting digital financial literacy among Syrian refugees and unbanked low-income Jordanians to help increase their knowledge and access to digital money transfer services. In Uganda, with funding from KfW, we are currently working on a feasibility study for Uganda Development Bank to assess the feasibility of developing financial products targeting women-led and refugee businesses. Moreover, we ran financial literacy, entrepreneurship, and business management trainings for over 1,000 MSMEs in 10 refugee camps and host communities in Uganda under the EIB Financial Sector Technical Assistance Programme in East and Central Africa.

For more information, please contact: celine.serhal [at] gopa-afc.de