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Chapter 4
Methodology
4.1 Small Enterprise Education and Promotion (network) SEEP
SEEP includes set of five tools that addresses different aspects from the point of users.
This set of tools can be used individually or in any combination. Significance of these
tools is that they are helpful to assess how the microenterprise development programs are
contributing towards community development in terms of household welfare/security,
well being of individuals and enterprise stability (Sebstad & Chen, 1996).
Table 11. Cost and Benefit Analysis of Poverty Assessment Approaches
Tools
Cost
1.
Detailed
Household
Expenditure Surveys and
Living Standard Measurement
Survey
2. Rapid Appraisals
Participatory Appraisals
a.
Participatory
Ranking1
and
Wealth
3. Indicator Based Methods
a. Housing Index
b. Human Development Index
(UNDP 1999)
4. Consultative Groups to
Assist the Poorest (CGAP)
Source: Developed
Large samples, time consuming, analytically too
demanding
Too subjective
reliability
Tool has the limitation to be used on larger populations
or determine the poor(est) in a large geographical area.
Tool has the limitation of generalizibity across rural
and urban areas across regions and countries.
Neglecting other dimensions of poverty such as food
security and human resources
Uses three indicators out of which 2 i-e life expectancy
at birth, and per capita income are costly and cannot be
operationalized.
Benefits
Accuracy, rigorous
Best to get the fast
information on local level
economic conditions
Can identify the poor at
community level
Holistic,
People-centric
determination of poverty
Reliabilty
Simple, observable and
verifiable
Practical,
accurate, and relatively
simple mean of
assessment
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4.2 Client Assessment Continuum
Academicians argue that there is a need of rigorous market research to assess the client
for microfinance intervention which is too costly and time consuming. However, on the
other hand impact evaluations call for longitudinal approach, large sample sizes and
require complex analysis. Since AIMS-SEEP tool fits in between market research at one
end and impact evaluation on the other as shown in figure 7.
Figure 7. Client Assessment Continuum
Source: Based on Nelson 2000
4.3 Unit of Assessment
Following the design and impact path model, next step is the choice of the unit(s) of
assessment (or levels of assessment). Assessment at all the levels i-e household,
enterprise, individual and community level is made which gives the fullest picture of over
all impact by household economic portfolio model (HEMP), a project AIMS (Chen &
Dunn, 1996).
Common units of assessment are the household, the enterprise or the institutional
environment within which agents operate (Hulme, 1999). The relative advantages and
disadvantages of different units of assessment are summarized in the following Table 12.
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Table 12. Units of Assessment and their Advantages and Disadvantages
Unit
Individual
Advantages
• Easily defined and
identified
Enterprise
• Availability of analytical
tools (profitability,
return on investment
etc)
Household
• Relatively easily defined
and identified
• Permits an appreciation
of livelihood impacts
• Permits an appreciation
of interlinkages of
different enterprises and
consumption
Community
• Permits major
externalities of
interventions to be
captured
• Availability of data
• Availability of analytical
tools (profitability, SDIs,
transaction costs)
• Comprehensive
coverage of impacts
• Appreciation of linkages
between different units
Institutional Impacts
Household Economic
Portfolio (ie household,
enterprise, individual and
community)
Disadvantages
• Most interventions have
impacts beyond the
individual
• Difficulties of
disaggregating group
impacts and impacts on
‗relations‘
• Definition and
identification is difficult
in microenterprises
• Much microfinance is
used for other enterprises and/or
consumption
• Links between
enterprise performance
and livelihoods need
careful validation
• Sometimes exact
membership difficult to
gauge
• The assumption that
what is good for a
household in aggregate
is good for all of its
members individually is
often invalid
• Quantitative data is
difficult to gather
• Definition of its
boundary is arbitrary
• How valid are inferences about the
outcomes produced by institutional
activity?
• Complexity
• High costs
• Demands sophisticated
analytical skills
• Time consuming
Source: Based on Hulme 1999
4.4 Longitudinal vs. Cross-sectional Design in Impact Assessment
Many USAID projects have tradition of working with the longitudinal designs. This
include two studies after a specified interval, pre-test followed by post-test.
Hulme (1997a) states that in longitudinal data collection clients may not show their
interest in second and third interview as they had in the first interview. In such
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circumstances interviewees can be rewarded at few places to enhance the data quality.
This can be in the form of social reward such as small gifts, like snacks, soda water
bottles etc. This practice was quite successful in East Africa where the interviewee was
paid cash for surrendering his/her time.
This research uses a cross-sectional design with many advantages when used in field
settings. Distinctive advantages are less expensive in terms of time and resources. It also
provides more timely information useful to program a manager which is an edge over the
longitudinal data. Field studies mostly use cross-sectional designs because it saves time,
cost and effort (Sekaran, 2003). Following table shows the study design chosen in the
previous studies.
Table 13. Impact Assessment Studies using Different Study Designs
Name of the Study
―Bangladesh Institute of Development Studies(BIDS) and
World Bank (WB)‖ joint study in Bangladesh
Managing Resources, Activities, and Risk in Urban India:
The Impact of SEWA Bank
―The Impacts of Micro credit: A Case Study from Peru‖
―Impact of microfinance on rural households in the
Philippines; A case study from the special evaluation study
on the effects of microfinance operations on poor rural
households and the status of women‖
Impact of microfinance on Household welfare, Japan
Small Industries Development Bank of India
(SIDBI), India
Design
Cross-sectional
Longitudinal (1997-99)
Longitudinal
Longitudinal
Quasi-experiment
Longitudinal/cross sectional
Longitudinal (2001-2004)
Source: Developed
There were three options available to the researcher;
Option 1, ―Clients only‖ gives a ―quick dirty‖ assessment of MFI clients. Since there is
no comparison group, it is difficult to attribute the ―change‖ as microfinance success.
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Option 2, ―Clients and non clients‖ is the most common and popular cross-sectional
design, which has been used tremendously in previous studies (see literature review
Table 2). It gives a comparison with/without microfinance intervention. However, results
can be misleading because clients and non-clients are different in having the
entrepreneurial drive.
Option 3, ―Mature clients and incoming clients‖ is considered appropriate because these
two groups comprise of same ―type‖ of people who choose to join the program. Incoming
clients serve as the comparison group and are considered as proxy for non clients. The
assumption is that incoming clients have same to existing clients have same exposure of
social environment and characteristics like motivation, business experience, and
entrepreneurial drive. Hence it offers more appropriate and well identified comparison
group. This helps to reduce self-selection bias reason being they also opted to join the
program (Nelson, 2000).
Regardless of the chosen design and the elaborateness of comparisons, however, some
uncertainty about the size of treatment effects will always remain. It is impossible to rule
out completely all threats to validity. Ultimately, researchers must rely on accumulating
evidence across multiple designs and the corresponding multiple estimates of effects
(Reichardt & Mark, 1998).
The cross-sectional approach claims to overcome the problem of experiencing the
difference in the entrepreneurial spirit, since both its control and treatment group consist
of individuals who have opted to participate in the MFI. The new entrants are the control
group, whereas the veteran participants with two or more years experience with the MFI
are the treatment group (Karlan, 2001 & Marr, 2002).
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4.5 Survey Method
Different impact assessments have used different tools in the previous studies to tackle
the cultural diversity. Present research has used AIMS-SEEP tool as a baseline though it
was adapted further according to the culture. New clients (incoming clients) are
compared with the established clients. Difference in the lives of two groups based on the
indicators under study can be attributed to the program impact. Selection bias was
controlled by comparing new and established client; rational is that two groups will not
have the difference in their entrepreneurial spirit.
4.6 Instrumentation: Development of Interviewee Data Form
Based on AIMS-SEEP tool, new scale items were added by conducting focus groups and
to make it suitable for local environment. Following table explains the employed research
methods.
Table 14. Overview of the Employed Research Method.
Method
Type
Literature Review
Analysis
of
books,
academic
Number
Year
…………
April
magazines and journals, newspapers
2007-April
2009
and company reports, conferences and
workshops proceedings.
Focus Groups
a. Focus group consisting of four
members with NRSP executives.
b. Focus group consisting of three
members
with
of
Pakistan
Microfinance Networks (PMN)
c. Focus group consisting of three
members of PakOman Microfinance
bank
3 Focus groups
May-September
2007
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Personal interviews with microfinance
58
4 Interviews
March 2008
4 Rounds
May 2008
12 usable responses
October 2008
48 usable replies
December 2009
384 usable replies
January- April 2009
clients and practitioners. The main aim
was to check that the questionnaire
captures all the facets of the constructs
mentioned in main conceptual model.
Sorting Rounds
Review of local survey instruments
(tools used by NRSP in conducting
local surveys and data forms by banks
used for verification of clients) Sorting
of
items
for
questionnaire
for
questionnaire by a group of 3 judges
(1 Professor, 2 doctoral students)
First Pilot Study
Field tests of draft instrument with
client
Second Pilot Study
Field interviews with NRSP and KB
clients
Final Survey
Final field survey to the clients of
NRSP, KB, POMF and FMFB
Source: Developed
Questions on enterprise development has been added, similar approach has been followed
by Kondo et al, 2008 in order to establish a household survey questionnaire which was
adopted from the Annual Poverty Indicators by adding questions on loan accounts,
enterprises, and gender-related matters.
Initially eight clients were interviewed to sort and resolve measurement issues. Since it
was a field study it was important to explore issues like interview length, question format,
sensitivity issues, recall ability and information accuracy. Based on these interviews, the
household-level and enterprise-level questionnaires for the baseline study were
constructed. Sequence of questions was changed and questions were reworded where
necessary. After this, interview form was field tested and revised four times. Pilot test
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was run on a sample of 100 households. Based on this, questions on household and
enterprise levels were finalized.
Different impact assessments have used different tools in the previous studies to tackle
the cultural diversity. Present research has used AIMS-SEEP tool as a baseline though it
was adapted further according to the culture. New clients (incoming clients) are
compared with the established clients. Difference in the lives of two groups based on the
indicators under study can be attributed to the program impact. Selection bias was
controlled by comparing new and established client; rational is that two groups will not
have the difference in their entrepreneurial spirit.
To ensure consistency in the questionnaire wording, researcher has translated it into Urdu
language. However, depending on the literacy level and exposure of the respondents,
interviews were conducted in local languages as well.
(Both English and Urdu version of Interview forms are attached as appendix I).
4.7 Sampling Procedures
There has been a much debate on the appropriate size of sample. Two approaches are
followed which are entirely reverse of each other. A maximalist approach is usually used
by a statistician who is more concerned about the quality also he wants to ensure that all
the assumptions are met to apply a certain statistical test. On the other hand, field
researcher adopts minimalist approach but still provides credible results. Reality is that
field research is much more expensive in terms of money and time
Maximalist takes at least 500 whereas minimalist recommends at least 35 to 50 for each
subgroup we want to compare and analyze ((Nelson et al, 2000 & USAID, 2008).
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4.7.1 Cluster Sampling
Cluster sampling is mostly used in those situations when population is geographically
dispersed and it is not possible to reach every respondent when time is limited.
Since the four microfinance institutions chosen for analysis have geographically
dispersed clients so cluster sampling was thought to be the most appropriate. One way to
group or cluster the clients in on the basis of time spent in the microfinance program (e.g.
1-3years vs. more than 2 years etc). This type of clustering is more practical when good
records are available. The major significance of such a procedure is that it counters any
possibility of bias in the samples to a significant extent.
Figure 8 shows the choice points in sampling design.
Figure 8. Choice Points in Sampling Design
Representativeness of sample is
critical for the study so chosen
PROBABILITY Sampling
Purpose is generalizability
Cluster sampling
Two heterogeneous groups by time i-e
New and established clients (Simple
random sampling of clusters)
Source: Based on Sekaran, 2003
Cluster sampling would work best for this research because the clients for four different
microfinance institutions were geographically dispersed and it involved huge cost in
reaching them especially in rural areas where they were away several kilometers.
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4.7.2 Sample Size
Collection of data from survey sample is constrained by time and budget. This cost
includes transportation, photocopies, filed team compensations, and other related costs of
data cleaning and data verifications. Time is also a big cost which is reflected in training
the interviewers, facilitations in the field etc. Generally, rural survey samples are much
more expensive than the urban surveys. For most cross-sectional impact assessments
using the two categories of clients suggested in this research design, sample sizes of
either 170 (for the sampling design in Table 15) or 340 (for the sampling design in Table
16) would seem reasonable. These figures include an additional 20% over the sum of all
the cells—including ―extras‖ to replace those who are not available to be interviewed.
Interestingly, these sample sizes will also likely produce requisite numbers for achieving
statistical significance in many cases.
Table 15. Minimal Sample Size for Two Groups of Clients
Disaggregated by one subcategory
Male
Female
Established Clients
35
35
Incoming Clients
35
35
Source: Based on Nelson 2000
Table 16. Minimal Sample Size for Two Client Groups
Disaggregated by two sub-categories
Established Clients
Male
Female
35
35
Incoming Clients
Male
Female
35
35
35
35
35
35
Source: Based on Nelson 2000
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Based on the above guidelines and as proposed by Sekaran (2003), the present study has
taken sample size of 384.
4.8 Selection of Microfinance Providers
Based on the spectrum of services, microfinance institutes have been categorized to in
four major classes (Pakistan Microfinance Review, 2006) as under:
Rural Support Programme (RSP)
RSP‘s are running microfinance operation as part of multi-dimensional rural development
programme.
Microfinance Banks (MFB)
MFB‘s are licensed and prudentially regulated by the State Bank of Pakistan to
exclusively service microfinance market.
Microfinance Institution (MFI)
MFI‘s providing specialized microfinance services.
Others
All institutions that do not fall in the above three categories.
Four different microfinance institutes have been selected for this study, based on the
statistics presented in the Table 17 consisting of one RSP and three MFBs.
National Rural Support Programme has been taken as RSP and Khushhali Bank (KB),
The First Microfinance Bank Ltd. (FMFB), Pak-Oman Microfinance Bank Ltd.
(POMFB) as MFBs. Moving from oldest to the latest, this study has taken NRSP as the
oldest and Pak-Oman Bank as the latest establishment in Pakistan as microfinance service
providers.
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Two categories i-e Rural Support Program and Microfinance Banks were taken to get the
true opinion and diversity. Similar pattern has been found in the previous study by Kondo
et al, 2008.
Table 17. Summary Statistics of Microfinance Institutes
MFB’s
RSP
Age
Total Assets
Average Gross Loan
Portfolio
Number of Active
Borrowers
Number of Active
Savers
Total Number of Staff
Total Number of Loan
Officers
Borrowers per staff
Total Assets
Equity-to-Asset ratio
Debt-to-Equity ratio
Average Loan Balance
per Active
Borrower/per capita
income
Average Number of
Active
Loans/(Deposits)
Adjusted Cost per
Borrower (Rs. In 000)
NRSP
KB
POMFBL
FMFBL
14
3,673,667
7
6,703,280
2
495,587
6
2,807,162
2,619,282
2,400,264
89,393
954,234
292,456
704,318
283,965
14,397
12,249
101,394
79,827
2,469
1,865
201
1,045
1,968
616
70
651
118
152
72
3,673,667
6,703,280
495,587
97
2,807,162
11.8%
27.0%
91.8%
23.9%
7.5
2.7
0.1
3.2
11
16
11
21
241,651
260,441
18,532
136,191
2
3
4
2
Source: Adapted from Micro WATCH. A Quarterly Update on Microfinance outreach in
Pakistan: Jan-Mar 2008.
4.9 Pretest
A pretest was carried out before conducting the actual survey to test and measure the tool
in the local settings because this tool was tested first time in Pakistan. The population of
the study consists of all the active borrowers of the microfinance institutions. Face-toface interviews were designed and interview form was translated into Urdu language. An
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initial 100 interviews were conducted from two different microfinance institutions as a
pretest.
Like client of any other bank, confidentiality of client personal data is maintained by the
microfinance institution. One has to get written permission from the Head Office for
reaching clients. That is why a numbers of steps were involved in the process.
1. Writing letters/e-mails/telephone to the Head office seeking permission.
2. Head office approves and directs to regional branch
3. Regional branch refers it to the service centre (locality where microfinance clients
are being served)
4. A customer representative officer (CRO) at service centre was assigned to help
access the client.
5. Appointments for visiting clients (at their homes or visiting branch office on
recovery days)
The credibility of research findings is a very important element of a research. For this
reason, it is important to do a good research design from the beginning (Saunders, Lewis,
& Tronhill, 2007) Credibility includes validity, reliability, generalization and
transferability, discussed in chapter 5.