This systematic review finds that both micro-credit and micro-savings can reduce poverty but do not in all circumstances, nor for all clients. Given these varied results, it is important to consider whether there is potential for harm in offering either of these services, or in not doing so. While the lack of financial services may limit the ability of the poor to withstand shocks or to increase their wealth, micro-credit also brings the risk of increased debt and loss of collateral. It is harder to envisage a potential for harm in having a voluntary savings account. This logic, combined with the mixed evidence for positive impacts, suggests that micro-savings is the ‘safer’ intervention. No rigorous relevant evidence about micro-leasing was found.
The study identified over 14,000 citations that were assessed against the inclusion criteria and reduced to 84 relevant studies. Of these, 17 were judged to be of good enough quality for inclusion in the review. The interventions assessed in these studies varied widely and there was variation in their findings, with both positive and negative impacts identified.
The review found no evidence that micro-savings enables engagement in economic opportunities, although in some cases, but not all, it increases income, savings, expenditure and the accumulation of non-financial assets. The most rigorous evidence on micro-savings comes from studies in Malawi and Kenya. The first shows that commitment savings accounts increase levels of non-financial assets among savers, while the evidence from Kenya suggests savings accounts increase female market vendors’ levels of savings and expenditure. The review also found that:
- Micro-credit sometimes increases engagement in economic opportunities, but not always. The most rigorous evidence is from Bosnia and Herzegovina and shows that micro-credit leads young people to start new businesses; however, this was only true of those with relatively high levels of education or vocational training. Micro-credit can also increase income in some circumstances, but reduces it in others. It has similarly mixed impacts on levels of savings and accumulation of assets, and in most cases reduces expenditure, although the advantages or disadvantages of the latter are unclear.
- Even when combined, the provision of micro-savings and micro-credit has little impact on clients’ engagement in economic opportunities. Combined services have mixed impacts on income, the accumulation of non-financial assets and on expenditure. There is little evidence about the impact of combined services on levels of savings.
The varied nature of the evidence makes it difficult to draw conclusions. However, implications for policy include the following:
- As micro-credit makes some people poorer and not richer, there is an imperative to be particularly cautious when targeting the poorest of the poor. There is less risk if services are targeted at those who already have some financial security, such as savings (often integrated into micro-credit programmes) or another source of income, which will allow them to make loan repayments even if their businesses do not generate a profit immediately.
- Savings services, without linked credit, should be made more widely available for the poor.
- Micro-credit benefits some clients: the potential for increasing income and reducing poverty for some should be carefully balanced with the possible risk to others.
- Rigorous evaluation of pilot programmes is required prior to roll-out in order to minimise the risks of doing harm.
- There is, as yet, a lack of evidence about whether interventions that target women benefit them more than those which do not specifically target women. While care should therefore be taken to avoid excluding women from financial interventions, extra effort to focus micro-credit and micro-savings exclusively on women as opposed to including them in mainstream interventions is not warranted by the evidence base.
