Cost-effectiveness of microfinance client assessment in Honduras

Abstract

After the positive experience of one of their members in pilot testing the SEEP/AIMS client assessment tools, the Covelo Network, an association of microfinance institutions in Honduras, sought funding to be trained in the use of these tools. A series of workshops was held between 2001 and 2004 covering the use of: exit surveys; client satisfaction focus groups; the use of loans, savings and profits; empowerment interviews; and impact surveys. This article describes some of the changes that the MFIs adopted as a result of implementing some of these tools, principally to reduce client exit rates and to permit faster and more flexible lending. It then provides cost estimates for the client assessment work and estimates the 'break-even' induced increase in profits (from whatever source) required to cover them. More specific cost-benefit models are then presented, based on more precise assumptions of the induced organizational changes. The client assessment work is shown to have been highly costeffective for the participating MFIs in Honduras during this period.