Evaluating the impact of financial inclusion and women’s empowerment in India’s poorest states

Under the Poorest State’s Inclusive Growth (PSIG) programme, DFID is providing up to GBP 30 million to support financial inclusion and women’s empowerment across four target states (Bihar, Madhya Pradesh, Orissa and Uttar Pradesh). We are conducting a multi-year mixed-method evaluation of the financial inclusion component of the PSIG, in partnership with EDA. The evaluation design uses a theory-based approach incorporating composite methodologies to test outcomes and impacts at the household-, institution- and sector-level. At the household level, a quasi-experimental panel survey will be complemented by focus group discussions and key informant interviews, while analysis at the sector level will incorporate a process evaluation. The team will also complete cost-efficiency and cost-benefit analyses. The evaluation comes at an important time in the development of the microfinance sector in India and provides an opportunity to build a more robust evidence base on what works and under what circumstances.

Challenges 

The states of Bihar, Madhya Pradesh, Orissa, and Uttar Pradesh account for one third of India’s population yet remain amongst the poorest regions in the country and the world. In each state, the potential for social and economic growth is limited by a lack of access to sustainable, pro-poor financial products and services, characterised by low rates of financial inclusion amongst the poorest sections of the population.

As part of its multi-year, ‘Poorest State Inclusive Growth’ (PSIG) programme, DFID is providing up to GBP 30 million to support financial inclusion and women’s empowerment across the four states. The programme aims to build a deeper financial sector that widens the scope of microfinance beyond credit to include a full range of accessible financial services that support the needs of the poorest members of society. It will do this by working with stakeholders at a number of levels:

• At the sector level, working with think tanks and microfinance associations to advocate for policy change.
• At the institutional level, providing technical support and capacity building to banks, microfinance institutions, and other intermediary organisations to support the development of responsible, sustainable, pro-poor financial services.
• At the client level, facilitating the delivery of financial services, financial literacy training, and new products.

This evaluation is addressing the need to provide robust evidence on the performance of this financial inclusion component of the PSIG programme, to demonstrate its impact and inform future DFID programming within the sector. 

Our approach

Our expert team has designed, and will implement, a multi-year impact evaluation based around the programme’s theory of change that gathers evidence for outcomes and impacts at the client (household), institutional, and sector levels.

For each level of the programme, the evaluation design includes a composite methodology that uses both quantitative and qualitative tools. At the client level, the design includes a longitudinal, quasi-experimental panel survey of over 3,600 households across the four states. Qualitative methods including key informant interviews and focus group discussions will be used to identify survey indicators and also to ensure the triangulation of results.

At the institutional and sector levels, the team will use a combination of primary and secondary research approaches – including literature reviews, process analysis, and interviews with selected institutions and government stakeholders– to identify programme outcomes and impacts. Where possible, the financial institutions that are sampled will correspond with those providing products and services to households participating in the programme, to enable direct links to be made between client and institutional impacts.

The team will complete the following activities:

• Updating the programme’s theory of change
• Conducting literature reviews and scoping work including stakeholder mapping
• Developing a mixed-methods impact evaluation design including baseline, midline and endline rounds and incorporating quantitative and qualitative survey approaches, field visits and participatory tools
• Designing and conducting a quasi-experimental household panel survey based on a sampling strategy that allows for longitudinal comparison of treatment and control households and difference-in-difference analysis
• Completing sector-level analysis including interviews and process evaluation
• Disaggregating findings by gender, religion, social and economic group and poverty level to allow for in-depth analysis of impact and causality
• Conducting cost-effectiveness and cost-benefit analyses

Outcomes

This project will help improve DFID’s understanding of the impact of the financial inclusion component of its poorest states programme in India. The complex, multi-year programme operates at many levels and this evaluation is addressing the need for clear evidence of the links between inputs, outputs, outcomes, and impacts within and between these levels.

By documenting and sharing lessons learnt, this evaluation project will also contribute to the wider evidence base around financial inclusion and women’s empowerment, highlighting those strategies that have the greatest impact within different low-income states. In turn, this evidence will help inform future programming within the sector.

More broadly, the evaluation will contribute to the wider debate around microfinance and its role in promoting saving and investment, reducing vulnerability and improving livelihoods within low-income settings.