What impact do microfinance and welfare programmes have on financial and social inclusion in Europe? And which ensure the best value for money?
The European Investment Fund (EIF) has just published in a research paper the results of an EIF-led EIBURS research grant, conducted by Università Cattolica del Sacro Cuore (Piacenza, Italy), in collaboration with the Department of Economics of Università di Parma, Microfinanza Srl, Università di Genova and European Microfinance Network (EMN) of Brussels and Milan.
Microcredit providers, donors, investors and public institutions usually use their own set of indicators to measure the impact of the programs and projects they support. This makes comparisons difficult. The research suggests a methodology, called Social return on investment (SROI), to identify a set of stable, comparable, operable, specific and measurable indicators (about 10 to 15), covering the economic, social and environmental dimensions of microfinance projects. By comparing the outcome of selected microcredit lines, researchers find that SROI is greater than two for all credit lines analysed, meaning that every euro invested generates at least two euros of social return.
A second EIF research paper complements the SROI methodology by introducing an analytical approach, which relies on indicators concerning the three dimensions, i.e. economic, social and environmental.
The EIF has been involved in microfinance in Europe since 2000, providing funding (equity and loans), guarantees and technical assistance to a broad range of financial intermediaries, from small non-bank financial institutions to well established microfinance banks to make microfinance a fully-fledged segment of the European financial sector. It has become an important pillar of this segment, by managing specific initiatives mandated by the European Commission, the EIB, and other third parties, as well as by setting up operations using own resources.
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