Complexity Theory and Social Impact Looking at Outcome Mapping in Relation to Microfinance and Microsavings Initiatives
14 June 2015 Mallory St. Claire
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Complexity Theory and Social Impact 1
Table of Contents EXECUTIVE SUMMARY
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OVERVIEW – COMPLEXITY THEORY
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OUTCOME MAPPING
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OVERVIEW -‐ MICROFINANCE
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OUTCOME MAPPING AND MICROFINANCE
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CASE STUDY 1 CASE STUDY 2
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CONCLUSION AND MOVING FORWARD
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BIBLIOGRAPHY
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APPENDIX 1
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APPENDIX 2
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Executive Summary This paper is meant to analyze the field of microfinance through the lens of complexity theory – specifically the concept of outcome mapping. Outcome mapping is a tool utilized to develop and assess programs without attributing change to a single hard impact variable, as some program frameworks do. Rather, it seeks to create positive changes in behaviors of stakeholders and local partners, which then contribute to changing the operating environment as a whole. Outcome mapping recognizes a key idea of complexity theory – it is almost impossible in a complex environment to attribute change to a single player. Rather a variety of players and stakeholders wield power and help facilitate change. A successful program or intervention should seek to facilitate the change it desires, not be the sole point of causation. Outcome mapping can be especially useful for microfinance institutions, specifically for those who want to impart good savings and financial habits on their clients. The microfinance theory of change states that clients should responsibly use loan and savings products to increase income from their businesses, provide a buffer against disasters or unforeseen pitfalls, or invest in other areas such as education. This thus will move the client out of poverty. Rather than attempting to disperse loans at a high rate or pressure customers to take on more and more debt, microfinance institutions can utilize outcome mapping to instill useful financial habits (such as savings and debt management) on the vulnerable populations they serve, which then lead to favorable financial habits and outcomes. This paper first gives an overview of complexity theory and outcome mapping, then a brief introduction to microfinance. Finally, at the end of the report are two case studies of using outcome mapping techniques on nascent microfinance institutions in East Africa. I had personally worked on projects with these two microcredit institutions, specifically related to capacity building and expanding working capital. Finally, the paper concludes with thoughts on expanding complexity theory tools into the microfinance and social impact space.
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Overview – Complexity Theory Complexity and complexity theory is a relatively nascent term when it comes to social impact and development. Complexity science has been widely applied to “hard sciences,” like in biology to track animal behaviors or in theoretical physics in the analysis of phase space (Ramalingam et al, 2008). Only recently have development practitioners examined complexity theory as applicable to what we do in social impact, and its relevancy to our efforts to eradicating poverty. Complexity theory in relation to development essentially recognizes that these “wicked problems” – like poverty, public health, infrastructure, and economic development – are in fact complex problems. They inhabit a space that is constantly changing, has many stakeholders, many influencers, and is highly driven by local realities on the ground. Because of the many change agents present in a complex environment, change does not happen in a linear fashion and cannot be attributed to only one actor. Complexity also critically examines the feasibility of top-‐down approaches and their efficacy in development. We have all worked with or seen an approach that was crafted overseas, in a Western aid office or Western charity, delivered to the developing country, and implemented. These interventions, built without any local context, often do not work at the offset. More disastrously, some interventions do more harm than good. When working in a complex environment like aid or social impact, complexity theory posits that the best solutions are deeply rooted in the local context, and empower local actors. It additionally means that program managers should build in enough flexibility into the intervention’s DNA for iteration – since a highly complex scenario is ever evolving, a program will have to be agile enough to respond to its changing environment. Though this is an emerging theory, this research can be a valuable lens to look at tough, sticky problems in the field of development and poverty eradication.
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Outcome Mapping Outcome mapping is defined by the International Development Research Centre (IDRC) as “focusing on one specific type of result: outcomes as behavioral change” (Earl et al, 2001). This is a tool of complexity analysis that can be used to understand a cycle of implementation from the ground up, as opposed to structuring an intervention from the top down. It additionally looks as the desired outcome to be behavioral change, rather than some kind of hard variable to be measured and weighed against other controls. The desired behavioral changes typically are reflected in “boundary partners,” or local institutions and stakeholders that the intervention is targeting. OM focuses attention in the incremental, subtle changes that contribute to larger scale social change. In a traditional impact mapping approach, the flow looks something like this:
Impact Outcome Output Input
• direct result of interven]on
• long term result of interven]on
• short term result of interven]on
• interven]on delivered by the organiza]on
The focus is a heavily quantifiable impact metric, which typically interprets a causal relationship between the program in question and a positive social output. For example – providing free meals in schools increases learning outcomes and boosts opportunities for later in life. Rather than focusing on the impact, outcome mapping wants to see what behavioral changes were sustained by the program. In the example of microfinance, desired behavioral changes can include better saving habits,
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increased financial literacy and responsibility, or more responsible management of household debt. These desired behavioral changes should be manifested in the boundary partners. Outcome mapping is more holistic and adaptable to complex international contexts. It examines the logical links between the intervention and desirable behavioral change, and monitors three key areas of project implementation – the change in partner behavior, efficacy of program strategies, and the way the implementing organization is functioning as a unit. Inten2onal Design • What is the vision?
• Who are the boundary partners?
Evalua2on Planning • ID evalua]on priori]es
Outcome/Performance Monitoring • develop framework for M + E ac]vi]es
(Earl et al, 2001)
The above diagram displays the process for assembling an intervention using outcome mapping techniques. Note how evaluation and performance monitoring are built strategically into the intervention from the onset. Most of the outputs from outcome mapping are related to the boundary partners, emphasizes that the ultimate responsibility for change rests with the stakeholders and local context holders. The two tangibles that this paper will focus on producing are outcome challenges and strategy maps. Outcome challenges are produced for boundary partners, and are specifically focused on the behavioral
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changes that the project wants to affect. A strategy map is developed from an outcome challenge, and identifies the strategies that relate to the achievement of an outcome. It specifies actions that the program has direct control over, what the program can influence, and actions that the program can take to be supportive of the overall change infrastructure. A sample strategy map from the Overseas Development Institute.
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Overview – Microfinance Microfinance in the context of this paper refers to a wide range of commercial banking services customized and made available to poor and bottom-‐of-‐the-‐pyramid consumers. Microfinance includes microcredit, microinsurance and microsavings. Popularized by lending giants such as Grameen Bank, BRAC, FINCA, Opportunity International, and Kiva, microfinance has surged and grown in popularity since the 1970’s. Microcredit, first pioneered by Grameen Bank, is the practice of giving small loans to the very poor, with the intent of stimulating entrepreneurship, growing small business, and with the end goal increasing the income (and therefore overall livelihood) of the creditor. Microsavings is practiced more informally – there are many microfinance institutions (MFI’s) that offer savings accounts, and even more informal savings schemes offered by community based organizations. These include chits or ROSCAs and savings and community cooperatives (SACCO’s). Microinsurance is a relatively new player in the inclusive finance world, and is often offered by existing MFI’s to complement their product portfolio. Microinsurance schemes are often targeted toward farmers as weather or calamity insurance. Microcredit has specifically been researched as a solution to poverty reduction by the Abdul Latif Jameel Poverty Action (JPAL) lab out of the Massachusetts Institute for Technology. The microcredit component of microfinance has not offered significant causal evidence that disbursing a loan to a very low-‐income customer has any effect on their household income (Policy Bulletin, 2015). Many consumers of microcredit did not use the loan to invest in a business, rather using it to smooth household consumption or pay for school fees. While it did help consumers make more informed choices about household consumption, it might not be the panacea that we thought it was.
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Microsavings has more unexplored promise to help increase the very poor’s income level. Savings is already done in some concept with the poor – the bottom of the pyramid population invests in durable assets, such as building materials, jewelry, cattle/livestock, or electronics. Access to savings accounts has been shown to increase household income. Other innovative schemes such as ROSCAS/tontines have been shown to be useful to the poor. Even more importantly, educating bottom of the pyramid consumers on how to best manage finances and incrementally save into a more secure future could help more than loan disbursement can. While many MFI’s are focused primarily on distributing loans, greater impact could be made in providing financial training – training focused on setting savings goals, budgeting, responsible loan management, and other skills required to create a cushion against disasters or other shocks.
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Outcome Mapping and Microfinance
The following are sample strategy maps and outcome challenges for microfinance initiatives, specifically drawn off two case studies in East Africa. The two case studies are based off personal experience working with these projects. For each outcome challenge, we chose one specific boundary partner to target, and subsequently made an appropriate strategy map.
Case Study 1 – Nakanyonyi SACCO, Jinja, Uganda
Background – Nakanyonyi Savings and Credit Cooperative (SACCO) is a microfinance initiative located outside of Jinja, Uganda. The SACCO was originally created out of Nakanyonyi primary school as a means to help teachers and staff of the school access low-‐interest loans and affordable savings accounts. The SACCO has since grown, and serves the surrounding community. Since Nakanyonyi is a credit cooperative by nature, customers who wish to open an account must buy shares in the co-‐op, and maintain a minimum savings account balance. The SACCO provides loans to its members in several categories – including business loans, agricultural equipment loans, and school loans. Through a new savings lockbox initiative, Nakanyonyi has been able to increase savings deposits and attract new clients by providing financial training and easy deposit services.
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Boundary Partners – • Employees at Nakanyonyi SACCO • Clients of the SACCO • Greater community members • Government officials and microfinance regulators in Uganda Outcome Challenges –
Nakanyonyi Facilitate good savings habits for coopera]ve SACCO members -‐ to be measured in number of deposits, Members amount of funds in savings accounts, and frequency of deposits in savings accounts.
Facilitate responsible loan habits and repayment -‐-‐ to be measured in number of loans taken out and repayment rate. Members should ac]vely use the SACCO to take charge of their personal finances and facilitate growth in income -‐-‐ including sejng savings goals, expanding small businesses, and expanding investments
Strategy Map -‐-‐ Strategy (aimed at a specific individual or group)
Causal (responsibility rests with organization) I-‐1 Create savings and loan products that are well-‐designed for client base
Persuasive (convincing stakeholders) I-‐2
Supportive (building supportive networks) I-‐3 Offer financial Offer sessions for strategy and literacy clients to interact workshops to with each other clientele based on specific
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(aimed at the external environment)
E-‐1
E-‐1
Facilitate community savings and financial literacy outreach – could result in gaining more clients and generally benefiting the environment as a whole.
Educate community members in taking good loans vs bad loans; and identifying beneficial MFI schemes.
interests – for example, small business owners, agricultural workers, etc. E-‐3 Work in tandem with government microfinance initiatives to ensure compliance and share resources
Case Study 2 – COODEKA Microfinance Initiative, Kabwende Primary School, Kinigi, Rwanda
Background – Kabwende Primary School is located in Kinigi, Rwanda – at the slopes of Virunga National Park in northeast Rwanda. COODEKA is a nascent community savings cooperative founded by the teachers and principal of Kabwende, and is open to employees of the school and parents of students. COODEKA was created as a means to assist low-‐paid teachers and other needy members of the immediate community.
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The COODEKA fund requires members to deposit a fixed monthly amount of 1000 Rwandan francs ($1.45 USD) with the organization. Shares for new members cost 3000 Rwandan francs ($4.35 USD). After a year of saving with the organization, members can take out at least half of their savings. The other half can be withdrawn as a loan against themselves. Members must repay back the savings with a low interest rate. If a larger amount is needed, members can draw a formal loan from the cooperative. Entry to the cooperative is limited only to people the cooperative knows well – this way, risk is reduced and community leaders can arbitrate disputes if necessary. The COODEKA fund has a savings account with Kinigi SACCO, where it deposits the lump sum of its members savings. The fund wishes to grow its working capital to the point where it can generate an interest payment on its lump deposit from the SACCO. COODEKA is very socially focused -‐ it wishes to create income generating projects for teachers, buy a van to provide transport to teachers of the school, and organize tree planting campaigns in the local community. Boundary Partners – • Members of the COODEKA cooperative – teachers, administrators, and parents at Kabwende Primary School • Community leaders • Leaders of the COODEKA cooperative • Microfinance institute (Kinigi SACCO) where the cooperative deposits money
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Outcome Challenges –
COODEKA members
Facilitate healthy savings habits -‐-‐ to be measured by the amount of savings a client withdraws and repays Facilitate healthy financial habits related to loan management -‐-‐ how many loans are given? How many loans are repayed? Members should be able to save and invest in income genera]ng projects or other financial goals. They should also be able to accrue some form of financial stability to prevent from economic shocks.
Strategy Map -‐-‐ Strategy (aimed at a specific individual or group)
(aimed at the external environment)
Causal (responsibility rests with organization) I-‐1 Provide a supportive and flexible structure for members of the cooperative – for example, making sure loan repayments are in line with a client’s capacity to pay E-‐1 Create income generating projects
Persuasive (convincing stakeholders) I-‐2
Supportive (building supportive networks) I-‐3 Offer workshops on Have sessions for good financial the greater habits and support community and financial literacy members of the cooperative to sensitize members on good savings habits, and allow members to network outside the cooperative E-‐1 E-‐3 Encourage other parents of students
Take support from other community
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with beneficiaries of to join the the cooperative, in cooperative order to boost incomes of teachers
microfinance organizations to benefit from shared knowledge
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Moving Forward and Conclusion Complexity theory has a number of useful components that are contributing to the way professionals think about development and the social impact space. It allows a social impact professional to step back, recognize, and embrace the inherent unpredictability of trying to solve some of the world’s toughest problems. Possibly one of the most striking components about this emerging theory is that it reverses the current power structure of the aid/development paradigm, from being one that is overly top-‐down, Western based, to one that empowers local actors and sees local context as the only context to operate in. When microfinance is concerned, this effort to establish safety nets for the very poor and fund micro enterprises is here to stay, integrated into our collective social impact toolkit. The following are additional components of complexity theory that can be utilized in working with MFI’s.
Phase Space Mapping
Feedback Loops
• a concentrated effort to map all possible "phases" or states that a sector can occupy at one ]me
• Looking at how to arrange feedback with local beneficiariesof an interven]on, and create a responsive interven]on to the local context
• can be used to iden]fy what are locking organiza]ons into their exis]ng paqerns, how small changes contribute to large changes
Iden]fying Agents of Change • A complex system has many actors and influencers -‐-‐ ID'ing those agents and aqractors can help an interven]on facilitate change in a complex ecosystem.
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There is no doubt that complexity theory has a lot to contribute to the social impact space. Specifically in the field of microfinance, complexity theory can be used to understand an MFI’s role in changing not only their client’s practices, but also the environment in which a client operates. If an MFI’s ultimate goal is to provide stability and increased income for their clientele, then they must critically examine the space which they occupy and how to best facilitate and contribute to positive change.
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Bibliography
Craig, Peter, Paul Dieppe, Sally Macintyre, Susan Michie, Irwin Nazareth, and Mark Petticrew. Developing and Evaluating Complex Interventions: The New Medical Research Council Guidance. Rep. no. BMJ 2008;337:a1655. British Medical Journal, Aug. 2008. Web. <http://www.bmj.com/content/337/bmj.a1655>.
Earl, Sarah, Fred Carden, and Terry Smutylo. Outcome Mapping: Building Learning and Reflection into Development Programs. Rep. International Development Research Centre, 2011. Web. <http://www.idrc.ca/EN/Resources/Publications/Pages/IDRCBookDetails.aspx?PublicationID=121>. Hearn, Simon. "Outcome Mapping -‐ Planning, Monitoring, and Evaluation."SlideShare. Web. 1 June 2015. <http://www.slideshare.net/sihearn/introduction-‐to-‐outcome-‐mapping?from_action=save>. Jones, Harry. Taking Responsibility for Complexity: How Implementation Can Achieve Results in the Face of Complex Problems. Working paper no. 330. Overseas Development Institute, June 2011. Web. <http://www.odi.org/sites/odi.org.uk/files/odi-‐assets/publications-‐opinion-‐files/6485.pdf>. J-‐PAL and IPA Policy Bulletin. 2015. “Where Credit is Due.” Cambridge, MA: Abdul Latif Jameel Poverty Action Lab and Innovations for Poverty Action. Ramalingam, Ben, Harry Jones, Toussaint Reba, and John Young. Exploring the Science of Complexity: Ideas and Implications for Development and Humanitarian Efforts. Working paper no. 285. Overseas Development Institute, Oct. 2008. Web. <http://www.odi.org/sites/odi.org.uk/files/odi-‐ assets/publications-‐opinion-‐files/833.pdf>.
Image credits: Mallory St. Claire
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Appendix 1 – Outcome Mapping Framework (International Development Research Centre)
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Appendix 2 – Sample Outcome Statements and Strategy Maps (International Development Research Centre)
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