MICROCREDIT ROLE IN THE
SUSTAINABLE DEVELOPMENT AND
SOCIAL WELLBEING
“The case of Albania”
Forcim Kola PhD Candidate
“Aleksandër Moisiu” University, Faculty of Economics and Administration,
Durrës, Albania
Bajram Korsita PhD
“Aleksandër Moisiu” University, Faculty of Economics and Administration,
Durrës, Albania
2015-04-10
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MICROCREDIT ROLE IN THE SUSTAINABLE
DEVELOPMENT AND SOCIAL WELLBEING

“Microfinance is the supply of loans, savings, and
other basic financial services to the poor.”

People living in poverty, like everyone else, need a
diverse range of financial instruments to run their
businesses, build assets, stabilize consumption,
and shield themselves against risks. Financial
services needed by the poor include working capital
loans, consumer credit, savings, pensions,
insurance, and money transfer services.
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MICROCREDIT ROLE IN THE SUSTAINABLE
DEVELOPMENT AND SOCIAL WELLBEING



This research was conducted to assess impact of the
Microfinance Institutions programmes (loan product), relating
the investigation specifically to the following questions at the
following levels of impact.
Also the main objective of the Client Empowerment Research
is to test the hypothesis that participation in microfinance
programmes (being Microfinance Institutions clients) increases
empowerment in clients.
The research is aimed to help identify ways in which clients
manifest empowerment as a result of their participation in the
programme on the assumption that those clients who have
been
empowered
through
microfinance
programme
participation make decisions differently and take greater risks.
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MICROCREDIT ROLE IN THE SUSTAINABLE
DEVELOPMENT AND SOCIAL WELLBEING



Methodological approach
The research methodology used to answer these questions
was a “mid-range” impact assessment. Unlike more rigorous
“academic” methodologies, mid-range methodologies explicitly
accept some level of reduction in statistical validity so as to
accommodate field and resource constraints and to satisfy
program requirements for effectiveness and usefulness.
The Client Empowerment study is also part of the qualitative
research that was conducted to measure the level of
Microfinance Institutions empowering clients. The clients were
met and interviewed using in-depth semi-structured interviews.
Clients were selected from many Microfinance Institutions
branches covering almost all the territory of Albania.
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MICROCREDIT ROLE IN THE SUSTAINABLE
DEVELOPMENT AND SOCIAL WELLBEING

Sampling

Broadly speaking, the sample was composed of the treatment
group and the control group. The target population for the
treatment group was “two-year clients”, and included both
current and ex-clients.
The distribution of current to ex-clients in the treatment group
was roughly proportional to the percentage of clients who
dropped out of the program over the relevant time period. The
control group consisted of pipeline clients, or new program
clients, who either have not received their first loan or have
received their first loan but have yet finished their first loan
cycle.

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MICROCREDIT ROLE IN THE SUSTAINABLE
DEVELOPMENT AND SOCIAL WELLBEING

Poverty Targeting
The evidence shows that the Microfinance Institutions products (loans) are
successfully reaching “poor” people.
in %
Poverty Level
(Treatment Group vs. Control Group )
80
70
60
50
40
30
20
10
0
66.67
Treat. Group %
34.57
22.22
0
7.41
Very Poor
2015-04-10
61.73
3.7
Poor
Control Group %
3.7
Vulnerable
Non-Poor
Non-Poor
Chart 1. Poverty Level as Measured by Daily per Capita Household Expenditures
and Adjusted for Purchasing Power Parities—Treatment Group vs. Control Group
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MICROCREDIT ROLE IN THE SUSTAINABLE
DEVELOPMENT AND SOCIAL WELLBEING

Changes in Household Income
The data allow us to conclude that the treatment and control groups differ in
terms of changes in household income over the last 12 months.
Total
%
Mature
Client %
Ex-Client
%
Treatment
Group %
Control
Group %
Change in Household (HH) Income over Last 12 Months
Decreased greatly
Decreased
Stayed the same
Increased
Increased greatly
4
0
0
0
4
3.70
0.00
0.00
0.00
12.90
12
2
1
3
9
11.11
3.39
5.56
3.90
29.03
25
8
2
10
15
23.15
13.56
11.11
12.99
48.39
41
33
5
38
3
37.96
55.93
27.78
49.35
9.68
26
16
10
26
0
24.07
27.12
55.56
33.77
0.00
Table 1. Change in Income over Last 12 Months—Treatment Group vs. Control Group
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MICROCREDIT ROLE IN THE SUSTAINABLE
DEVELOPMENT AND SOCIAL WELLBEING

Emergencies and Crises

Again, there was difference in the proportion of the treatment
and control group adopting any of the coping strategies to pay
for unusually large or unexpected expenses. Primary coping
mechanisms in control group were: loans from family and
friends (19.75%), handouts from family or friends (19.75%),
compared to the figures of (2.74%) and (9.59%) for the
treatment group.
While for the treatment group the primary coping strategies are
current income (21.92%), Microfinance Institutions loan
(23.29%), withdrawing savings (10.96%) compared to the
figures of (4.94%), (2.47%) and (11.11%) for the control group.

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MICROCREDIT ROLE IN THE SUSTAINABLE
DEVELOPMENT AND SOCIAL WELLBEING

Dreams and Goals

The personal dreams and goals of clients fall into two
categories: i) to provide basic needs for the family, such as
food, clothes, and education for the children and ii) aspirations
for their family members (children) to achieve their fullest
potential in society. The women interviewed expressed both
dreams, while the men interviewed more often expressed the
latter.

For virtually all clients interviewed, their dreams and goals did
not change before and after having joined the microfinance
programme (being Microfinance Institutions clients).
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MICROCREDIT ROLE IN THE SUSTAINABLE
DEVELOPMENT AND SOCIAL WELLBEING

Perception by Household Members

The general perception from the clients interviewed was that
financial improvement leads to more harmonious family
relations and positive feelings toward the provider in the
family. As basics like food, clothing and school needs are met,
family members are happier and there is more respect by
family members for the provider.

Interestingly, there did not seem to be differences in how male
and female clients were perceived by their household. “I am
the bedrock of my family” was the expression shared by five
women and four men.

One man indicated that “I have an important place in my family
even though I am not the sole financial provider.” “Head of the
house” was the expression used by three other clients, two
men and one woman.
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MICROCREDIT ROLE IN THE SUSTAINABLE
DEVELOPMENT AND SOCIAL WELLBEING

Decision-Making about Family Issues

The loans seem to have had more of an impact on the married
female clients who were able to start their own businesses
because of the loans. As income earners, they are now more
involved in the decision making process for issues such as
schooling for children and healthcare, than they were before.

Four of the men indicated they were still the head of the
household and the decision maker for household affairs, even
though they were not the sole bread-winner of the family.
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MICROCREDIT ROLE IN THE SUSTAINABLE
DEVELOPMENT AND SOCIAL WELLBEING

Job Creation
The difference in the average number of full-time employees between the
treatment group and control group is statistically significant.
Job Creation
(Number of Full-Time Employees)
100
in %
80
76.92
60
31.88
19.23
40
20
Treat. Group %
46.38
5.8
Control Group %
15.94
3.85
0
0
0
1
2
3
Number of Full-Time Employees
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Chart 2. Job Creation: Number of Full-Time Employees
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MICROCREDIT ROLE IN THE SUSTAINABLE
DEVELOPMENT AND SOCIAL WELLBEING

The number of part-time new jobs created by treatment group compared to
control group was as; for 0 jobs (14.93% vs. 75.00%), 1 job (35.82% vs.
17.86%) and 2 jobs (49.25% vs. 7.14%) as according to Table 3.
Number of Employees
0
1
2
Total
%
Mature
Clients
%
ExClients
%
Treatme
nt Group
%
Control
Group %
31
9
1
10
21
32.63
18.00
5.88
14.93
75.00
29
20
4
24
5
30.53
40.00
23.53
35.82
17.86
35
21
12
33
2
36.84
42.00
70.59
49.25
7.14
Table 3. Job Creation: Number of Part-Time Employees
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MICROCREDIT ROLE IN THE SUSTAINABLE
DEVELOPMENT AND SOCIAL WELLBEING

Self-Esteem

Several of the clients had pre-existing businesses with
insufficient inventory and were unable to satisfy their
customers’ demands. Two of the male clients interviewed were
unable to find work and became self-employed out of
necessity.

This is particularly true for the women who were previously
unemployed. Their new livelihood has helped them become
more motivated about business, i.e. creating higher profit
margins for themselves by minimizing cost and/ or maximizing
revenue, as well as given them an opportunity to manage an
endeavor of their own.
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MICROCREDIT ROLE IN THE SUSTAINABLE
DEVELOPMENT AND SOCIAL WELLBEING

Client Satisfaction
The level of overall client satisfaction is higher for the current and ex-client
groups than for control group (4.4 vs. 3.3).
4.3
3.2
4.4
4.4
4.2
3
3.4
3.3
Treat. Group %
Overall
Staff and
management
Control Group %
Savings
policies
5
4
3
2
1
0
Loan
products and
policies
Scores
Mean Client Satisfaction Scores
(Treatment Group vs. Control Group )
Indicators of Client Satisfaction
Key: 1=Very dissatisfied; 2=Dissatisfied; 3=No opinion; 4=Satisfied; 5=Very satisfied
2015-04-10
Chart 3. Mean Client Satisfaction Scores—Treatment Group vs. Control Group
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MICROCREDIT ROLE IN THE SUSTAINABLE
DEVELOPMENT AND SOCIAL WELLBEING

Participation and Leadership
Several clients were active in their communities before receiving loans,
regardless of their employment situation, and have continued with their
activities.
Indicator of Empowerment
Amount spent on schooling for children
Amount spent on food
Amount saved
How to spend Microfinance loans
Total
%
Mature
Clients%
ExClients %
Treatment
Group %
Control
Group %
2.7
3.1
2.8
3.0
1.9
23.98
24.96
23.10
24.34
25.86
3.0
3.2
3.2
3.2
1.7
26.38
25.50
27.14
26.05
23.05
2.8
3.1
2.9
3.0
1.8
24.63
24.96
24.56
24.80
24.20
2.8
3.0
3.0
3.0
2
25.02
24.58
25.20
24.80
26.89
Key: 1=Husband only; 2=Mostly husband; 3=Husband and wife equally; 4=Mostly wife; 5=Wife only
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2015-04-10
Table 4. Intra-Household Decision Making—Treatment and Control Group
MICROCREDIT ROLE IN THE SUSTAINABLE
DEVELOPMENT AND SOCIAL WELLBEING

An woman expressed that the loan enabled her to help her
immediate community, her friends and neighbors, and in this
way “improved” her standing among them, although she also
indicated that her neighbors would have done the same for her
family in times of need. The other three women agreed that
this kind of sharing/ welfare was practiced with their neighbors
as well.

A group of three men interviewed together, who had
businesses before joining the Microfinance Institutions, said
their participation in the community was the services their
businesses provide. One, a mechanic, said “Everyone needs
me. If I am absent, the whole community would be affected.”
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MICROCREDIT ROLE IN THE SUSTAINABLE
DEVELOPMENT AND SOCIAL WELLBEING



Conclusion
The responses provided during the client interviews seem to
indicate that empowerment, as expressed by increased
confidence in one’s abilities to be a provider for the family, a
successful entrepreneur and a productive member of the
community, is more evident among clients who have
participated in the microfinance programme for over 24
months.
However, loan impact has not been identical for all clients. The
impact on self-confidence and empowerment seems to be
greater for those who were unemployed or had relatively poor
business activity before receiving loans from the company and
for whom the loan meant a new opportunity or a significant
improve in business.
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MICROCREDIT ROLE IN THE SUSTAINABLE
DEVELOPMENT AND SOCIAL WELLBEING



More rigorous data gathering, such as conducting further indepth studies with a larger sample, and better controlling for
other external factors is necessary in order to isolate the
contribution of the Microfinance Institutions loans on a client’s
life.
Analysis of this data would provide a more complete
understanding of how and to what degree, if at all; financial
services play a role in improving the standard of living and
feelings of empowerment in clients.
Overall, it is important that the evidence of positive impact of
Microfinance Institutions products (loans) on income is viewed
in combination with the broader macro-economic environment
of Albania, which is improving every day.
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Thank You !
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