In the second year of the Microfinance Index, 60 Decibels listened to more than 32,000 borrowers from 114 financial institutions in 32 countries, collecting over one million unique data points. Two thirds of all the clients 60 Decibels spoke to are women. The study concludes, amongst others, that microfinance improves quality of life for 81% of clients and increases financial resilience in times of crisis.

Five questions to Tatiana Kalinina who coordinated our contribution to this survey. She is Senior Analyst Sustainability and Impact for the Impact Private Debt and Equity Funds at Triodos Investment Management (Triodos IM).

Why did Triodos IM participate in this survey?

We invest in financial inclusion because of its important role in bringing more prosperity, equality and well-being. By investing in and engaging with values-driven financial institutions in emerging and developing economies, we contribute to improved access to affordable, effective and transparent financial services, especially for excluded or disadvantaged people. 

The financial institutions in our portfolio report several indicators, such as the number of loan and savings clients, the percentages of female clients and clients living in rural areas. But ideally, one would like to ask microfinance clients directly if access to products and services made them better off. We do this when we visit clients of our portfolio companies, but this is more on an anecdotal basis. Such a survey should be based on sound methodology, be conducted by trained staff and on a global scale. And this is exactly what 60 Decibels started doing a couple of years ago and accomplished in its 60 Decibels Microfinance Index survey published in 2021.That’s why we joined in 2022.  

What was our contribution?

We selected a dozen microfinance institutions (MFIs) from our portfolio in different regions and asked them if they wanted to be included in this survey. Some were already familiar with it, others not. Several declined, but the majority reacted positively. Together with other impact investors, we financed the surveys of nine MFIs in Cambodia, Indonesia, India, Tajikistan, Georgia and Bolivia.

Can you shed light on the angle of the review?

The 60 Decibels team conducted telephone interviews with a random sample of 275 clients of each of the selected MFIs. The interview topics are grouped into six dimensions: Access (to financial services), Business Impact, Household Impact, Client Protection, Resilience and Agency. Access, for example, shows to what extent the Financial Service Providers serve the base of the pyramid (the poorest and often excluded from financial services part of the population).

The topic of client protection is very important for us. While scores here varied, overall performance is in line with our expectation and assessment: being at or very often above the 60 Decibels benchmark. The outliers – with scores significantly below the benchmark - lead to discussion with the MFIs to better understand the reasons and assess if and what action needs to be taken. Such engagement is an ongoing process.

Any key insights and findings you’d like to share?

First of all, the 60 Decibels survey gives voice to the most important stakeholders – the microfinance clients themselves.  

It is very rewarding to see the high scores and positive responses of clients on the impact that our portfolio companies generate for them. Yet, even more interesting are the challenges and gaps that the low scores point out. For example, fintech companies show lower levels of understanding of the loan conditions reported by the borrowers: significantly below the  benchmark. Another finding is that between roughly 30% and 70% of the respondents indicated they would not know how to report inappropriate treatment.

To understand better what these findings could mean, we discussed them with the portfolio companies. This is, by the way, another valuable feature of running such surveys – they bring more depth to the engagement with our portfolio companies.

Also, the survey is an important tool for triangulation of information for our due diligence process, given the limited opportunity we have to interview the clients of our portfolio companies.

What are next steps?

Looking at the data of a limited set of portfolio companies and given the methodology of 60 Decibels of surveying between 250 and 280 clients out of either the MFI’s full client set or a minimum of 2,500 clients, there are some strengths and limitations. This approach yields a 90% confidence interval and 5% margin of error for the sampled population—a high degree of rigor, though less than one would do for a full evaluation. Therefore, we see these results as optimised for MFIs to make management decisions and for us as investors to understand client experience and client perspective of impact. This is a big step forward in terms of the insights it gives us, even though it is less than the standard one would need for an academic study.

With this foundation of comparable data from customers, we can raise some interesting questions. For example, what is the most adequate way to measure wellbeing impact across different cultures with a standard set of indicators and questions? This is now being actively discussed within the sector.

Another important element of the survey is the discussion of the outcomes with investors and portfolio companies. It allows the parties to give context in discussions, understand each other’s assumptions and blind spots, and it leads to in-depth analysis and better understanding of the outcomes.