research topics on microfinance

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• Published: 20 April 2022

Does microfinance foster the development of its clients? A bibliometric analysis and systematic literature review

• João Paulo Coelho Ribeiro 1 ,
• Fábio Duarte   ORCID: orcid.org/0000-0002-4919-0736 2 &
• Ana Paula Matias Gama 3  

Financial Innovation volume  8 , Article number:  34 ( 2022 ) Cite this article

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This paper conducts a scientometric analysis and systematic literature review to identify the trends in microfinance outcomes from the perspective of their recipients, specifically more vulnerable people, while also focusing on the demand side. Applying the keywords “co-occurrence networks” and “citation networks,” we examined 524 studies indexed on the ISI Web of Science database between 2012 and March 2021. The subsequent content analysis of bibliometric-coupled articles concerns the main research topics in this field: the socioeconomic outcomes of microfinance, the dichotomy between social performance and the mission drift of microfinance institutions, and how entrepreneurship and financial innovation, specifically through crowdfunding, mitigate poverty and empower the more vulnerable. The findings reinforce the idea that microfinance constitutes a distinct field of development thinking, and indicate that a more holistic approach should be adopted to boost microfinance outcomes through a better understanding of their beneficiaries. The trends in this field will help policymakers, regulators, and academics to examine the nuts and bolts of microfinance and identify the most relevant areas of intervention.

This study conducts a scientometric analysis and systematic literature review to identify the trends in microfinance outcomes from the perspective of their recipients

A Bibliometric analysis were conducted to examine 524 studies indexed on the ISI Web of Science database between 2012 and March 2021

A content analysis of 11 ABS ranked articles (rank 4 or 4*) were conducted to stablish trends of research

The findings suggest that a holistic approach should be adopted to boost microfinance outcomes through a better understanding of their beneficiaries

Introduction

Microcredit has emerged as an innovative tool for fighting poverty in underdeveloped countries (Mustafa et al. 2018 ). Positive experiences suggest that it constitutes an agile, flexible, and cost-effective financial instrument for entrepreneurship projects that otherwise suffer from bank credit rationing (Stiglitz 1990 ). Combining microcredit, microsavings, and microinsurance, microfinance “can help low-income people reduce risk, improve management, raise productivity, obtain higher returns on investments, increase their incomes, and improve the quality of their lives and those of their dependents” (Robinson 2001 : 9).

The promise of microcredit to eradicate global poverty has proven overly ambitious, as poverty results from a wide number of factors. Nevertheless, at least theoretically, providing poor people with financial resources to start their own businesses can help them increase their income and purchasing power, even if starting and running a successful business is not a simple task. Furthermore, if microcredit loans do not create financial wealth, they should then be classified simply as a “mechanism for transferring resources to the poor” (Khandker 1998 : 7).

The implementation of microfinance and its potential as a tool for fighting social and financial asymmetries is an expanding research topic. However, while microfinance may have grown into a worldwide industry, scholars have expressed doubt about its actual impact on the recipients (e.g., Morduch 1999 ). The lack of true profit-generating potential of financed ventures (Bradley et al. 2012 ), high interest rates (Webb et al. 2013 ), and the lack of management and entrepreneurial skills (Evers and Mehmet 1994 ) raise substantial doubts about the outcomes of microfinance for recipients. Furthermore, the current empirical literature casts doubt on the ability of microfinance to generate multidimensional outcomes such as empowerment, education, health, and nutrition (Khavul et al. 2013 ; Miller et al. 2012 ). Therefore, this study seeks to examine the trends in the outcomes of microfinance for its clients, particularly for more vulnerable people (e.g., women, self-employed, older adults, low-income, and refugees), by focusing on the demand dimension of microfinance. To present the prevailing state of research on microfinance and its benefits for clients, we apply a scientometric analysis, which enables us to trace the anatomy and analyze the knowledge of this research topic. Thus, we address three research goals: identifying the current trends in the outputs of the microfinance literature in terms of dates, journals, authors, affiliated countries, and institutions; examining the most influential studies and themes in this field; and discussing the intellectual structures of the outcomes of microfinance research and the underlying trends.

This approach identified five clusters using keyword analysis and knowledge maps: (1) the socioeconomic outcomes of microfinance, (2) the conflict between social performance and the mission drift of microfinance institutions; (3) group lending, social networks, and social capital; (4) poverty alleviation through entrepreneurial activities and the impact of innovative services, especially crowdfunding; and (5) gender and new thematic frontiers.

Muhammad Yunus argues that poor people possess natural abilities to run businesses, and that their own subsistence reflects the capacities of their survival skills (Yunus 1998 ). However, to set up new businesses, poor entrepreneurs need to find alternative financial resources due to their general exclusion from the traditional banking system because of their lack of collateral (Stiglitz 1990 ), limited property rights (Webb et al. 2013 ), and the high transaction costs incurred by small-scale bank loans (Chliova et al. 2015 ; Ghatak 1999 ; Weiss and Montgomery 2005 ). Ongoing and established relations between lenders and borrowers often generate trust and reduce the risk of credit rationing (Stiglitz 1990 ); however, this inherently does not apply to most potential microcredit beneficiaries, as they lack any credit history (Tang et al. 2017 , 2018 ). Hence, Yunus ( 1994 ) identifies the provision of credit as a key factor for overcoming poverty through innovative approaches to providing credit to the poor as encapsulating a potential solution. Therefore, as microfinance-related articles have been published, literature reviews have appeared on several microfinance-related themes. Table 1 summarizes these studies.

Brau and Woller ( 2004 ) surveyed 350 articles related to microfinance institutions (MFIs) sustainability, products and services, management practices, client targeting, regulations and policies, and impact assessment before calling for further research into microfinance practices as a means of combatting poverty around the world. Based on 71 research papers (peer-reviewed journals, university publications, reports by development organizations, and conference publications) on the performance of MFIs, Roy and Goswami ( 2013 ) propose that microfinance researchers, practitioners, and rating agencies consider other dimensions for assessing MFI performance besides the financial aspect, particularly considering measures for social performance, outreach, and sustainability. García-Pérez et al. ( 2017 ) carried out a systematic literature review of 475 articles on microfinance, resulting in their classification of sustainability research under four perspectives: economic, environmental, social, and governance. They report that the economic and social fields have received the most attention, with authors having researched the interrelationships and considered a broader variety of subjects in those areas than in the environmental or governance fields. Fall et al. ( 2018 ) performed a meta-regression analysis of the performance of 38 MFIs before demonstrating that the mean technical efficiency (MTE) of MFIs has increased over time. However, research estimating social efficiency generated lower MTE levels than that for financial efficiency, which may explain why the African microfinance sector has poor performance. Hermes and Hudon ( 2018 ) also studied MFIs while focusing on the determinants of social and financial performance. From a study including 169 articles, they concluded that the most important determinants of MFI performance addressed by the literature are their own respective characteristics (such as the size, age, and type of organization), their funding sources, the quality of their corporate governance policies, and the characteristics of their external environment (such as the prevailing macroeconomic, institutional, and political conditions). However, they report mixed empirical findings, which may stem from a multidimensional perspective of performance. They suggest that outreach, gender, and rural measures should be adopted to measure the social performance of MFIs more holistically. Akter et al. ( 2021 ) have also recently addressed this dual nature of MFI performance (i.e., spanning the financial and social dimensions). After applying bibliometric data to 1252 Scopus-indexed articles, the authors convey how the hot topic research themes related to microfinance cover poverty alleviation, group lending, and credit scoring, whereas the financial performance aspect has been gaining greater attention from recent research evaluating MFI performance.

Copestake et al. ( 2016 : 290) review three decades of microfinance doctoral research, referring to this as a “distinct field of development thinking,” describing the “mainstream narrative of progressive inclusion of poor people and their livelihoods into a globally integrated and regulated financial system, largely in the private sector but also strategically subsidised by government and aid agencies.” The authors identify a critical counterpoint to this narrative of development thinking by emphasizing the specific negative effects of financial integration on poverty and inequality. By compiling a series of studies, they suggest that the performance of microfinance depends on socio-cultural norms, regulation, and management practices, which might further explain the mixed empirical evidence on the impact of microfinance.

Deploying a scientometric analysis of 1874 papers on microfinance, Gutiérrez-Nieto and Serrano-Cinca ( 2019 ) focus on the most cited 5% in this pool and classify the resulting 94 papers as institutionalist (when more oriented toward MFIs), welfarist (when more oriented toward microfinance clients), and generalist (otherwise). Based on chronological analysis, these authors report that, having previously covered innovations in microcredit practices and their impacts (the first research stage), as well as the peculiarities of MFI (second stage), current research primarily targets certain concerns over MFI mission drift and the role of microfinance in fostering financial inclusion. Somewhat interrelated with Gutiérrez-Nieto and Serrano-Cinca ( 2019 ), Zaby ( 2019 ) sets out an overall picture of the state of the art in the microfinance literature coupled with the main schools of thought. This author adopts science mapping to examine 4,409 Scopus-index articles explicitly related to microfinance (Zaby 2019 : 1), and correspondingly identifies three thematic research clusters: (1) the institutional aspects of microfinance, (2) the application of sophisticated research methods to evaluate the impacts of microfinance, and (3) ground-breaking microfinance literature related more generally to social justice. Nogueira et al. ( 2020 ) also report how MFI performance-related issues represent one of the most commonly approached fields of research. Based on 2168 articles indexed in the Web of Science, these authors point out how financial inclusion and entrepreneurship are hot topics related to microfinance. The authors then conclude in favor of the relevance of studying entrepreneurship in order to better understand the beneficiaries of microfinance.

Duvendack et al. ( 2011 : 2) argue that “no study robustly shows any strong impact of microfinance” on the well-being of its beneficiaries. After analyzing 58 papers, these authors identified cases with both poor methodology and data and concluded that most studies advanced no reliable evidence regarding the impact of microfinance. Van Rooyen et al. ( 2012 ) also focus on the impact of microfinance on poor people in their systematic review of studies conducted in sub-Saharan Africa. They report that microfinance has a modestly positive impact, but also occasionally results in the deterioration of the situations faced by beneficiaries. This framework indicates that academics and practitioners should closely consider the beneficiaries of microfinance rather than the overall performance of MFIs. This research gap prevents us from reaching any conclusions about the value of microfinance, particularly microcredit, as a tool for mitigating poverty and financial and social exclusion, nor regarding whether their multidimensional outcomes extend beyond the creation of wealth.

Only a few studies have hitherto focused on the impact of microfinance on the poor and on their well-being (e.g., Duvendack et al. 2011 ; Van Rooyen et al. 2012 ). This gap led us to combine bibliometric and content analysis to compile current literature and provide a roadmap of trends for future research into the outcomes of microfinance for recipients with a particular demand-side focus.

Therefore, this study makes several contributions to the literature. In particular, the results of the knowledge maps convey how more traditional topics, such as the focus of microfinance institutions, may potentially shift gradually over time and with the move from social to financial performance, increasing the risk of mission drift, and the advantages of group lending for creating social networks to overcome access to capital-related problems still attracts research interest. Furthermore, emerging trends relate to strategies for overcoming poverty and enhancing socioeconomic development. Entrepreneurship is a powerful tool that strengthens the financial and non-financial outcomes of microfinance. In addition, the scope of microfinance outreach is changing due to the emergence of crowdfunding platforms, particularly prosocial platforms (e.g., KIVA: https://www.kiva.org/ ) that boost women empowerment and gender equalities, stimulating the liberalization of financial systems at a global level and potentially prompting a more financially and socially inclusive system.

The structure of this paper is as follows: Sect.  2 sets out the research methodology design, and Sect.  6 details the bibliometric analysis that systematizes the publication trends, the most prolific journals, authors, and affiliated institutions, as well as the most influential studies and subjects in the field. Section  12 provides the content analysis based on bibliometric coupling, and Sect.  18 outlines and discusses the new trends in the microfinance literature, before Sect.  23 presents our conclusions.

Research methodology

Data and research criteria.

This study applies bibliometric and content analytical procedures to the selected papers, focusing on the outcomes of microfinance for their recipients (demand side), based on information collected from the Web of Science (WoS), Footnote 1 a database that “contains thousands of academic publications along with bibliographic information on their authors, affiliations, and citations” (Ferreira et al. 2019 : 186). We limited our research to articles published after 2011, as that was the last year with systematic literature reviews of this field, following the studies by Duvendack et al. ( 2011 ) and Van Rooyen et al. ( 2012 ; see Table 1 ). Our search of the field adopted the keywords (“microfinance*” OR “micro finance” OR “micro-finance*” OR “microcredit*” OR “micro credit*” OR “micro-credit*”) AND NOT (“microbank*” OR “micro bank*” OR “micro-bank*” OR “microfinance institution*” OR “micro finance institution*” OR “micro-finance institution*” OR “mfi*”) AND (“performance*” OR “success*” OR “outreach*” OR “impact*” OR “impacts*”) as entered in the WoS database. We then screened the articles based on titles, keywords, and abstracts to establish a database of 796 articles with the data collected in April 2021 spanning the period between 01:2012 and 03:2021. Footnote 2 Table 2 provides a comprehensive summary of the criteria used to collect the WoS data.

In accordance with our objective of analyzing the literature on the outcomes of microfinance for recipients, the more vulnerable people (demand side), we carried out a screening process of these documents involving the reading of the abstracts and, in case of doubt, we examined the documents in full length, which led to the exclusion of 272 purely institutional articles, that is, those concentrating solely on the financial performance of MFIs (e.g., Gutiérrez-Nieto and Serrano-Cinca, 2019 ). Nevertheless, this screening process did not exclude studies focusing on the social performance of MFIs, as these usually reach out to women, rural, vulnerable, and marginalized populations. This process was undertaken independently by two of the authors before verification by the third author. Thus, the bibliometric analysis examined 524 articles with detailed content analysis and then applied more detailed analysis to 47 of them in keeping with their common linkage to other documents in the network, based on the bibliometric coupling methodology. Furthermore, we undertook an additional context analysis of the most recent articles published between January 2018 and March 2021, ranked by the Association of Business Schools (ABS). This analysis concentrated on 11 articles published in elite journals (ABS 4*) and top journals (ABS 4). These journals generally publish the greatest advances in their respective fields and generate the highest citation impact factors within their field of knowledge. Figure  1 provides a comprehensive summary of the data analysis process.

Data retrieval process

Therefore, this study combines bibliometric analysis and a systematic literature review. Based on quantitative literature analysis, bibliometrics represents a study method from the library and information sciences (Huang and Ho 2011 ) and, according to Sengupta ( 1992 : 76), “is a sort of measuring technique by which interconnected aspects of written communications can be qualified.” Narin et al. ( 1994 : 65) refer to “bibliometrics and, in particular, evaluative bibliometrics,” which “uses counts of publications, patents, and citations to develop science and technology performance indicators.” This type of analysis emerged in order to deal with constantly growing bodies of knowledge and incorporates three major dimensions: measuring a particular scientific activity, its impacts as conveyed by the total number of article citations, and the links among articles (Narin et al. 1994 ), thus tracing the anatomy of the knowledge existing in a research field with regard to a specific topic.

Our study applied VOSviewer Footnote 3 software version 1.6.8 to analyze the publishing trends and most prolific journals, disciplines, authors, institutions, countries, studies, and subjects. This analysis is mainly derived from the number of published articles, total citations, and occurrences. To complement the analysis of the most influential studies, we performed co-citation analysis to systematize the most fundamental articles published between 1:2012 and 3:2021. Introduced by Small ( 1973 ) and developed by White and Griffith ( 1981 ) and White and McCain ( 1998 ), co-citation analysis is one of the most common bibliometric methods for unveiling similarities among the cited articles (Small 1973 ). By applying this tool via VOSviewer, we were able to highlight the main studies guiding the research over the last decade. The fractional counting methodology was used to analyze the most influential subjects, correcting the number of occurrences of each keyword in accordance with the total number of (key)words used in the title, abstract, or keyword list for the same article (Xu et al. 2018 ). The fractional counting method is more suitable than the full counting method (Narin et al. 1994 ): “When full counting is used to construct a bibliometric network, each link resulting from an action has a full weight of one, which means that the overall weight of an action is equal to the number of links resulting from the action. On the other hand, when fractional counting is used, each link has a fractional weight such that the overall weight of an action equals one” (Perianes-Rodriguez et al. 2016 : 1180). In so doing, the relationship between two keywords becomes closer when articles provide fewer keywords. Thus, Van Eck and Waltman ( 2014 ) recommend the fractional counting method, as this overcomes the potential for bias created by highly cited articles with long reference lists or more keywords, leading to misinterpretations.

Following the bibliometric analysis, we performed a systematic literature review to systematize the state of the art and to determine trends and possible research gaps based on the content analysis of clusters. Detailed content analysis was performed in the cases of bibliographically coupled articles—articles sharing a common link to other documents in the network. Bibliographic coupling establishes relationships between articles based on citation similarities and deems two articles to be bibliographically coupled whenever there is a third article cited by both these articles (Kessler 1963 ). Based on a dataset of 524 articles, we deployed VOSviewer to generate bibliometric maps based on the visualization of similarities technique. Of the 524 published articles in our refined dataset, this software reports that only 47 articles were coupled by the same item of reference, with at least 25 citations.

• Bibliometric analysis

Annual publication trends

Figure  2 illustrates the trends displayed by the 524 WoS-indexed articles in the field of microfinance outcomes (i.e., demand side) since 2012.

Publication trend of 524 published articles, indexed to WoS, between 1:2012 and 3:2021

The figure indicates an upsurge in publications from 27 papers in 2012 to 84 in 2020. Footnote 4 This trend in publications stems from the increasing number of scholars challenging the proposed benefits of microcredit as a salient tool for addressing credit constraints and poverty (e.g., Angelucci et al. 2015 ; Banerjee et al. 2015a ; Bocher et al. 2017 ; Tarozzi et al. 2015 ), especially when based on entrepreneurial activities (e.g., Alvarez and Barney 2014 ). The Nobel Prize awarded to Banarjee, Duflo, and Kremer in 2019 for their work on different strategies to mitigate poverty also justifies the rise in research related to the ability of microfinance/microcredit to generate positive outcomes, such as empowerment and education, beyond mere wealth creation.

Prolific journals and subjects

Table 3 depicts the list of the most prominent journals publishing on issues related to the demand side of microfinance, and hence the microfinance recipients. A total of 252 journals were included in the 524 articles analyzed. The most prolific journals (two of them ex aequo with nine published articles, three with six published articles, and five with five published articles) have published 179 of the articles studied (34.2% of the total). Almost all of these 179 articles appear in ABS-ranked journals, mainly in ABS 3 (according to the ranking published in 2018) by the Chartered Association of Business Schools. Footnote 5 These findings illustrate how research on the microfinance field primarily engages quality journals of business and management. The Journal of Development Studies represents the most productive journal, having published 31 articles, followed closely by World Development with 30 articles. Together, both journals published 11.4% of the articles analyzed.

Figure  3 displays the 10 main fields of journals publishing microfinance research since 2012. The most representative areas are economics , business , and management (which includes business finance), with 379 articles (i.e., 72.32% of the total articles). This figure indicates how the analysis of the outcomes of microfinance (on the demand side) has especially adopted an economic perspective. Despite the prominent position of Development Studies in publishing research on this topic (80 articles), the journal still only represented 15.27% of the total articles. The relevance of microcredit for society as a whole remains only a marginal issue and is scarcely addressed in the literature. More studies from the fields of health, business ethics, sociology, and psychology would be worthwhile to generate a better understanding of the effectiveness of microfinance in promoting the Sustainable Development Goals (SDG) of the United Nations 2030 Agenda, specifically eradicating poverty (SDG 1), promoting health and well-being (SDG 3), gender equality (SDG 5), and reducing inequalities (SDG 10), in addition to the economic objective of decent work and growth (SDG8).

Top 10 subject areas in microfinance (demand side) research in the 524 published articles, indexed to WoS between 1:2012 and 3:2021

Prolific authors, affiliated institutions, and countries

Tables 4 and 5 display the top 10 authors, institutions, and countries publishing on microfinance (demand side) outcomes since 2012 in WoS-indexed journals by number of publications and citations. Abdullah Al Mamum provides the list detailed in Table 4 , with nine published articles. His research mainly targets the effectiveness of microcredit and training programs to combat poverty and promote the sustainable growth of micro-enterprises in rural areas in Malaysia. However, Ester Duflo stands out as the most prolific author based on total citations—412 citations (Table 5 ) with three published articles. Ester Duflo and her research team, Michael Kremer and Abhijit Banarjee, won the Nobel Prize for Economics in 2019 for research on fighting global poverty over the preceding two decades, contributing to transforming development economics into a flourishing field of research. In the field of microfinance, Duflo conducted experimental research in less developed countries to evaluate the impact of training programs on microfinance outreach, especially on health and empowering women. Dean Karlan emerged as the second most prolific author based on both the total number of published articles (Table 4 ) and the total number of citations (Table 5 ), with six published articles (equal to Ariana Szafarz) and 381 citations, 32 more than Johnathan Zinman, with four articles published with Karlan. The expansion of microcredit, the use of loans, and repayment incentives constitute the main topics in the experimental research undertaken by Dean Karlan and Johnathan Zinman. Erica Field and Rohini Pande attained three publications with a total of 179 citations. Based on randomized experiments in India, these authors have been working on the default risk of microborrowers and the repayment requirements that best suit the needs of the poor. Ariana Szafarz represents one of the six authors with over 100 citations divided across six published articles, mainly approaching the topics of social and financial performance, gender, and empowerment. This evidence suggests that, despite the prevalence of articles from the fields of economics, business, and management (as pointed out in Fig.  3 ), the most prolific authors focus on topics within the scope of development studies. Experimental researchers seem to capture the enthusiasm of their target communities, mainly in less developed countries such as Bangladesh, India, Morocco, and Malaysia.

The institution with the most articles published on this aspect of microfinance (Table 4 ) is the University of Groningen (Netherlands) with 11 published articles, followed by the World Bank (United States) with 10, and MIT (United States) and Yale University (United States) with 9 each. MIT is the most prolific institution, based on total citations (968 citations). Yale University and Harvard University (United States) are among the top three with 440 and 300 total citations, respectively. Together, the articles published by members of these institutions received 1,708 citations, accounting for over 57% of the total citations generated by our dataset of WoS-indexed articles. The most prolific institutions all have locations in the United States and are responsible for the highest number of published articles (145) and total citations (2,990).

Citation analysis

Citation analysis is the best method for mapping the influence of a research paper. Citation counts encompass the number of citations that a paper received over a period of time. Thus, a more influential and productive paper is cited most frequently. We use VOSviewer to determine the most influential papers on microfinance outcomes. Table 6 displays the 10 most cited articles locally and globally. The local citations reflect the number of times a paper is cited by others within a sample size of 524 papers, whereas global citations measure the number of times a paper is cited by other works across all databases, including other areas and research fields.

According to global citations (local citations), Banerjee et al. ( 2015b ) are at the top of the list with 295(72) citations, followed by Banerjee et al. ( 2015a ) and Bruton et al. ( 2013 ) with 226(53) and 157(8) citations, respectively. Banerjee et al. ( 2015a , b ) are the most prominent papers paving the way for further research on microfinance outcomes. These studies provide theoretical support for the use of a randomized experimental methodology to measure the causal effects of microcredit on community development, namely on the livelihood of microentrepreneurs.

The number of citations reflects the popularity of a paper. To measure this prestige, we use the total link strength based on the fractional counting method, which indicates the number of times a paper is cited by highly cited papers. Thus, a highly cited paper could not also be a prestige paper. The total link strength is a composite measure that encompasses both popularity and prestige. Table 7 lists the top 15 papers based on the total link strength. The results differed from those of the citation count. When the top 10 papers were compared based on citations (global and local) with the total link strength (co-citations), only 5 papers (Angelucci et al. 2015 ; Attanasio et al. 2015 ; Banerjee et al. 2015a , b ; Crépon et al. 2015 ) are among the top 15 papers based on total strength links (co-citations). Co-citation refers to the number of times two articles are co-cited by an article in the database. The more often articles are co-cited, the greater the link strength (i.e., the more similar the domains under study).

Table 7 shows the studies that mostly guide the research in the last decade, which includes several articles published before 2012. Pitt and Khandker ( 1998 ), with the highest number of co-citations(total link strength) 76(546), is the most influential study in the recent literature. This study provides an evaluation of the group lending program of the Grameen Bank (and similar ones) in Bangladesh, showing that these programs have a significant effect on the well-being of poor households; their effect on education, health, labor supply, and consumption is greater when targeting women. Khandker ( 2005 ) is the third most influential study in this ranking, with 63(411) co-citations (total link strength) in our dataset. This study examines the effects of microfinance on poverty reduction in Bangladesh, at both the individual and aggregate levels, finding that microfinance contributed to poverty reduction, especially for female participants, in line with Pitt and Khandker ( 1998 ), concluding that microfinance boosts local economic growth at the village level. Morduch ( 1999 ) is the fourth most co-cited author in our sample statistics articles with 524 articles and 55(417) total link strengths. The author promotes an evaluation of innovative mechanisms beyond group-lending contracts, raising doubts about the effectiveness of microcredit programs in fighting poverty compared to traditional credit programs. Armendáriz and Morduch ( 2010 ) is the seventh most influential study according to this ranking, with 49(394) co-citations and total link strength.

These authors conducted extensive research on general topics that question the economic problems of microfinance, why such programs are needed, and why financial resources do not flow naturally to the poor. Karlan and Zinman ( 2011 ), with 46(437) co-citations(total link strength), and Karlan and Zinman ( 2010 ) and Stiglitz ( 1990 ), both with 44 co-citations and 325 and 437 total link strengths, respectively, are the ninth and tenth ( ex aequo ) most influential studies. Karlan and Zinman ( 2011 , 2010 ) adopted experimental research methodologies to analyze microcredit programs in the Philippines and South Africa, respectively. Karlan and Zinman ( 2011 ) found that microcredit may serve to increase the ability to cope with risk, strengthen community ties, and increase access to informal credit, but under channels different from those often proposed. The results of Karlan and Zinman ( 2010 ) corroborate the presence of binding liquidity constraints in South Africa and suggest that expanding the credit supply improves welfare. Stiglitz ( 1990 ) also analyzed the success of the Grameen Bank, suggesting that peer monitoring is largely responsible for the financial performance of the microcredit program in Bangladesh. Banerjee et al. ( 2015a ), with 70(605), Crépon et al. ( 2015 ) with 52(517), and Banerjee et al. ( 2015b ) with 51(398), Attanasio et al. ( 2015 ) with 48(517), and Angelucci et al. ( 2015 ) with 43(409) co-citations(total link strength), all published after 2012, also assume a prominent place in this ranking.

Keyword analysis

Table 8 reports the top 15 keywords in the 524 articles selected by the study methodology and published between 1:2012 and 3:2021 that attain at least 20 occurrences. This table’s right column reports the number of links a given keyword obtains with another keyword based on the total link strength. “Microfinance” is the most frequent keyword, with 320 occurrences (281 total link strength), indicating that this word acts as a termed concept in the literature. The words “microcredit,” “impact,” and “poverty” are also three of the most frequently cited words with 199(187), 154(148) and 138(136) occurrences (total link strength), respectively, suggesting that scholars are focusing on microfinance/microcredit outcomes, especially approaching these as tools for development and intervention with the potential to lift people out of poverty. The emerging topics of “gender/women,” “entrepreneurship,” and “empowerment” emphasize how the literature is increasingly evaluating the effects of microfinance/microcredit across various dimensions beyond the financing facet.

Figure 4 displays the most influential subjects based on the keyword occurrence networks. Footnote 6 These keywords are either extracted from the title and abstract of each article or sourced directly from the article keyword lists (Van Eck and Waltman 2014 ). To establish this network, we applied VOSviewer software and the fractional counting method, which considers the number of keywords (key), to explore the most relevant themes in microfinance outcomes. This figure also confirms that “microfinance” is widely interconnected with “microcredit,” “poverty,” and “impact.” These results again corroborate how researchers examine microfinance/microcredit as a tool to eradicate poverty in greater depth, especially through entrepreneurial activities.

Network of keyword occurrences in the 524 articles selected from the study sample, covering the period between1:2012 and 03:2021 according to the fractional counting method

Content analysis

We deploy bibliometric analysis to explore the most relevant documents in this field of research. To identify the most influential publications, we applied VOSviewer to perform bibliometric coupling with a threshold of 25 citations for our analysis, yielding 47 articles out of a total of 524 with at least 25 citations, coupled into five clusters. Figure 5 depicts the knowledge map of the most-cited microfinance articles resulting from the fractional counting method. In a network, these nodes may be aggregated into clusters in which the weighting of edges is higher between the nodes within one cluster than those with another cluster. Thus, the VOSviewer algorithm returned five distinct clusters, with 11 documents in Cluster 1, 10 documents in Cluster 2, 9 documents in Cluster 3, 9 documents in Cluster 4, and 8 documents in Cluster 5. Footnote 7 Table 9 portrays the 48 papers in the five clusters. We subsequently carried out a content analysis with careful examination of the papers in each cluster to determine their common theme.

Knowledge map of the top articles cited by cluster according to the fractional counting method, based on 524 studies selected between 1:2012 and 3:2021

Cluster 1: socioeconomic outcomes of microfinance

This cluster comprised 11 studies focusing on the impacts of microfinance programs on socioeconomic outcomes with randomized experimental evaluations, questioning the influential role of microcredit on poor households. Banerjee et al. ( 2015b ) report that group lending programs in India increase the take-up of microcredit with a positive impact on small business investment and profits as well as on the expenditure of durable goods, but only over a short period. They also did not encounter any significant effects of group microcredit lending on health, education, or women’s empowerment. Banerjee et al. ( 2015a ), Angelucci et al. ( 2015 ), and Tarozzi et al. ( 2015 ) raised doubts about the transformative impacts of microcredit as a development tool. Angelucci et al. ( 2015 ) and Tarozzi et al. ( 2015 ) provide evidence that the effectiveness of microfinance is modest, with little or no evidence of any effectiveness in promoting micro-entrepreneurship, income, the labor market, consumption, social status, subjective well-being, schooling, or empowerment, despite affording a substantial increase in access to credit. Microcredit increases borrowing, which is mainly used for investment and risk management. However, this increased access to credit leads to only modest increases in female decision making, trust, and business size, with little effect on overcoming debt traps (Angelucci et al., 2015 ).

Crépon et al. ( 2015 ) suggest that the effects of microcredit are mainly derived from borrower characteristics rather than from externalities. Microcredit access leads to a significant rise in investment in the assets applied to self-employment activities and an increase in profits among households with higher abilities to borrow. Ngo and Wahhaj ( 2012 ) also demonstrate how access to microloans can lead to positive outcomes for intra-household decision-making and the welfare of women depending on their starting point conditions. They convey how women only benefit from microcredit when they are able to use the credit to invest in profitable joint activities, and when a large proportion of the household budget goes to the consumption of public goods. Otherwise, women borrowers may experience a decline in welfare.

Bruhn and Love ( 2014 ) document the remarkable effects of microcredit on labor markets and income levels, especially among individuals located in areas with lower pre-existing bank penetration and those with low incomes. Arouri et al. ( 2015 ) also provide evidence that access to microcredit, internal remittances, and social allowances can help households strengthen their resilience to natural disasters. Kaboski and Townsend ( 2012 ) indicate that microcredit lines might increase total short-term credit, consumption, agricultural investment, income growth (from business and labor), and wages, but decrease overall asset growth. Schicks ( 2014 ) provides measures for policymakers to address the over-indebtedness potentially arising from microcredit. Analyzing the loan-related sacrifices that borrowers report, the author identifies how male microborrowers are more likely to be over-indebted than women and that over-indebtedness is lower for borrowers with good levels of debt literacy. Based on a case study of microfinance trials, Allcott ( 2015 ) suggested that default rates may depend on the size of the trial samples. This study of program evaluations based on randomized control trials draws attention to the systematically biased out-of-sample predictions of program evaluations, even after many replications.

Microcredit has been referenced as a relevant tool for addressing credit constraints and promoting entrepreneurial activities. However, empirical studies have returned conflicting results, casting doubt on the strength of microcredit not only in financial outcomes but also in its actual ability to enhance several dimensions of human development. Stressing the research findings that indicate the need to consider the context of microcredit program deployment, we suggest paying particular attention to the development setting, as some studies demonstrate how microcredit programs are more effective in contexts where the credit markets have failed (i.e., poor settings), while others propose that microcredit intervention is boosted by environments with higher levels of social, economic, and institutional development. Research on this domain constitutes a fruitful field of research.

Cluster 2: Social performance or mission drift?

This cluster encompasses 10 studies. The focus of this cluster is access to microfinance, usually addressed in the literature as an indicator of MFI social performance (mission locked-in versus mission drift). Vanroose and D’Espallier ( 2013 ) report that MFIs reach more poor clients and prove more profitable in countries where access to the traditional financial system remains low. The results suggest that MFIs offset market failures in the traditional banking sector and flourish best when the formal financial sector is absent. However, MFIs have also shown remarkable social performance in countries with well-developed financial systems, as this pushes MFIs down the market and makes mission drift less likely. Cornée and Szafarz ( 2014 ) also provide evidence that banks offer advantageous credit terms for social projects. In turn, borrowers are motivated to repay loans, thus reducing the probability of default. Louis et al. ( 2013 ) and Lebovics et al. ( 2016 ) provide evidence that these dimensions of performance, and thus the social and financial aspects, are not mutually exclusive. Over a short time frame, there are positive relationships between social efficiency and financial performance (Lebovics et al. 2016 ; Louis et al. 2013 ). However, D’Espallier et al. ( 2013 ) adduce evidence pointing in the opposite direction and propose that microfinance faces a mission drift with the lack of subsidies, worsening the social performance of MFIs. Dealing with this trade-off has involved the implementation of several strategies, including charging higher interest rates, targeting less poor individuals, or reducing the proportion of female borrowers in order to compensate for public non-subsidization.

Bocher et al. ( 2017 ) demonstrate that individuals owning land and with larger households and/or savings experience a greater probability of getting microcredit. These results may indicate that some MFIs do not target the poorest of the poor. Canales ( 2014 ) examines how MFIs balance the pressures to pursue financial efficiency with the need to remain responsive to local needs. The authors document how MFI branches allowed discretionary diversity and decentralized flexibility through relational embeddedness to cater to local needs tend to achieve better performance. Thus, microcredit committees may yield substantial benefits for organizations and unbackable local individuals, for example, when dealing with missed repayments. Augustine ( 2012 ) proposes that the transparency of MFIs’ corporate governance policies is more important than their orientation, concluding that transparent declarations of their social orientation increase their performance. This may occur because public statements about MFI orientation generate commitments to the target community.

Among these clusters, the studies conducted by Al-Azzam et al. ( 2012 ) and Van Gool et al. ( 2012 ) are somewhat collateral to the main topic of MFI social performance. Van Gool et al. ( 2012 ) analyze whether the credit scoring system adopted in retail banking is appropriate for the microfinance industry, especially with regard to its social concerns, and reported that all the benefits of credit scoring models are commercially related. However, they also suggest that credit scoring may serve social concerns, for instance, by modelling information about indebtedness in order to avoid debt traps. Al-Azzam et al. ( 2012 ) focus on the effects of screening, peer monitoring, group pressure, and social ties on borrowing group repayment behaviors. The authors provide evidence that social ties built on religious attitudes and beliefs improve repayment performance. Thus, this study straddles the frontier with Cluster 3.

The trade-off between MFI outreach and profitability remains controversial. Several studies report that MFI shifts over time from social to financial performance as a result of both the costs of microfinance market contracts and the high fixed costs associated with small loans. Recent studies also reinforce that the national context also has a relevant impact on MFI performance. Consequently, several strategies have emerged to improve profitability, including increasing loan amounts, charging high-interest rates, public subsidization, and gaining efficiency through new technologies. Hence, the trade-off between outreach and sustainability continues to attract the research community studying governance and new organizational strategies, such as legal status, to improve MFI social and financial performance.

Cluster 3: group lending, social networks, and social capital

The third cluster involves nine studies focusing on group lending, social networks, and social capital, and how these relate to credit access and loan repayment. Group lending has the ability to build up social networks outside of the family (Attanasio et al. 2015 ), promoting social interactions that increase repayment rates (de Quidt et al. 2016 ), even in the absence of any collateral (Feigenberg and Pande 2013 ). One concern here is that the grace period might restrict social networks among group members, thus increasing default rates by lowering the effectiveness of informal insurance (Field et al. 2013 ).

Social capital is based on a “pre-existing connection between group members” (Banerjee 2013 : 496). Group members hold better information about each other than the respective MFI; they are therefore not only in a better position to screen and monitor the actions of each group member but also to punish those who default, for example, by withdrawing social capital from them (Banerjee 2013 ). Thus, group meetings increase social capital and networks and reduce the monitoring costs of lenders, which may encourage recourse to formal insurance, reducing the bail-in costs in case of default (de Quidt et al. 2016 ). According to the authors, by also functioning on an individual liability basis, group lending might facilitate increases in repayment rates depending on the social capital and networks developed within those groups. Group lending also displays the ability to increase both borrowing and entrepreneurship, as such an approach reduces the discouragement experienced by some individuals who are uncomfortable with borrowing on an individual basis but are willing to borrow in groups and share the liabilities, especially women with lower levels of education (Attanasio et al. 2015 ).

Wei et al. ( 2016 ) indicate how credit scoring models encapsulating client social networks—their social score—might provide a means of raising access to microcredit as an alternative to group lending. However, Yuan and Xu ( 2015 : 232) drew attention to how poorer households “are limited by social networks and they have no financial means to invest in their social capital to expand their social network.” Donou-Adonsou and Sylwester ( 2016 ) examine the relationships between financial development and poverty reduction, a topic on the frontier with Cluster 1. Gabor and Brooks ( 2017 ) seem to approach the frontier with Cluster 4, as they analyze the growing importance of digital-based programs for fostering financial inclusion in the fintech era.

Group-lending mechanisms are still attracting the attention of scholars. The social cohesion characterizing borrowing groups explains the effectiveness of the screening and monitoring stages that reflect in the repayment rates as well as in the outcomes of loans made for business purposes. Furthermore, this requires a deeper understanding of where group lending contexts generate advantages over individual contracts, for example, in developing countries where social capital often implies investments that poor people are not able to attain.

Cluster 4: poverty alleviation, entrepreneurial activities, and financial service innovations

Cluster 4 includes nine studies that focus on the contribution of entrepreneurial activities and financial service innovations to poverty alleviation. The literature posits that entrepreneurship represents a crucial pathway for alleviating poverty (Bruton et al. 2013 ) arising from socioeconomic and technological growth and development (Zahra and Wright 2016 ), which requires an industrialized approach to offset the multiple market failures prevailing in developing economies (Alvarez et al. 2015 ). This might explain why microcredit generally has stronger socioeconomic impacts (especially for the empowerment of women) in more challenging contexts and when targeting client entrepreneurs (Chliova et al. 2015 ). However, not all entrepreneurial activities lead to sustainable economic growth. For example, self-employment opportunities in sectors requiring low levels of human capital tend to perpetuate abject poverty (Alvarez and Barney 2014 ). Significant economic growth and poverty alleviation depend on the ability to discover and create new business opportunities based on more effective utilization of human capital, property rights, and financial capital (Alvarez and Barney 2014 ; Alvarez et al. 2015 ). In fact, local development (Diniz et al. 2012 ) and entrepreneurial success (Josefy et al. 2017 ) depend on the ability to mobilize resources, including financial capital. However, to be effective, an increase in financial resources requires accompanying financial education.

Formal credit markets and even traditional microfinance sources for encouraging investment, innovation, and launching new ventures may no longer be sufficient to overcome the persistent societal challenges of poor countries (Zahra and Wright 2016 ). According to these authors, peer-to-peer lending and crowdfunding may provide a solution for financial, social, and environmental wealth. “Crowdfunding refers to the practice of raising funds for a venture or project from dispersed funders typically using the Internet as a channel of operation” (Josefy et al. 2017 : 163). The availability of funds for promoting microenterprises is expanding rapidly through crowdfunding platforms, such as Kiva, which provides a greater audience of lenders for microenterprises’ signaling autonomy, competitive aggressiveness, and risk-taking (Moss et al. 2015 ). The success of loan campaigns on crowdfunding platforms also depends on contextual community attributes, such as the cultural values of the target audience that shape the level of interest the projects generate in the crowd (Josefy et al. 2017 ).

Information and communication technology (ICT) seems to be an alternative for supporting financial inclusion and fostering social inclusion (Diniz et al. 2012 ). By examining an ICT-based platform, Berger and Nakata ( 2013 ) analyze the socio-technical characteristics that technological solutions may have to successfully implement financial service innovations in the field of microfinance. According to these authors, these innovations tend to produce better results when they are congruent with the unique surrounding socio-human, regulatory, and market conditions.

The literature references entrepreneurship, particularly in deprived environments, as the only option to earn money due to the absence of any other market participation. In such contexts, microcredit enhances entrepreneurial activities through the issuance of small and unsecured loans. Scholars still raise concerns about the effectiveness of such programs, mainly due to the lack of profits generated by the financed ventures to pay the costs of loans and ensure loan repayment. The lack of management skills is an additional issue pointed out by researchers. Recently, new finance alternatives have emerged, especially crowdfunding, which deploys online platforms to allow entrepreneurs to connect with prospective crowd funders—the crowd—who finance new entrepreneurial ventures by lending small amounts. Empirical studies in this area are still in their infancy, but strengthen the perspective that crowdfunding may democratize entrepreneurial finance, particularly among the more vulnerable, and help break the poverty cycle.

Cluster 5: gender and thematic frontiers

The final cluster included eight studies. This cluster covers the impacts of microcredit targeting the vulnerable, with some articles focusing specifically on women. Thus, in this cluster, we encounter several studies bordering on the frontier with other clusters, such as Cluster 1 (e.g., Duvendack and Palmer-Jones 2012 ; Roodman and Morduch 2014 ), Cluster 3 (e.g., Willy and Holm-Müller 2013 ; Mallick 2013 ; Mendes-Da-Silva et al. 2016 ), and Cluster 4 (Deininger and Liu 2013 ; Barasinska and Schäfer 2014 ; Mendes-Da-Silva et al. 2016 ; Gleasure and Feller 2016 ).

Duvendack and Palmer-Jones ( 2012 ) and Roodman and Morduch ( 2014 ) re-examined previous studies, specifically those developed by Pitt and Khandker ( 1998 ), questioning the evidence they reported after studying Bangladesh microcredit programs. Both studies raise doubts about the microcredit outcomes identified by Pitt and Kandker. However, Duvendack and Palmer-Jones ( 2012 ) corroborate the positive effects of microcredit for vulnerable women. Gleasure and Feller ( 2016 : 110) conducted a meta-triangulation analysis of crowdfunding research. Their results suggest that crowdfunding generates new opportunities and describing how these “present genuinely new ideas and behaviours” and not “simply a migration of established practices into a new domain.” For example, crowdfunding may solve some of the discrimination problems faced by women in traditional credit markets, as the study found no gender effects on the likelihood of receiving funds. Deininger and Liu ( 2013 ) report that a combination of microcredit and self-help group initiatives (including training and capacity-building programs) produces positive pro-poor effects, especially by promoting the empowerment of women and health and improving consumption and income diversification in the short term.

Mallick ( 2013 : 179) examines whether continued support for poor individuals, which includes “management assistance, a subsistence allowance, health care facilities, and support for building social networks,” plays a crucial role in borrowing decisions. The authors indeed conclude that this “big push” affords the extremely poor access to microfinance. This effect is higher for larger households and for households with male heads, and increases with the average levels of education and income in the household. Social capital also plays an important role in borrowing decisions, in keeping with several of the findings systematized in Cluster 3. Mendes-Da-Silva et al. ( 2016 ) also support the notion that entrepreneurs’ social networks might play a central role in funding, especially on crowdfunding platforms. Willy and Holm-Müller ( 2013 ) examined the effects of social influence, social capital, and credit access in the agricultural sector and demonstrated how they represent significantly positive predictors of farm soil conservation.

Scholars have identified how entrepreneurship represents one path to the empowerment of women, particularly in developing countries, although empirical evidence indicates a mixed range of outcomes. Some studies stress that microcredits/microfinance endows women with great control over the operations of their ventures and household resources, thus fostering their empowerment. Others argue that microfinance programs do not take into account the cultural and social context of their deployment and thus, in some ways, sustain the existing hierarchy of classes, increasing tensions among household members and providing new forms of dominance over women. Recent research posits that new technologies extending basic financial services have a large effect at a relatively low cost and are susceptible to deepening through knowledge transfers in the form of financial literacy.

Mapping the trends

This section discusses the most recent and influential articles on microfinance topics published in the last three years (2018–3:2021) and ranked on ABS with a classification of 4 or 4*, yielding a total of 11 articles. Footnote 8 As they are more recent, these articles have been cited less often and therefore excluded from the bibliographic coupling analysis carried out in Sect. 4 . We also identified the most relevant emerging topics in the field.

Emerging trends

Table 10 systematizes the scope and main findings of all the articles published in ABS (4 or 4*)-ranked journals in the field of microfinance. Recent studies have promoted new approaches to examining the socioeconomic impacts of microfinance at both the macro (Buera et al. 2021 ; Duflo 2020 ) and micro (Burke et al. 2019 ; Singh et al. 2021 ) levels. The theme of MFI mission drift or mission lock-in is still at the fore in most recent literature (Alon et al. 2020 ), as well as the benefits to the group and joint lending (Attanasio et al. 2019 ), and reputation, social capital, and network (Li and Martin 2019 ). ABS (4 and 4*)-ranked journals have also published papers on somewhat underexplored topics on the frontiers of some clusters, such as alternative programs for promoting social changes (Kim et al. 2019 ), the impact of microcredits on subjective well-being (Bhuiyan and Ivlevs 2019 ), and the roles of cultural institutions (Drori et al. 2018 ) and government regulation (Tantri 2018 ) in the microfinance performance returns.

After analyzing the keywords of the most influential studies published between 1:2018 and 3:2021 (whether or not ABS ranked), Table 11 presents the most recent trends on microfinance literature, with “microfinance,” “microcredit,” “impact,” and “poverty” still representing the keywords with the most occurrences. Comparing Tables 8 with 11 , we observe that roughly half of the occurrences of these keywords relate to articles published since 2018. “Gender/women,” “entrepreneurship,” “performance,” and “empowerment” are trending topics, gaining in importance in the microfinance literature over the last three years.

Entrepreneurship and performance

Microfinance appears as an instrument that promotes access to capital for impoverished individuals otherwise excluded from financial systems and gaining popularity as a means of enhancing entrepreneurial activities (Yunus 1998 ), enabling vulnerable people to engage in market transactions and end subsistence-based livelihoods. Consequently, entrepreneurship among individuals living in poverty settings represents a more important outcome than much traditional entrepreneurship research in developed countries.

However, the empirical literature is inconclusive about the ability of microfinance to enhance the financial standing of vulnerable people (Khavul et al. 2013 ). This ambiguity is strengthened when coupled with other development outcomes, specifically the capabilities of the poor across several facets of human development (e.g., empowerment, education, health). Thus, researchers perceive that a key aspect for continuing scrutiny derives from the effectiveness or otherwise of microfinance, justifying the emergence of an increasing number of papers on this domain. Furthermore, some authors maintain that the context of microfinance deployment, hence the national context and specific features, impact the outcomes of such tools (Crépon et al. 2015 ; Weiss and Montgomery 2005 ), particularly in environments where credit markets have failed. Hence, the performance effect of microfinance is greater in developing countries (Chliova et al. 2015 ). Meanwhile, other authors emphasize the synergetic relationships between institutional and socioeconomic developments as outcomes that microfinance can achieve. However, it remains unclear whether microfinance aligns with supplementary or complementary outcomes.

Our bibliometric analysis demonstrates that when designing programs, microfinance institutions should focus on borrower characteristics instead of standard credit contracts; otherwise, credit only worsens problems of over-indebtedness. To achieve win–win propositions, in addition to credit, microfinance interventions should also involve education and training programs to boost the capabilities of less advantaged citizens to start, maintain, and grow their own ventures. This seems particularly relevant in less developed entrepreneurial ecosystems as well as in regions where the economic development model is based on intensive (low-educated) human capital that is more exposed to persistent poverty traps and anemic economic growth. By achieving successful entrepreneurial outcomes, educated and trained entrepreneurs increase their financial and non-financial outcomes. In sum, our findings shed light on the powerful interwoven effects of knowledge, credit, and entrepreneurship in lifting poor entrepreneurs out of poverty, particularly in deprived settings.

Empowerment and gender

Gender inequalities constitute one of the greatest barriers to human development (Conceição 2019 ), especially in developing countries (Ojong et al. 2021 ). In these countries, women may face additional challenges in obtaining education and a well-paid job, in addition to working an average of three times more often in unpaid and domestic activities than men (UN Women 2020 ). Scholars have emphasized how entrepreneurship provides a pathway to empower women, stressing that microfinance is a reliable tool that leverages its effects primarily through business activities.

The strength of microfinance as a development intervention tool to transform social and economic structures relies on its potential ability to lift people out of poverty (Yunus 1998 ) by running small ventures that generate financial resources to increase entrepreneurs’ financial well-being (Mckernan 2002 ). However, beyond wealth creation, this approach forecasts a capacity for microfinance to boost the livelihood of recipients across several dimensions (Buckley 1997 ; Miller et al. 2012 ). Hence, this places great emphasis on non-financial human development outcomes, specifically women empowerment (Hermes and Lensink 2011 ), which is particularly relevant in poor settings, as the constraints women face regarding market participation constitute a form of dominance and control over women. Women empowerment emerges as a multidimensional concept (Weber and Ahmad 2014 ) that, besides access to credit, also includes income, contribution to household expenditure, health, education, control over resources, participation in community and household decision-making, social mobility and freedom of movement, and self-worth (Kabeer 2001 ; Noponen 2003 ). Therefore, when considering these dimensions, any substantial increase in access to credit certainly does not automatically promote subjective well-being or empowerment (Angelucci et al. 2015 ; Tarozzi et al. 2015 ). Nevertheless, studies suggest that the provision of small loans to women enables them to more effectively mitigate gender barriers by running their own businesses, increasing their mobility outside the household, and achieving the ability to make decisions (Todd 1996 ). In addition, through economic activities, household income increases, improving their standard of living, and consequently enhancing the education of their children and leading them to adopt more preventive health practices (Yunus 1998 ).

The mission to promote the empowerment of women through the provision of small loans also depends on training programs and the ability of MFIs to understand the characteristics of female borrowers (Hunt and Kasynathan 2001 ). Thus, MFIs must design and implement internal policies to mitigate gender biases based on the conditions of female borrowers at the outset. Promoting the participation of women in decision-making processes in higher loan cycles, for example, will spread women’s empowerment (Swain and Wallentin 2009 ) and positively increase the abilities of female borrowers to decide how to use their loans (Weber and Ahmad 2014 ). Hence, recent research suggests a more holistic approach to answering the extent to which microfinance meets sustainable development goals, for example, eradicating poverty, reducing inequalities, and boosting sustainable development.

In fact, the outreach of microfinance itself is changing with the emergence of fintech, namely prosocial crowdfunding platforms. Fintech has had a noteworthy impact on the financial system by reducing operating costs, providing higher quality services, and increasing user satisfaction (Kou et al. 2021 ). In the context of microcredit, prosocial crowdfunding platforms act as socially oriented digital marketplaces, particularly targeting poor settings (Meyskens and Bird 2015 ), where lenders provide credit access to impoverished people underserved by the banking industry, facilitating the liberalization of the financial sector at a global level. In turn, this boosts more inclusive financial and social systems (Dupas and Robinson 2013 ) that generate large effects at relatively low costs.

To be fruitful, the crowdfunding platform design cannot ignore the decision dynamics underlying not only traditional e-commerce platforms but also fintech. Commercial digital platform users base their judgments and decisions on trustworthy reviews. Likewise, we posit that prosocial lenders will increasingly drive digital funding decisions on systematized crowd reviews on borrowers and MFI. Thus, as in many financial applications (see Li et al. 2021 ), detecting clusters of financial and social-environment data (such as borrowers’ social capital and MFIs’ financial and social performance) will be critical for inferring lenders’ behavior and maximizing the performance of crowdfunding platforms and their outcomes. This might constitute a new application case for the so-called data-driven opinion dynamics model (see Zha et al. 2020 ), because financial technologies provide important advantages in processing big data into more meaningful, cheaper, worldwide, and more secure data than conventional methods (Lee and Shin 2018 ).

Thus, we might expect these topics to guide future research, providing a starting point for returning practical implications for policymakers, academics, players in crowdfunding markets, and microentrepreneurs.

Conclusions and implications

Poverty remains a key global challenge. According to the World Bank forecast, the total number in poverty is due to rise for the first time in over two decades, from 119 to 124 million by the end of 2021. In this context, microfinance has emerged as an innovative and sustainable poverty alleviation tool to serve more vulnerable people, particularly in developing countries. However, some scholars have challenged its proposed benefits (e.g., Chliova et al. 2015 ; Morduch 1999 ). Through the application of bibliometric methods, this paper reviews the most recent literature on the trends in the outcomes for microfinance recipients, thus focusing on the demand side. The study examines 524 articles collected from the Web of Science database published between 1:2012 and 3:2021.

Based on keywords, co-occurrences, and links between citations to obtain knowledge maps, the findings demonstrate that in both the theoretical domain and the empirical, research still casts doubt on the capacity of microfinance to generate positive outcomes beyond wealth creation, particularly in terms of empowerment, education, and health (Cluster 1). Further studies in this domain should consider the macro-context when undertaking empirical research; otherwise, policies designed based on such limited evidence may yield unexpected outcomes contrary to the forecast socioeconomic goals. Furthermore, entrepreneurship, through granting small loans (microcredits), represents a precondition for individuals living in poverty starting small businesses and the most efficient strategy for leaving behind subsistence-based lives. However, as lack of management skills may hamper the survival of these businesses, providing finance literacy training has a positive impact on the performance of such small ventures (Cluster 4). Nowadays, the reach of microfinance is changing due to the emergence of crowdfunding, as the crowd of lenders provides prompt credit access to start-ups launched by impoverished microentrepreneurs and empowering women (Cluster 5). This research is still in its infancy, but by sharing risks worldwide, informal lenders can extend credit through small loans, thus democratizing entrepreneurial finance to boost new ventures. The group lending methodology remains an efficient instrument for overcoming the lack of access to financial resources by building up social networks in the community (Cluster 3). Therefore, research in this field should examine how new screening models and credit social models, along with soft information, leverage the financial performance of new ventures and enhance financial inclusion and foster the social inclusion of such individuals. This study also identifies the role of MFIs in addressing market failures in the traditional banking sector, stressing the idea that MFIs gradually shift over time from social performance (outreach to the poor) to financial performance (Cluster 2). Thus, taking into account the recognized role played by microfinance and MFIs in the process of socio-economic transformation, public policy must consider the need to compensate for the market’s financial performance gap in the poorest economies by subsidizing credit activities to avoid mission drift effects. This needs to be accompanied by a transformation of MFI corporate governance policies to ensure transparency in their operations and selection of microfinance recipients. Overall, this study corroborates that microfinance is a distinct field of development thinking that requires a more holistic approach to overcome poverty and boost economic and human development at the global level.

As with any bibliometric analysis, this study has some limitations. As we gathered bibliometric data from the WoS database, we may have missed studies listed only in other databases (e.g., Scopus). Furthermore, some research domains within microfinance and microcredit may rely more on citations than others, which may reduce the scope of the outputs within clusters. Finally, early career researchers may not fare well in citation and co-citation studies even when producing seminal research, which may reduce the impact of their studies as measured using tools deployed to gather bibliometric data.

One of the greatest advantages of the Web of Science database, compared with PubMed, Scopus or Google Scholar, is its timeline coverage in terms of quality research production (Falagas et al., 2008 ). This aggregates research information from five indexed databases: Science Citation Index Expanded (SCI Exp.), Social Sciences Citation Index (SSCI), Arts and Humanities Citation Index (A&HCI), and the index of Chemistry and Current Chemical Reactions (Goodman 2005 ). The SCI Exp. includes articles published since 1900; and with SSCI and A&HCI dating back to 1956 and 1975, respectively (Meho and Yang 2007 ).

We would acknowledge how searches based on a set of keywords include certain limitations (e.g., Costa et al, 2016 ). One way of improving the selection process in a systematic literature review involves adopting a Preferred Reporting Item for Systematic Review and Meta-Analysis – PRISMA (Moher 2009 ).

VOSviewer is a program developed for constructing and viewing bibliometric maps based on the visualization of similarities (VOS) technique (Van Eck and Waltman, 2009 ).

The year 2021 reflects only the publications until March.

https://charteredabs.org/academic-journal-guide-2018-view/ (accessed in April 2021).

The following similar keywords were merged: “programs” and “credit programs” (to “credit programs”); and, “gender” and “women” (to “gender/women”).

VOSviewer software only reports the name of the first author.

Paul et al. ( 2017 ) examine the most influential papers in the last four year. Spasojevic et al. ( 2018 ) also examine the papers ranked as class ABDC. Furthermore, Gutiérrez-Nieto and Serrano-Cinca ( 2019 ) select the top 5% articles for analysis as the excellent highly cited papers.

Abbreviations

Arts and Humanities Citation Index

Association of business schools

Information and communication technology

Microfinance institutions

Mean technical efficiency

Preferred reporting item for systematic review and meta-analysis

Science citation index expanded

Social enterprises

Social Sciences Citation Index

Sustainable development goal

Visualization of similarities

Web of science

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We acknowledge the financial support of Fundação para a Ciência e a Tecnologia (UBI PTDC/EGE/OGE/31246/2017; UIDB/ 04630/2020; UIDB/04728/2020; UIDB/04105/2020).

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Ribeiro, J.P.C., Duarte, F. & Gama, A.P.M. Does microfinance foster the development of its clients? A bibliometric analysis and systematic literature review. Financ Innov 8 , 34 (2022). https://doi.org/10.1186/s40854-022-00340-x

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Frontiers in microfinance research for small and medium enterprises (SMEs) and microfinance institutions (MFIs): a bibliometric analysis

• Francis Lwesya   ORCID: orcid.org/0000-0002-0415-1215 1 &
• Adam Beni Swebe Mwakalobo 2  

Future Business Journal volume  9 , Article number:  17 ( 2023 ) Cite this article

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This article aims to present current research trends in microfinance for small and medium enterprises (SMEs) and microfinance institutions (MFIs), as microfinance plays an increasingly role in entrepreneurship development and poverty alleviation. The study uses a bibliometric analysis, in this work, we performed citation, bibliographic coupling, and keyword evolution analyses. The results show that research in microfinance for SMEs and microfinance institutions continue to grow. The authors found that recent research in microfinance for SMEs and microfinance institutions has evolved around eight thematic clusters, covering (1) access to and constraints on microcredit for SMEs (2) microfinance and economic empowerment, (3) sustainability of MFIs, (4) creditworthiness, microfinance technology infrastructure and financing patterns, (5) Islamic financial inclusion, (6) credit assessment models for microcredit, (7) microfinance and innovative business models, and (8) gender and equity crowdfunding. Research gaps in each of the thematic clusters are identified. Topics related to COVID-19, Islamic social finance, microfinance institutions, credit scoring models, crowdfunding, and entrepreneurial finance are likely to feature in the domain of microfinance and sustainability of MFIs in future.

Introduction

Finance is widely acknowledged as one of the crucial resources for entrepreneurial development and poverty alleviation in developing countries. Resource-based view theory identifies three categories of important resources, namely (1) physical resources, (2) human resources, and (3) organizational resources [ 1 ]. These resources cover finance, organizational processes, people, and information (knowledge). This represents a synergy of resources that is important to the survival, growth, and development of any organization. However, small and medium enterprises (SMEs) continue to face significant obstacles to fulfilling their potential to grow, innovate, and create jobs due lack of finance and inadequate access to reliable sources of finance [ 2 – 4 ]. As a result, they fail to execute their strategies efficiently, grow, and build sustainable competitive advantages [ 5 ]. This failure is linked to several reasons, including the underdeveloped formal financial sector in many developing countries which is characterized by risk aversion, limited size, and a bias against small businesses, thus making the financial requirements of small businesses not sufficiently addressed by large financial institutions and banks [ 5 , 6 ].

Over the past three decades, there has been widespread recognition of microfinance institutions (MFIs) and an increasing provision of microcredit services in developing countries in all economic sectors. These institutions provide a wide range of services, including loans, savings, insurance, and remittances, to the rural and urban poor through cooperatives, credit unions, specialty banks, commercial banks, and other institutional arrangements [ 7 ]. The previous goals of microfinance institutions have been to meet the financial needs of poor and marginalized members of society, such as women, through an increased outreach of services, and the sustainability of microfinance institutions [ 7 ]. MFIs are believed to be instrumental in poverty reduction initiatives by both governments and non-governmental organizations (NGOs) in developing countries, particularly in tackling social and financial exclusion. As a result, governments and public institutions instituted policies and strategies aimed at addressing the financial problems of the less privileged. This includes formulating microfinance policies, guidelines, and creating a conducive business environment for the creation of microfinance institutions (MFIs). The measures aimed to liberalize financial systems and attract more investment to the sector by lowering entry barriers. However, some of the MFIs still have rigid regulations, bureaucratic tendencies, charge high interest rates, lack sufficient capacity, governance, and transparency and accountability to act as responsible financial intermediaries [ 8 – 11 ]. These challenges raise doubts about the sustainability of microfinance institutions and microfinance services for the development of the SME sector. Therefore, in this article we consider the dynamic change in microfinance research for SMEs and microfinance institutions over the last six (6) years. Bika et al. [ 12 ] reported on the underdevelopment of research on entrepreneurial practices related to microfinance in developing countries. The existing and growing literature tends to focus on the relationship between entrepreneurial growth, microfinance, and institutional formalization [ 12 – 14 ]. Similarly, there exist several reviews and bibliometric works on the topic of microfinance in the literature, e.g., Kaushal et al. [ 15 ], Nisa et al. [ 16 ], and Ribeiro et al. [ 17 ]. However, most of these publications are topic and industry specific. For example, Kaushal et al. [ 15 ] discussed microfinance institutions and the empowerment of women. Nisa et al. [ 16 ] examined the effects of competition on microfinance institutions and Ribeiro et al. [ 17 ] examined whether microfinance promotes the development of its clients. The current research consolidates all studies on microfinance research for SMEs and microfinance institutions and suggests the likely future research direction. The specific goals were:

To identify the most influential publications, authors, and institutions in microfinance research for SMEs and microfinance institutions

What are the collaboration networks in microfinance research for SMEs and microfinance institutions?

To understand the current research themes or topics in microfinance research for SMEs and microfinance institutions.

Methodology

This study adopts bibliometric analysis using tools such as citation, bibliographic coupling, co-authorship, and keyword analysis to answer research questions and objectives [ 18 ]. Bibliographic coupling is used to identify current research trends and future priorities as they are reflected at the frontiers of research. It groups two documents with common references. In contrast to co-citation analysis, bibliographic coupling captures recent contributions, including future research direction [ 19 ]. On the other hand, co-authorship assesses the social ties between researchers, it captures the state of the research collaboration network within a field [ 20 , 21 ]. Similarly, keyword analysis captures the most used words using keyword co-occurrence analysis [ 22 ].

Data extraction process

We used Scopus for the collection of bibliographic data which is a large database covering over 20,000 peer-reviewed journals [ 23 ]. The search criteria and article selection are indicated in Table 1 .

Results and discussions

Descriptive bibliometric analysis.

Data collection shows that a final sample of 338 articles was written by 904 authors and were published in 205 journals. Most authors wrote multi-author documents (868 authors) and only 36 documents were single-authored (Table 2 ). This study covers a duration of 6 years.

The level of item production in 2017 was slightly low with only four publications. However, the number of publications increased thereafter registering a total number of publications of 112 in August 2022 (Fig. 1 ). This suggests a growing research interests in microfinance research for SMEs and microfinance institutions.

Number of articles per year

The most important publications, authors, and institutions are listed in Table 3 . Based on a set of citations, the most influential researchers in microfinance for SMEs and microfinance institutions are Chandio. A, Jiang Y. and Mohsin M. with 74, 72, and 51 citations, respectively. Based on several publications in microfinance for SMEs and microfinance institutions, Chandio. A is the most prolific researcher with three publications. In terms of institutions, the most influential institutions are Henan Agricultural University, Sichuan Agricultural University, and the Jiangsu University with 51, 51, and 51 citations, respectively. This shows that all top three institutions are based in China and recorded a similar number of citations and are majoring in the agriculture sector. This means that the agricultural sector is one of the most important sectors in need of microfinance support. In terms of intellectual contribution, the countries with the highest total number of publications and citations are the USA, China, and the UK with 54 (310), 29 (168), and 22 (161), respectively.

The main journals published in microfinance and microfinance institutions are listed in Table 4 . Based on citations, the most influential journals are Review of International Political Economy, Journal of Business Ethics, and Journal of Asian Business and Economic Studies with 64, 58, and 51 citations, respectively. The first two journals are rated A by the Australian Business Dean Council’s Journal Quality List 2020 (ABDC). Most articles are published in leading journals hosted by publishers such as Elsevier, Taylor and Francis, Emerald Insight, Springer Open, and Wiley Online Library.

Thematic clusters of microfinance and microfinance institutions research through bibliographic coupling

Using bibliographic coupling, we analyze the intellectual structure and recent knowledge development of the literature (Table 5 ). Bibliographic coupling captures the similarity between two documents based on the number of references they share [ 24 , 25 ]. The bibliographic coupling analysis revealed seven clusters as follows.

Cluster 1: access to and constraints on microcredit for SMEs

This is the largest among all the eight clusters, it consists of 31 articles related with access to and constraints on microcredit for SMEs. The three most cited articles on this cluster are Chandio et al. [ 26 ], Nguyen et al. [ 27 ], and Tran et al. [ 28 ] with 51, 11, and 10 citations, respectively. The studies in this cluster show that factors such as formal education, company size, investments, financial assets, debt, equity, registration, sex, and age of the business owner significantly influenced the likelihood of credit constraints or demand [ 26 , 27 , 29 ]. Factors such as farming experience, size of land holdings, road access and advisory services, credit source information, deposits, household size, and marital status were important in the agribusiness sector [ 26 , 29 ]. Likewise, gender was an important factor, as women were more restricted in accessing credit than their male counterparts, resulting in fewer women than men having access to formal credit [ 28 , 29 ]. Other factors include lack of collateral, higher interest rates, rigid loan repayment schedules that limit access to microcredit and contribute to higher default rates [ 32 , 33 , 34 , 37 ]. Initiatives such as empowering women in business leadership, strengthening credit agencies, membership of farmers’ unions, and agricultural extension services can increase both access to and demand for credit [ 28 , 30 ]. Similarly, increasing the informal sector’s credit base by providing credit to specific segments of the informal credit market, as practiced in India, creating novel rural financial institutions, and establishing separate channels for lending to the most disadvantaged are proposed [ 31 , 36 , 35 ].

Cluster 2: microfinance and economic empowerment

This is the second largest cluster with 30 articles dedicated to microfinance and economic empowerment. Articles in this cluster discuss the role of microfinance in economic empowerment. In this cluster, studies show that areas with dominant microfinance access have experienced high levels of economic improvement [ 41 , 44 ]. Similarly, access to microfinance by MFIs has benefited culturally excluded members of society, particularly women, thereby narrowing the gender gap in access to formal credit [ 38 , 42 , 43 , 45 ]. However, high interest rates still prevent many women from obtaining credit [ 47 ]. Studies in this cluster also show that despite the positive impact of MFIs, the saturation of uncoordinated microfinance institutions and the expansion of multiple indebtedness have created challenges for regulators and management of microfinance institutions, leading to deterioration in loan portfolios and the financial sustainability of institutions [ 39 , 41 ]. To enhance the sustainability of MFIs, effective MFI policies and improved regulatory regimes need to be put in place to enable MFIs to play a key role in poverty reduction [ 46 , 47 , 101 ].

Cluster 3: sustainability of microfinance institutions

This cluster consists of 27 articles related with sustainability of microfinance institutions. The three most cited articles in this cluster are Gul et al. [ 49 ], Awaworyi [ 50 ], and Cervelló-Royo et al. [ 51 ] with 20, 18 and 10 citations, respectively. The topics in this cluster deal with the financial sustainability of microfinance institutions (MFIs) for the thriving and growth of the microfinance industry. To achieve MFI sustainability, the complementarity between financial sustainability and outreach, the government’s positive ideology on MFI performance, social and technological innovation and financial deepening, and the exploration of digital technologies to increase operational efficiency are crucial factors [ 49 , 50 , 51 , 52 , 57 ]. We also observe different purposes between for-profit and not-for-profit microfinance institutions, while for-profit MFIs target relatively wealthier individuals and are therefore able to achieve wider outreach and charge higher interest rates than not-for-profit MFIs, the not-for-profit MFIs might have a smaller outreach and serve the poor more with lower interest rates [ 54 ]. Similarly, subsidies and deposit mobilization have been found to be a substitute fund with similar impacts on outreach and sustainability, lowering microcredit interest rates and allowing MFIs to reach poorer borrowers, but they both improve outreach and sustainability [ 56 ]. To improve sustainability, and institutional quality, most MFIs are targeting areas where they have a niche market or where commercial banks cannot serve low-income borrowers, and are trying to attract more start-ups and small industries, an activity which will potentially increase economic growth and the risk of insolvency of MFIs [ 55 , 59 ].

Cluster 4: creditworthiness, microfinance technology infrastructure, and financing patterns

This cluster consists of 21 articles dealing with creditworthiness, microfinance technology infrastructure, and microfinance patterns. The three most cited articles in this cluster are Bernards [ 64 ], Tanima et al. [ 65 ], and Langevin [ 66 ] with 34, 20, and 13 citations, respectively. Studies in this cluster show that technological change and innovations in microfinance have increased efficiency in microfinance systems, this includes the use of big data technologies is trying to transform the fringe finance sector [ 66 ]. However, due to heterogeneity of MSMEs, the financing patterns of micro-enterprises differ significantly from that of larger SMEs. This explains to some extent why some MSMEs owners are reluctant to embrace mainstream funding [ 72 ]. It has also been found that alliances between SMEs and large companies do not have a major impact on overall creditworthiness, but do affect SME collateral and terms [ 67 , 68 ]. Likewise, trustworthiness in microfinance is linked to gender differences, for example, female micro-borrowers have a better repayment record than male borrowers [ 70 ]. Similarly, it was found that in post-conflict communities in sub-Saharan Africa, social cohesion was used as a tool of social protection and as a safety net when female MSME borrowers lacked collateral and property rights [ 69 ].

Cluster 5: Islamic financial inclusion

This cluster consists of 18 articles related with financial inclusion. The three most cited articles in this cluster are Pomeroy et al. [ 73 ], Ali et al. [ 74 ], and Zauro et al. [ 75 ] with 20, 12, and 8 citations, respectively. Financial inclusion enhances the ability of people to engage in economic activities that lead to economic development and poverty reduction [ 76 ]. The themes in this cluster discuss about the barriers and determinants of financial inclusion. The identified barriers in this cluster relate to factors such as limited financial capability and literacy, lack of assets for collateral, geographic distance from a financial institution, and lack of formal identification [ 73 ]. Zauro et al. [ 75 ] proposed the use of Islamic financial instruments as means to enhance socioeconomic justice and financial inclusion in the Muslims’ communities. However, determinants of Islamic financial inclusion include financial literacy, religious commitment, socio-economy, and social influence, human capital, product and services, infrastructure readiness, and policies and regulation [ 74 , 75 ]. Financial inclusion improves people’s ability to engage in economic activities that lead to economic development and poverty reduction [ 76 , 80 ]. The themes in this cluster discuss the barriers and determinants of financial inclusion. Identified barriers in this cluster relate to factors such as limited financial capacity and literacy, lack of collateral assets, geographic distance from a financial institution, and lack of formal identification [ 73 ]. Zauro et al. [ 75 ] and Khmous and Besim [ 78 ] proposed the use of Islamic financial instruments as a means of enhancing socioeconomic equity and financial inclusion in Muslim communities. The determinants of Islamic financial inclusion include financial literacy, religious commitment, socioeconomics and social influence, human capital, products and services, infrastructure readiness, and policies and regulations [ 74 , 75 ]. In terms of the performance of Islamic finance in Islamic countries compared to conventional finance, it has been equally successful with conventional finance. However, the percentage of women empowerment through financial inclusion in Islamic financial countries has surpassed the conventional financial sector in non-Islamic countries, thereby narrowing the gender gap. However, conventional finance is more advanced than Islamic finance in terms of the use of technology to provide financial services [ 77 ]. A study by Shaikh [ 79 ] proposes an integrative model embedding fintech on both the demand side and the supply side to enhance the reach, scale, and impact of Islamic microfinance services. This cluster suggests that more research needs to be explored in areas such as digital financial services in Islamic finance and financial sustainability issues.

Cluster 6: credit assessment models for microcredit

This cluster consists of 14 articles related with credit assessment models for microcredit. The three most cited articles in this cluster are Shi et al. [ 81 ], Liang and He [ 82 ] and Ali et al. [ 74 ], and Enimu et al. [ 83 ] with 18, 13, and 8 citations, respectively. The themes in this cluster discuss about credit assessment models for microcredit. A study by Liang and He [ 82 ] examines whether semantic textual information on the loan description helps in predicting the credit risk of different types of borrowers using a Chinese P2P platform. The results show that the semantic features of textual soft information significantly improve the predictability of credit scoring models and the promotional effect is most evident in first-time borrowers. One of the credit risk assessment tools is the loss given default (LGD) which is performed by minimizing the LGD for higher rated loans as a standard for risk rating in the sense that decreasing LGD is associated with higher creditworthiness from the creditors’ perspective of the borrower. This helps guide the way to solving the phenomenon of mismatch between credit ratings and LGDs in the existing credit rating literature [ 81 ]. de Paula et al. [ 88 ] also found that using statistical methods such as combining credit scoring and profit scoring makes it possible to provide credit to the customers with the highest potential for paying off credit union debt. Similarly, a study by Enimu et al. [ 83 ] argued that lenders should consider the socioeconomic determinants of group members to ensure sustainable loan repayment benefits. Factors such as age of group members, household size, household income and level of education, amount of credit received, length of stay in their community, distance to credit source, supervision, and disbursement are important in determining viability and sustainability of repayment [ 83 ]. Another method is the spatial random effects credit scoring model. It helps improve the ability to predict defaults and non-defaults for both individual and group loans, and several credit characteristics and demographic information are important determinants of individual loan defaults but not group loans [ 84 ]. On the other hand, to predict the credit risk of SMEs in supply chain finance (SCF), DeepRisk is proposed. This method applies the multimodal learning strategy to merge the two different data sources. The concatenated vectors derived from the data fusion are then used as input to the feed-forward neural network to predict SME credit risk. The fusion of the two different data sources is superior to existing approaches to SME credit risk forecasting in SCF [ 85 ]. Furthermore, three methods such as logistic regression (LR), artificial neural network (NN), and support vector machine (SVM) were compared to achieve the banks’ strategic and business goals. The results showed that the LR model outperformed both ANN and SVM on various performance indicators, including the achievement of the bank’s strategic and business objectives [ 87 ]. A study by Wang et al. [ 91 ] discusses the role of social and psychological soft information in predicting defaults in the P2P lending market and assesses the importance of such information in fintech lending analysis by combining hard and soft information on defaults. The results show that soft information can make a valuable contribution to credit assessment. Soft information shows high predictive power in our test, and in combination with hard information, it increases the power of our model to predict failures [ 91 ].

Cluster 7: microfinance and innovative business models

This cluster consists of eight articles related with microfinance and innovative business models. The three most cited articles in this cluster are Zhang et al. [ 92 ], Kimmitt and Dimov [ 93 ], and Souza et al. [ 94 ] with 14, 9, and 4 citations, respectively. The themes in this cluster discuss about microfinance and innovative business models for entrepreneurship development. A study by Kimmitt and Dimov [ 93 ], which uses Amartya Sen’s concepts of freedom of process and freedom of opportunity to understand microfinance and entrepreneurial behavior, found that microfinance institutions need to understand the needs of their customers in terms of a generative recursive mechanism that drives the chain of action and how entrepreneurs deal with their attitudes and intended relationships in practice. Souza et al. [ 94 ] discussed the importance of understanding each microfinance program and its clients on a case-by-case basis in order to use microfinance consumer market segmentation to develop the most appropriate strategies to address clients’ needs. Similarly, Kumra et al. [ 95 ] found that the faster access and ease associated with P2P lending positively influence borrowers’ intention to participate, lenders are positively influenced by the high returns and diversified risk. In addition, a study by Zhang et al. [ 92 ] proposes the use of new business models to leverage more opportunities to deliver customer value. This includes the use of e-business microcredit platforms. However, a thorough understanding of the models and their implementation is crucial to avoid disruptive business model innovations of e-business microcredit.

Cluster 8: gender and equity crowdfunding

This cluster consists of four articles dealing with gender and equity crowdfunding. The three most cited articles in this cluster are Geiger and Oranburg [ 97 ], Figueroa-Armijos and Berns [ 98 ], and Zhao et al. [ 99 ] with 24, 7, and 3 citations, respectively. The topics in this cluster discuss about relationship between gender and funding raised through equity crowdfunding. Geiger and Oranburg [ 97 ] using population data collected from US equity crowdfunding campaigns, found that campaigns receive significantly less funding when the main signatory is female. Regarding the interactions between gender and a campaign’s funding goal, their results show that campaigns raise significantly less funding as the target amount increases when the main signatory is female. Similarly, Figueroa-Armijos and Berns [ 98 ] found that applying for funds through a field partner that targets vulnerable populations can negatively impact the entrepreneur’s application for full funding. However, identifying the entrepreneur as female or rural as key characteristics of individual vulnerability increases the likelihood that the project will be fully funded. This study provides evidence that prosocial crowdfunding can indeed support the vulnerable and poor through a unique framing mechanism. Along the same lines, Zhao et al. [ 99 ] found that female entrepreneurs are more likely to be funded through equity crowdfunding than their male counterparts. The study found that lead investors placed the funding advantage for women entrepreneurs in the equity crowdfunding market. These results contribute to the literature on equity crowdfunding and female entrepreneurship by showing that an entrepreneur’s gender influences equity crowdfunding performance. This finding is supported by Cicchiello et al. [ 100 ] who found that having at least one woman on the board of companies seeking equity financing increases campaign success rates. The articles in this cluster suggest the existence of a relationship between gender and funding raised through equity crowdfunding.

Based on bibliographic coupling of thematic clusters, we present the research gaps and the future research direction (Table 6 ).

Collaboration networks in microfinance research for SMEs and microfinance institutions

In terms of co-authorship and collaboration between authors and countries, the analysis shows that Chandio A., Jiang Y., and Kumar A. are the most influential authors in terms of overall link strength. Figure 2 shows the nodes representing author names, the links representing the co-authorship relationships between different authors, and the node sizes representing the publication counts of each author. Chandio. A is the most influential author with 74 citations. The data and network structure in Table 7 and Fig. 3 show that the research collaboration ties between developed economies and African countries is low. However, the analysis suggests that the collaborative network among developing countries is increasing. In terms of the country co-author network, Malaysia, Bangladesh, USA, and China are influential centers for research in microfinance for SMEs and microfinance institutions. Others are India, UK, and France. The cooperation relationship between the Malaysia and Bangladesh is the most common with six cooperations. USA and China follow with 6 cooperations.

The author co-authorship network. The whole network consists of 51 nodes, 10 clusters, and 141 links. The total link strength value is 202

Bibliographic coupling network of publications

Thematic development of the microfinance research for SMEs and microfinance institutions using a conceptual thematic map

A conceptual thematic map was used to assess the thematic development of the microfinance research for SMEs and microfinance institutions based on keywords analysis (Fig. 4 ). The strategic diagram is divided into four quadrants (the upper right quadrant defines motor clusters, the upper left quadrant defines highly developed and isolated clusters, the lower left quadrant defines emerging or declining clusters, and the lower right quadrant defines fundamental and transversal clusters). Centrality measures the degree of a network’s interaction with other networks and can be understood as the external cohesion of the network, and density measures the internal strength of the network and can be understood as the internal cohesion of the network [ 102 , 103 ].

Conceptual thematic map

First quadrant (motor themes)

This part presents well-developed themes that are of central importance for the structure of the research field. There are three bubbles in this quadrant, two of which traverse the fourth quadrant. Regarding to the Ghana corresponding bubble, the keywords with the highest frequency scores (occurrence) are; Ghana (6), credit access (5), and formal credit (4). Referring the bubble corresponding to financial inclusion, the keywords with the highest occurrence are; financial inclusion (24), Vietnam (8), and Fintech (6). Similarly, the bubble corresponding to microcredit, keywords with the highest frequency are: microcredit (38), Bangladesh (10), and poverty alleviation (10). The results of the two bubbles crossing the fourth quadrant suggest that they are well-developed themes that can structure the research field and are still the leading themes in broader microfinance research.

Niche themes (second quadrant)

These are well-developed and very specialized topics that are marginal in the overall field. This quadrant consists of two bubbles represented by India and COVID-19. In terms of the bubble corresponding to India, the top occurrence scores are: India (10), access to finance (4), and emerging economies (4). On the other hand, with the bubble corresponding to COVID-19, the highest occurrence scores come from COVID-19 (4), Islamic social finance (4), and waqf (3). The results suggest that issues in this quadrant (niche) such as access to finance, COVID-19, and Islamic social finance are potential topics that need to be more loosely linked to broader microfinance research. Researchers can explore these areas to advance knowledge in the broader field of microfinance.

Peripheral themes (third quadrant)

This quadrant consists of three bubbles represented by credit union, microfinance institution, and credit scoring. Credit union is the smallest bubble in this quadrant with only two occurrences. Regarding the bubble corresponding to credit scoring, the keywords with the highest frequency scores (occurrence) are: credit scoring (7), crowdfunding (6), and entrepreneurial finance (5). Similarly, with a bubble corresponding to a microfinance institution traversing the fourth quadrant, the highest frequency scores are: microfinance institution (13), financial development (5), and credit rationing (4). This bubble means that some of its components are fundamental and necessary for the development of the microfinance field. The results in this quadrant suggest that future research direction will continue to focus on topics such as microfinance institution, credit scoring, crowdfunding, credit union, entrepreneurial finance, and credit rationing.

Transversal and general basic themes (Four quadrant)

These are high-centrality, low-density themes that are important to the microfinance field but are not well developed. This includes four major bubbles represented by gender, sustainability, credit, and microfinance. Regarding the bubble corresponding to gender, the top occurrence scores are found for gender (15), Pakistan (7), and credit constraints (6). On the other hand, the bubble corresponding to sustainability, sustainability (11), financial performance (7), and microfinance institution (7) are the highest occurrence values. Similarly, the bubble corresponding to credit, credit (9), productivity (6), and agriculture (5) are the highest occurrence values. Lastly, the bubble corresponding to supply chain, supply chain (46), local food (11), and agriculture (8) are the highest occurrence values. On the other hand, the bubble corresponding to microfinance, microfinance (95), poverty (14), and empowerment (10) are the highest occurrence values.

Conclusion, future research direction, and study limitations

This research is among the few studies covering microfinance research for small SMEs and microfinance institutions using bibliometric analysis. By applying bibliographic coupling, we found that recent research in this area has evolved around eight thematic clusters, covering (1) access to and constraints on microcredit for SMEs, (2) microfinance and economic empowerment, (3) sustainability of microfinance institutions, (4) creditworthiness, microfinance technology infrastructure and financing patterns, (5) Islamic financial inclusion, (6) credit assessment models for microcredit, (7) microfinance and innovative business models, and (8) gender and equity crowdfunding. The emerging research topics in the microfinance research for small SMEs and microfinance institutions relate to COVID-19, Islamic social finance, microfinance institution, credit scoring, crowdfunding, credit union, entrepreneurial finance, and credit rationing. Areas where research gaps remain include the sustainability of informal sources of credit and their impact on SME performance, financing models and patterns used by MFIs, the sustainability of Islamic finance, crowdfunding in developing countries, and regulatory and policy frameworks for MFIs. We have also observed that most microfinance research is focused on the agricultural sector and Western countries and Asian countries like China, Bangladesh, Australia, USA, and UK are dominating microfinance research lately and there is less research collaboration between Africa and Western countries. The limitations of the research are that is based on the bibliometric analysis and only one database, namely Scopus was involved. Secondly, the research conducted a retrospective review from 2017 to August 2022 to identify the current research trends, a wider inclusion of other databases and deeper content analysis could expand the findings of this research.

Theoretical and managerial implications

The results of this study may be of practical interest to managers, industry researchers, and policy makers. For example, managers can apply various models and techniques to enhance sustainability of microfinance institutions such as increasing outreach, social and technological innovation, financial deepening, and the use of digital technologies to increase operational efficiency. Managers can also employ various efficient credit assessment models such as the loss given default (LGD). Similarly, managers can combine credit scoring and profit scoring makes it possible to provide credit to the customers with the highest potential for paying off credit union debt. Another method is the spatial random effects credit scoring model which helps to improve the ability to predict defaults and non-defaults for both individual and group loans. Industry researchers can use our research to understand the broad spectrum of research in the field, emerging research areas, research gaps, and future research direction. Similarly, policy makers can apply the outcomes to design policies and interventions in regions of the regulatory and policy frameworks for financial access to the poor and the sustainability of MFIs.

Availability of data and materials

Abbreviations.

• Microfinance institutions

Loss given default

Small and medium enterprises

Supply chain finance

Artificial neural network

Australian Business Dean Council’s Journal Quality List

Support vector machine

Logistic regression

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Lwesya, F., Mwakalobo, A.B.S. Frontiers in microfinance research for small and medium enterprises (SMEs) and microfinance institutions (MFIs): a bibliometric analysis. Futur Bus J 9 , 17 (2023). https://doi.org/10.1186/s43093-023-00195-3

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A comprehensive framework for understanding microfinance performance evaluation methods

• Javier Sierra   ORCID: orcid.org/0000-0003-2427-9619 1 ,
• Victoria Muriel-Patino 1 &
• Fernando Rodríguez-López 1  

Humanities and Social Sciences Communications volume  11 , Article number:  764 ( 2024 ) Cite this article

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Multiple stakeholders in the microfinance sector seek to foster financial, social, and environmental development in a sustainable way by providing a wide range of products and services for financial inclusion. This heterogeneity is also reflected in the multiple methods to evaluate the performance of financial service providers. For this reason, it can be challenging for stakeholders to identify and understand the evaluation approaches that may be required to meet their needs and help them improve their performance. This study presents a comprehensive review of the existing approaches for the evaluation of the financial and social performance of microfinance. This research provides a systematic and comprehensive classification of microfinance performance evaluation methods, an explanation of evaluation methods and techniques, and a theoretical framework suitable to explain the applicability every method to assess different dimensions of microfinance. These results of this research are useful to help policymakers, donors, and practitioners understand and compare existing evaluation methods. Also, this framework enables the identification of the appropriate evaluation method according to the type of performance being examined and considering how to communicate this information effectively to the market.

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Introduction.

The microfinance sector has experienced rapid growth and development in recent decades (Armendáriz and Morduch, 2010 ; Hermes and Lensink, 2011 ). As a consequence, it has evolved towards a heterogenous environment (Chikweche et al., 2022 ), in which a wide range of institutions with different status and objectives provide a broad spectrum of financial and non-financial services to tackle the needs of socially and financially excluded people (Marconatto et al., 2016 ). For this reason, financial service providers (FSP) have developed a wide range of products and services to help the poor start productive activities, promote entrepreneurship, manage unexpected events, and smooth consumption, among other crucial issues for poverty reduction. Overall, FSP seeks to foster financial, social, and environmental development in a sustainable way by providing products and services for financial inclusion (Tanin et al., 2019 ; Fersi and Bougelbène, 2021 ). This heterogeneity can create some confusion for donors, policymakers, and practitioners, as it is not always easy to identify the different types of institutions operating in the sector, their objectives and characteristics, which can complicate the design of appropriate policies and strategies (Marconatto et al., 2016 ).

During its inception, microfinance primarily revolved around microcredit offerings in developing nations (Morduch, 1999 ). Nonetheless, as the sector progressed, there was a significant expansion in product diversity and complexity to cater to the diverse array of customer profiles and their corresponding requirements. In this context, microfinance has also gained increasing significance in enhancing financial inclusion in developed countries (Song et al., 2024 ; García-Pérez et al., 2017 ). Consequently, an increasing number of institutions and programs, whether public or private, are integrating microfinance mechanisms into their social, economic, and environmental development initiatives (Ferilli et al., 2024 ). In this context, microfinance is used today in a multitude of areas with very different objectives, yet consistently serves as a tool to drive positive social transformation. Its utilization spans initiatives concerning gender equality (Cruz Rambaud et al., 2022 ; Bapolisi et al., 2024 ), minority integration (Cruz Rambaud et al., 2022 ), digitization (Johri et al., 2024 ), mobile banking (Osabohien et al., 2024 ), youth empowerment (Rokhim et al., 2023 ), or entrepreneurship promotion (Coronel-Pangol et al., 2023 ), among other related issues.

In earlier years, microfinance was deemed a socially responsible activity. However, findings that showed that some institutions were moving away from their social mission in order to meet their financial targets suggested that the so-called mission drift phenomenon posed a risk for many FSPs seeking to achieve a set of social and financial aims: the double bottom line (Lopatta et al., 2017 ). In parallel, the extent to which microfinance is able to foster financial inclusion and improve well-being among the poor became a central point of debate (Lebovics et al., 2016 ; Bédécarrats et al., 2012 ). This issue increased pressure for evidence-based interventions in the microfinance sector (Authors, 2020). Stakeholders then began to struggle with a crucial challenge: while evaluation methods from the traditional banking sector were useful for assessing microfinance financial performance, there was a gap regarding practical methods to evaluate social performance and, as a result, data on social outcomes was scarce or simply absent (Spaggiari, 2016 ). This problem led different stakeholders to collaborate on developing tailored evaluation mechanisms to appraise the effectiveness of microfinance in generating the expected social change. As a result, several evaluation techniques have been developed and refined in recent years to provide social performance assessment with a similar level of consistency and acceptance as that of financial performance (D’Espallier and Goedecke, 2019 ).

This is reflected in the wide range of quantitative and qualitative methodologies devised to evaluate microfinance’s social, economic, and environmental performance. This topic has rapidly gained attention in recent years (Akter et al., 2020 ), but the literature provides little guidance to practitioners and policymakers, especially regarding the usefulness of existing quantitative and qualitative research methods to assess different performance dimensions. This circumstance is especially relevant for those actors who do not have a deep knowledge of the sector, given that the diversity of institutions and evaluation methods sometimes also leads to the use of terms with very different meanings, which may contribute to generating even more confusion.

Against this background, this study examines the theory and practice of microfinance performance evaluation in an attempt to answer the following research questions: What are the existing approaches for the evaluation of microfinance performance? What are the differences between them? To address these questions, we have undertaken a comprehensive review of the existing approaches for the evaluation of the financial and social performance of microfinance, providing a systematic and comprehensive classification of microfinance performance evaluation methods.

The article makes several contributions to the literature on microfinance evaluation. To the best of our knowledge, this is the first article that presents all the existing methods to comprehensively and systematically evaluate microfinance’s financial, social, and environmental performance. In addition, the study includes a theoretical framework to help practitioners, policymakers, investors, and other stakeholders understand existing evaluation methods, compare them, and identify the most suitable approaches to meet their specific needs. Specifically, this framework enables the identification of the appropriate evaluation method to be employed based on the type of performance being assessed, and most importantly, how such information is to be communicated to the market.

The article continues as follows: sections “Standard-based approaches for the evaluation of financial and social performance” and “Customized approaches to evaluate financial and social performance” review the existing methods for the evaluation of microfinance financial and social performance, first the standard-based and then the customized approaches. This is followed by a presentation of a comprehensive theoretical framework to guide microfinance performance evaluation. Finally, the last section presents the main conclusions and suggests further lines of research.

Standard-based approaches for the evaluation of financial and social performance

This section focuses on the forms of evaluation that are based on the review of internal institutional characteristics. First, those that assess and certify the FSP organization and procedures, and then those that seek to prove their compliance with a set of globally accepted standards.

Microfinance assessment and certification

Microfinance assessment is an evaluation approach based on the assumption that the study of the internal organization and procedures of an FSP, cross-checked against a set of commonly accepted standards, can be used as a proxy for the institution’s social and financial performance, and therefore reliably judges its trustworthiness (Smart Campaign, 2014 ). Microfinance certification, a complementary stage to assessment, is designed to identify the achievement of certain levels of performance (according to the accepted standards), benchmarking results, and best practices. While this appraisal could be performed by the FSP themselves with the support of an outside expert or via third parties, certification always requires an independent evaluation from a recognized firm or institution.

There are three main sets of standards used to measure FSP performance: Universal Standards for Social and Environmental Performance Management (Universal Standards, or USPM), Client Protection Standards (CPS), and Social Outcome Indicators (SOI). The USPM is a set of widely used standards designed to help institutions put clients at the center of their activity. In its current version, it includes seven dimensions: social strategy, committed leadership, client-centered products and services, client protection, responsible human resource development, responsible growth and returns, and environmental performance management (SPTF, 2021 ). These standards have been promoted by the Social Performance Task Force (SPTF) (SPTF, 2016 ). The CPS is a subset of 7 categories from the USPM, representing the ‘minimum standards that clients should expect to receive when doing business with a financial service provider’ (Smart Campaign, 2016 ). For its part, the SOI consists of a list of harmonized indicators to help stakeholders foster strong outcome management in four key categories: business and entrepreneurship; economic poverty, assets, and housing; resilience and vulnerability; and health (SPTF, 2022a ).

The microfinance sector is currently involved in a digitalization process that has been accelerated by the COVID-19 pandemic (Pal et al., 2022 ), but this process is still encountering some challenges (Chiappetta Jabbour et al., 2020 ). For this reason, a proposal for a draft set of Standards for Responsible Digital Financial Services (DFS) was recently published (SPTF, 2022b ). It is on issues such as agent management, algorithm bias, cybersecurity, and data privacy, among other topics relevant to digital microfinance.

These services are offered by four principal firms: MicroFinanza Rating (MFR), MicroRate (MR), M-CRIL, and Inclusion [Social Ratings] (ISR). Together, they offer a diverse set of assessment, certification, and rating elements—often under different commercial names—and are explained in detail below.

Social audits

A social audit is commonly done using social audit tools (SAT) to analyze institutional performance regarding a set of uniform standards. An evaluation that uses these tools can provide comprehensive insights into the strengths and weaknesses of a Microfinance Institution (MFI), helping to improve an organization’s overall performance (Wardle, 2017 ). The Social Performance Indicators (SPI), the most popular SAT in the microfinance sector, was created by a working group led by CERISE. The SPI consists of a spreadsheet designed to help FSPs assess their activity and intentions in relation to the USPM and CPS. The fourth version of the SPI tool (SPI4) is available at no cost on the CERISE website, as is its online version (SPI Online). Both can be applied either by the FSP themselves in a self-assessment or in collaboration with trained and certified consultants or specialized rating agencies, as accompanying assessments (CERISE 2022b).

In addition to the SPI4, CERISE has collaborated with several stakeholders to develop several socially oriented assessment tools, such as ALigning INvestors due diligence and reporting with the Universal Standards (ALINUS), the Social Business Scorecard (SBS), SBS Light (a subset of SBS indicators), the MetODD-SDG, and the Impact-Driven Investor Assessment (IDIA). As shown in Table 1 .

Client protection

Client protection is a particularly important part of the field of social performance and, therefore, merits a detailed explanation. The Smart Campaign, an active organization in social performance from 2009 to 2020, developed the Getting Started Questionnaire (GSQ), which allowed institutions to gain recognition through the Client Protection Certification (CPC). The tools and resources of the Smart Campaign were transferred to CERISE and the SPTF (CFF, 2021 ), which enhanced the GSQ to create a new tool, the Client Protection Self-Assessment Tool (CP SAT), and adapted the CPC to design a new certification method, the Client Protection Pathway (CPP) (SPTF, 2022c ).

The CPP is a roadmap designed to help FSP implement the Client Protection Standards, based on a three-step process. The first step (Entry) refers to the commitment to implement client protection. It involves registering on the SPTF website, which creates a public profile for each FSP that shows the corresponding level of achievement as regards client protection. The second step (Progress) focuses on assessing and improving practices. Finally, the third step (Advanced) asks for evidence of progress and achievements. These three steps correspond to three levels defined by a set of eligibility criteria for certifying different levels of achievement, which can be calculated using the Excel CP SAT spreadsheet, based on the CPS. CERISE-SPTF has approved three institutions to certify client protection: MFR, M-CRIL, and ISR. In addition to these methods, a commitment to implement client protection can also be demonstrated via the SPI4, SPI Online, or ALINUS audit tools or by using a social rating, an approach explained in the following subsection. Disclosure documents are accepted if they are less than three years old, while certifications are valid for up to four years (SPTF, 2022c ).

Poverty scorecards

Poverty reduction is one of the main goals for financial service providers seeking to increase financial inclusion. The most reliable sources of poverty information are government-run large-scale representative household surveys (Berhane and Gardebroek, 2011 ), but these datasets, when available, are not always useful for estimating the poverty rates of directly targeted populations, apart from some other practical limitations (Christiaensen et al., 2011 ).

One popular instrument to overcome these problems is the Poverty Scorecards (PS), a simple and concise tool that, once calibrated for a certain country or region, can provide a quick proxy indicator of poverty based on a few quick answers from an individual or household. PS surveys can be designed to systematically assess microfinance performance by measuring poverty levels among the FSP’s clients. Examples of popular PS include the Poverty Probability Index (PPI) (IPA, 2022 ), the Simple Poverty Scorecard (SPS) (Schreiner, 2014 ), and the Multidimensional Poverty Assessment Tool (MPAT) (IFAD, 2014 ).

Loan portfolio audits

Loan portfolio audits are an evaluation method that exposes the risks inherent in a FSP’s loan portfolio, and design procedures to manage them. This evaluation approach, offered by MFR, M-CRIL, and MR, assesses compliance with national regulation and international standards, proves operational and credit quality accuracy, demonstrates consistency with internal practices and policies, and enhances portfolio administration systems (Microfinanza Rating, 2022d ). Its final and overall goal is to identify possible underestimates in the figures for the portfolio at risk reported by an FSP (MicroRate, 2022c ).

Truelift pro-poor seal of excellence

The Truelift Pro-Poor Seal of Excellence is a certification approach based on three principles: (1) purposeful outreach to people living in conditions of poverty; (2) services designed to meet the needs of people living in conditions of poverty; and (3) tracking the progress of people living in conditions of poverty. In turn, each of these principles is divided into four categories: (a) intent and strategy; (b) measurement, data quality, and analysis; (c) results achieved; and (d) use of findings. Assessing the degree to which these principles are implemented makes it possible to identify and recognize different levels of performance or milestones: Starting Commitment, Aspirant, Emerging Practitioner, Achiever, and Leader. Only those MFIs that satisfy all 30 indicators are eligible for the Truelift Certificate (Smart Campaign, 2016 ). These indicators have been included in the SPI4, and currently only MFR and M-CRIL grant specific Truelift certifications (Truelift, 2022 ).

Code of conduct

A commitment to implementing best practices in an organization can be also demonstrated by a Code of Conduct (CoC) assessment (SPTF, 2022c ). Though it may have different structures, a CoC is a process that consists of three general stages: development, implementation, and compliance. It must be structured around clearly defined topics and developed through a consultative process in which all relevant stakeholders participate (SEEP Network and MasterCard Foundation 2015). Therefore, the scope of application and recognition of the CoC is diverse. One particular case is the specific CoC designed to assess the performance of FSP in the European Union: the European Code of Good Conduct for Microcredit Provision (ECGCMP). The ECGCMP is based on a set of standards corresponding to management, governance, risk management, reporting, and consumer and investor relations (European Commission, 2021 ). MFR certifies the ECGCMP in the European Union, while M-CRIL has been recognized by the Small Industries Development Bank of India (SIDBI) to perform Code of Conduct assessments of FSP in India.

Outcomes management

Outcomes Management is a multi-step institutional procedure of collection, analysis, and use of outcome information, based on a feedback loop to help stakeholders enhance social change. It consists of 10 essential steps divided into four stages: Stage 1 (Planning) includes (1) defining social change goals; (2) selecting indicators to capture social change; (3) selecting the evaluation method to measure social change; and (4) taking budget and human resource decisions to make the evaluation. Stage 2 (Data Collection) includes (5) putting systems in place to collect and capture data; and (6) putting systems in place to check data quality. Stage 3 (Analysis and Reporting of Findings) includes (7) data analysis; and (8) reporting and disseminating the results. Finally, stage 4 (Action) concentrates on (9) using outcomes data; and (10) reviewing the process (Sinha, 2017b ).

Additional assessment and certification services

In addition to the services described above, some firms offer additional services designed to meet the specific needs of some stakeholders. MFR and M-CRIL provide evaluation products designed to assess digital services, such as the GSMA Mobile Money Certification (GMMC) in the case of the former and several products for digital credit providers in the case of the latter. MFR, M-CRIL, and ISR also offer due diligence services and country studies, which can be tailored to meet the FSP’s needs.

Microfinance rating

The goal of microfinance rating is to evaluate performance by determining whether the MFI meets certain established standards included in a rating scale, providing information about the achieved performance level using a specific grade (The Rating Initiative, 2012 ). MFR, MR, M-CRIL, and ISR offer rating products, in addition to the assessment and certification services described above.

Institutional rating

Microfinance institutional rating is an assessment method that provides an outside evaluation of the long-term institutional viability and creditworthiness of an FSP. It relies on a comprehensive analysis of a set of key categories related to internal processes, risk management, and performance. MFR, MR, and M-CRIL offer an ‘institutional rating’, while ISR offers a ‘financial sustainability rating’ with a focus on financial performance. MR and M-CRIL also provide a rating outlook, which shows the expected evolution of the rating in the upcoming months. As shown in Table 2 .

Social rating

The social rating evaluates the degree of success of MFIs in translating their social missions into practice, focusing on up to six crucial areas for social performance: country context, social performance management, social responsibility and client protection, depth of outreach, quality of services, and outcomes. Its aim is to provide useful information to help stakeholders comprehend policies and practices implemented by MFIs, hence identifying possibilities for improvement and the further enhancement of social performance (Clark and Sinha, 2013 ). All four evaluation firms offer specific products to assess this dimension of microfinance performance. As shown in Table 3 .

Credit rating

Credit rating provides an external judgment on the FSP’s ability to manage credit risks and on its short-term creditworthiness. As a credit rating is required for a supervised (or ‘licensed’) FSP to be allowed to receive deposits from the public, rating firms need recognition by national supervisory authorities to offer this service in any given country. Only two microfinance evaluation firms offer credit ratings: MicroFinanza Rating, recognized by the Superintendence of Banks and the Superintendence of Solidarity-Based Economy in Ecuador, as well as the Supervisory Authority of the Financial System in Bolivia, and MicroRate, recognized by the Superintendence of Banking and Insurance in Peru. As shown in Table 4 .

Microfinance investment vehicles rating

Many FSPs depend on other sources for funding, e.g., borrowing from pooled investment parties that take the form of Microfinance Investment Vehicles (MIV), which include a wide range of investment instruments. They connect the goals of impact investors with FSP funding needs (Dorfleitner et al., 2017 ). To assess their ability to fulfill the needs of both investors and FSP, a MIV rating evaluates the MIV’s capacity to manage impact funds, their performance, and the generated social value, providing reliable information related to the MIV’s risk and social and financial performance (Microfinanza Rating, 2022e ). This kind of rating follows the MIV disclosure guidelines approved by the Consultative Group to Assist the Poor (CGAP) (CGAP, 2010 ) and the Principles for Responsible Investment (PRI) (PRI, 2019 ). MFR and M-CRIL offer MIV ratings, but only MFR provides a detailed and updated disclosure of its evaluation methodology. As shown in Table 5 .

Additional rating services

In addition to the four key rating services explained above, some rating agencies offer specific products or services designed to meet the needs of particular stakeholders. MFR provides the Islamic Finance Rating and the Social Performance Roadmap. MFR also offers an Institutional Diagnostic. ISR also offers a specific social enterprise rating and a product with an environmental focus (ESG Rating), while M-CRIL provides corporate social responsibility support. M-CRIL also offers several quantitative, qualitative, and mixed-method services for market research and impact evaluation. Finally, MFR, M-CRIL, and ISR present several institutional diagnostic services, as well as tailored training and capacity-building products. Table 6 summarizes compliance-based approaches.

As regards the relevance of each evaluation method, only Microfinanza, MicroRate, and ISR present a complete list of the evaluations undertaken to date on their websites. As shown in Fig. 1 , the most popular evaluation is institutional rating (602 evaluations), followed by social rating (480), client protection (186), credit rating (141), and institutional diagnostic (112). Regarding the number of evaluations undertaken by each rating company, Microfinanza Rating has performed 1205 evaluations, followed by MicroRate (442), and ISR (45).

Relevance of the different standard-based evaluations.

Customized approaches to evaluate financial and social performance

Case studies and process evaluation.

Microfinance evaluation research is dominated by quantitative studies, which either focus on measuring changes experienced by the beneficiaries of microfinance or by assessing FSP performance. However, microfinance services are not provided in a vacuum, and it is crucial to analyze the context in which microfinance institutions operate to fully comprehend the potential social, economic, and environmental effects. In contrast, qualitative research can be used to complement or replace quantitative methodologies, with the overall purpose of providing information regarding the historical, cultural, social, political, and religious context, as well as contributing to understanding how staff-client relationships evolve and determine microfinance performance (Shahjahan Chowdhury et al., 2020 ). Qualitative research relies on case studies and ethnographic fieldwork methodologies, applying interviews, observation, and focus group discussions to assess grounded theory and perform thematic analyses of specific contexts where the outcomes of the intervention may not be clear or precise or are simply difficult to measure from a quantitative perspective (Yin, 2012 ). Process evaluation can be understood in many different ways by diverse stakeholders, but the core of this complementary approach is that it helps researchers, managers, and practitioners understand the positive, negative, significant, insignificant, or unexpected results of an intervention (Dixon and Bamberger, 2022 ).

Qualitative impact protocol (QuIP)

It is an evaluation method to appraise causal devices and infer causality links in program evaluations based on contribution analysis. The QuIP collects evidence of a project’s results and effects through narrative causal statements gathered directly from intended project beneficiaries. In this context, beneficiaries reflect on the main changes in their lives and are encouraged to reveal what they recognize to be the primary drivers of these developments, and to whom or what they attribute them (Copestake et al., 2019 ). However, since a control group is not used to check the attribution of change, it is questionable whether this method can truly be considered as belonging to the impact evaluation category.

Financial diaries

One of the most important challenges faced by the poorest households results from their low level of income, combined with uncertainty about when such income can be expected, including a lack of ability or skills to budget or manage money. Financial Diaries consists of a series of monthly interviews for some period, usually a year, to help households understand how they use money and find ways to improve their budget (Collins et al., 2009 ). Applications of this methodology suggest that the poor may benefit from initiatives and public policies to address their income uncertainty, hence increasing their economic stability (Biosca et al., 2020 ; McHugh et al., 2019 ).

Efficiency studies

The evolution of the microfinance industry has helped advance management practices. In recent times, many FSPs have transformed towards improved commercialization, seeking to reduce their dependency on external subsidies and aiming to achieve financial self-sufficiency (D’Espallier et al., 2017 ). Studies on the efficiency of microfinance are increasingly crucial, in that they provide information about the use of resources to enhance the overall mission of microfinance. This type of research is largely supported by two main estimation methodologies: Stochastic Frontier Approach, a parametric technique to estimate efficiency boundaries applying econometric inference, and Data Envelopment Analysis, a nonparametric method to construct efficiency frontiers applying mathematical optimization (Fall et al., 2018 ).

Impact evaluation: quasi-experimental and experimental methods

Despite the potential benefits of microfinance to expand financial inclusion and help the poor (Morduch, 1999 ; Karlan and Appel, 2012 ), some programs, products, or services that might seem promising may not actually generate the expected results effectively (Karlan and Appel, 2016 ; Roodman, 2011 ). Therefore, it is crucial to understand whether and how microfinance fulfills expectations in order to accurately identify the mechanisms by which beneficiaries respond to intervention (Banerjee and Duflo, 2012 ). In this regard, impact evaluation aims to identify and quantify the extent to which changes in client well-being are attributable to a specific microfinance program, product, or service.

Two major research methods address this issue: experimental and quasi-experimental. In experimental settings, program allocation is based on a random distribution of potential beneficiaries who are divided into a treatment group (who experience the intervention) and a control group (who are not affected by the intervention and form the counterfactual) (Glennerster and Takavarasha, 2013 ). This type of evaluation has become very popular in the field of Development Economics, and microfinance. The Jameel Abdul Latif-Poverty Action Lab (J-PAL), Innovations for Poverty Action (IPA), and the International Initiative or Impact Evaluation (3ie) are all examples of actors using this methodology. MFR has developed an impact assessment methodology to apply a similar framework (Microfinanza Rating, 2022b ).

Nevertheless, it may not be always possible or desirable to use it for different technical, economic, ethical, and political reasons (Bédécarrats et al., 2019 ). When the valuation setting is not purely experimental, some quasi-experimental techniques have been applied to try to mimic randomization effects, including matching methods, regression discontinuity analysis, instrumental variables, control function methods, and quantile regressions (Glewwe and Todd, 2022 ).

Microfinance performance evaluation and the theory of change

Having examined the existing methods for the evaluation of microfinance, the next step involves identifying the usefulness and applicability of each approach to meet different stakeholders’ needs and objectives. To achieve this, we applied a two-pronged framework defined by the theory of change (TOC) and the nature of the framework of reference used to analyze the success of the intervention (Authors, 2021). A TOC describes the causal process that leads from intentions to an ultimate objective and can be expressed both graphically and as a narrative. It is structured into five stages that describe a causal process to generate a positive social, economic, or environmental change, which in the case of the microfinance sector, are as follows:

Inputs include both intent (the specific goals that FSP wants to achieve, including their social mission) and design (internal organization, structure, and practices).

Activities refer to how products and services will be managed to meet clients’ needs.

Outputs represent the direct results or expected consequences of activities.

Outcomes indicate unexpected or uncontrolled changes that are plausibly associated with microfinance.

Finally, impact shows changes in well-being that can be attributed to microfinance, all other things excluded.

Although it may not always be explicit in all interventions it is possible to identify an underlying theory of change in every scenario (Jackson, 2013 ). Since the TOC symbolizes the coherent structure of the chronological steps necessary to achieve an expected change, it also represents a hierarchy of results: the first three steps represent measures of implementation, outcomes signal changes that go beyond outputs and finally, impact refers to effects that are a direct consequence of microfinance (Sinha, 2017a ).

As explained in the previous section, the framework of reference used to make microfinance performance evaluations can be based either on commonly agreed standards (USPM, CPS, SOI, etc.) or on customized research settings, and evaluation approaches can be classified as standard-based or customized. Figure 2 shows a map of the existing practical methods for the evaluation of microfinance performance within the theoretical framework. The commercial names of the evaluation tools and examples of institutions and firms that do these evaluations are in parentheses. Names of institutions and firms are in italics.

Practical methods for the evaluation of microfinance performance.

The framework of reference also provides non-exhaustive information for three important variables to be considered when selecting an evaluation strategy: cost, time, and the potential to generalize the results. Standard-based methods, in general, are more accessible in terms of implementation costs and duration, especially if they are applied by FSP themselves, possibly with the support of an expert, instead of by a third party. Moreover, since these methods rely on commonly agreed indicators, the results of the evaluations permit comparisons between institutions and benchmarking. In contrast, non-standard-based methods usually require a longer period for full implementation, mainly because of the need to assess changes at different points in time. There can also be important differences regarding implementation costs, depending on the number of clients or beneficiaries participating in the study, the size of the research team, the nature of the product or service subject to evaluation, and the time required to properly assess the performance of the intervention. Significantly, although non-standard-based methods are useful to evaluate specific contexts or projects, their outcomes can be hard to generalize, making it difficult to extrapolate the results to different settings.

In light of the heterogeneity and rapid evolution of the microfinance industry, it can be challenging for stakeholders to identify existing methods to assess microfinance performance, comprehend its characteristics, and decide what method is most suitable to help them achieve their financial and social objectives. In contrast, the theoretical framework presented in this study explains how each method addresses the different steps in the microfinance theory of change, making it possible to compare the different techniques and help stakeholders identify and decide what method best fits their needs. At the same time, it provides an estimation of the differences between methods in terms of implementation costs and time and the possibility of generalizing the results.

This article presents the first attempt to map practical methods for the evaluation of microfinance performance. To that end, the theoretical framework presents a comprehensive approach that can include all products and services, with the caveat that it was impossible to analyze the different categories and their corresponding methods in depth within the confines of this study. Neither has there been room to provide a detailed analysis of the differences between the various methods in each of the categories, which makes it difficult to offer a critical view of the techniques. Another limitation lies in the inability to accurately determine the precise cost of different methods and the time required for their implementation. This analysis would require a much more detailed assessment of each evaluation method, which would cause the article’s length to increase excessively. At the same time, information about the cost of each method is not available, making it impossible to accurately determine the cost of implementing the different techniques. Undoubtedly, these are two fundamental variables that can guide decision-making on which method to choose, depending on the needs of each actor and the available budget.

Our study adds to the body of knowledge on microfinance performance evaluation, helping to clarify the fuzzy thinking and complexity that can characterize the microfinance sector and existing evaluation methods. Further research in this area would benefit from richer data on the use of evaluation methods, especially if information regarding the results of the assessments and their implications is made available. In this regard, further evidence on the outcomes of microfinance can help analyze the relationship between the use of different evaluation methods and the positive or negative effects of various programs, products, and services. In this sense, being able to more precisely understand each evaluation method’s capacity to contribute to achieving the results expected by organizations would be highly useful in assisting different institutions in making decisions about the most suitable method for their needs. At the same time, the dynamism of the sector continues to increase the number of products and services, especially in the field of digitization. Undoubtedly, it is possible that new performance evaluation methods may emerge in the coming years, so it would be interesting to study their compatibility with the model presented in this article.

Data availability

Data sharing is not applicable to this article as no datasets were generated or analyzed during the current study.

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The Impact of Technology on Microfinance

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• Roberto Moro-Visconti 3  

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After the microfinance background, examined in Chapter 1 , and the microfinance issues, illustrated in Chapter 2 , this chapter analyzes the impact of technology on microfinance. Technological instruments include the digital scalability of lending networks, crowdfunding and peer-to-peer lending, or blockchains for data validation.

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• Software oracles;

• Hardware oracles;

• Inbound oracles;

• Outbound oracles;

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Moro-Visconti, R. (2021). The Impact of Technology on Microfinance. In: MicroFinTech. Palgrave Studies in Financial Services Technology. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-80394-0_4

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