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This chapter sketches a new development in responsible investing, namely impact investing. Impact investing, which we define as the entire spectrum of investments deliberately aiming to create shared value, can be seen as an integrative approach to wealth creation through investments. The case of microfinance is used to illustrate this new development.

The chapter combines a viewpoint and a case study that serves to illustrate the practical relevance of the viewpoint.

The chapter starts with a brief overview of the origin and rise of responsible investments, followed by a description of mission-related investments and impact investing as its latest development. Microfinance is presented as a special case, thereby focusing on the investors, the asset allocation and the meaning – and application – of the notion of impact.

The chapter shows that a focus on social and financial returns can be combined without having to make serious financial sacrifices. It also demonstrates that investments can come from investors as diverse as pension funds, foundations or high net-worth individuals.

If impact investing really takes off – particularly supported by institutional money – there will be much more opportunity to tackle social and environmental innovation than without those investments.

The chapter challenges (institutional) investors to evaluate their responsible investment strategy and to rethink their asset allocation. Impact investing can become an important addition to the responsible investment landscape.

The disagreement over the contribution of microfinance to fight poverty is mainly related to the wide range of methodologies used to study it. The aim of this chapter is to reveal the limitations of these methodologies and explore whether the capability approach may improve impact assessment, especially in the microfinance field.

The author’s contribution is based on a comprehensive literature review of the most cited scholarly studies on microfinance impact.

This contribution has two main findings: It identifies the characteristics of an impact assessment conceptual framework based on the Capability Approach. It also gives a documented justification on why this approach is an interesting way to evaluate the potential effects of microfinance programs.

Applying the capability approach to poverty in microfinance is not new. However, as far as we know this is the first contribution that tries to apply it to the specific issue of impact assessment.

Microfinance impact evaluation studies help in discovering client needs which are diverse, special and different from the needs of the conventional bankable clients. Thus, such area of market research is becoming essential for microfinance institutions for designing better client-centred products. In this research, the authors discuss the specific model of household economic portfolio (HEP) for qualitative impact evaluation in microfinance. The paper aims to discuss the complexity limitations of the HEP. Solutions are provided for overcoming these limitations. The modified household economic portfolio (M-HEP) model is simplified and detailed, and two types of diaries are suggested for implementing it.

First, the authors briefly review the literature on impact assessment methods in microfinance and on the HEP model. In the second part of the paper, the M-HEP is suggested and discussed in detail. In the third part, the authors present a case study to illustrate the additional information that can be generated by using our suggested research tool and model. Finally, the authors wrap up with a summary of the findings.

Solutions are provided for overcoming the limitations of the HEP model. The suggested model (M-HEP) is simplified and detailed, and two types of diaries are suggested for implementing it. The case study shows that, certainly, time and money are related. While time may mean money for a rich person, for a poor person, if money is not forthcoming, she may spend time on non-income generating work that adds to her social esteem. She may also consume inexpensive assets because spending time at low cost is important. Finally, she spends time in conducting activities for which she cannot afford to pay.

The paper offers two novelties. First, it details the interactions between the elements of the HEP model of Chen and Dunn. This improvement to the original model is highly important for defining the measures that are required for redrawing the economic portfolio of an individual. The second novelty is in suggesting the collection of time-use and financial daily data. To the best of our knowledge, this is the first time a combined diary is used in microfinance research. These two novelties allow the application of a modified version of the highly interesting HEP model in spite of its complexity.

The purpose of this paper is to analyze the impact of microfinance programs on the income and food expenditure of farm and nonfarm households in Thailand.

The study employs secondary data from the Thai Socioeconomic Survey (cross-sectional data from 2017 and panel data from 2012 to 2017). The cross-sectional data (2017) include 43,210 households. Panel data from the 2012 and 2017 Socioeconomic surveys (SES surveys) include 4,406 households. The estimation methods include propensity score matching (PSM) and a fixed effect (FE) model.

The result shows that village funds (VFs) have a significant negative impact on income and food expenditure for both farm and nonfarm households. The empirical results reveal that the saving groups for production (SGPs) effects are positively significant in terms of income and food expenditure, but only for farm households. The FE model result also shows that while VFs have a negative impact on income they have a positive impact on food expenditure for farm households. In contrast, SPGs have no impact on both farm and nonfarm households' income and food expenditure.

Farm and nonfarm households require both welfare and microfinance programs. Microfinance programs can only help these households once they have the necessary education. The government should provide social programs and business skills for these households; completion of these courses should be a pre-requisite for accessing microfinance programs.

This study is unique because it reveals the microfinance impact between VFs and SGPs programs so that most low-income and poor people in Thailand can access basic financial services.

The purpose of this paper is to establish what constitutes best practice models of microfinance for poverty alleviation. It argues that the new microfinance phenomenon characterized by two camps; commercial and developmental players should be recognized as legitimate separate microfinance approaches with different aims and motives. This paper aims to establish strong foundational argument for developing parallel thinking and separate best practice models for effective engagement with each approach.

Rapid evidence assessment methodology was used to systematically identify and analyze a comprehensive list of relevant literature on best practice models of microfinance for poverty alleviation from both online and offline publications. Over 40 publications on microfinance best practice were critically reviewed with a specific attention to how the two approaches to microfinance (commercial and developmental) were dealt with in relation to impact on poverty and best practice approaches.

The paper argues that, business priorities of commercial microfinance providers differ significantly to those of development microfinance providers and this impacts on the program design which means clients of each regardless of coming from the same target group may have different experiences. The microfinance concept evolved far beyond any single philosophical or ideological confinement that there is now need for formal recognition and acknowledgment that commercial and developmental microfinance paradigms are parallel models of approaches whose continuous evolution is less likely to converge in the near future, so should be treated separately.

Because the purpose, challenges and requirements of commercial and developmental microfinance approaches are different, continued lack of purposeful distinction between the two will continue to cause confusion and lack of precision in policy response on specific sector challenges. Further work and discourse on the impact of both commercial and developmental approach to microfinance on service delivery to the poor is required to test the implications on best practice.

The paper highlights the fundamental flaw in the current perspective of microfinance sector which fails to recognize irreconcilable parallel approaches underpinned by different motives.

The purpose of this study is to examine whether the village development fund (VDF) program reduces poverty in terms of income and expenditure.

The authors use cross-sectional data that are collected from 361 households in 15 villages in the rural district of Sukhuma of Champasak province in 2012 and use regression for analysis.

The estimate of the empirical model that is used for the econometric analysis is based on the model constructed by Coleman (1999). This study finds that VDF program has a positive impact on household income and expenditure but that the impact is statistically insignificant.

The authors conclude that the VDF program has a minimal impact on poverty reduction in the study area.

Policy-maker should be aware that promotion of the VDF program might not reduce poverty in terms of income and expenditure.

This finding might have significant impacts on poverty reduction strategy of Lao PDR.

It is the first study to investigate the impact of the VDF program on poverty in Lao PDR.

The purpose of this paper is to examine the impact of microfinance programs sponsored by Sudanese microfinance institutions (SMFIs) on monetary poverty reduction in Sudan where poverty is widely spread.

The study adopted the control group approach, where income and expenditure are taken as welfare indicators. The updated World Bank’s international poverty line of 1.90 per person per day was adopted to separate the poor from non-poor. The data were collected by the means of a questionnaire distributed to a random sample of beneficiaries in the institution under study. The study adapted the Foster, Greer and Thorbecke (FGT) model to evaluate the role of microfinance programs in poverty reduction. Furthermore, to gain more insight into the impact of the program, a preliminary analysis was conducted using the independent-samples t-test to examine the difference in the welfare indicators for the sample of the control group and treatment group as well as that of the small loan group and micro-loan group.

The findings show that the microfinance program provided by SMFIs has reduced the monetary poverty among the participants. The results also reveal that beneficiaries who had received a larger volume of loan were noted lesser poverty than those who had received very small loan size. Moreover, the results demonstrate that poverty indices based on expenditure as a welfare indicator are far lower than those based on income for both groups.

This study contributes to the available literature by filling the gaps through including income and expenditure as monetary variables, which included separately in previous studies adopted the FGT model in the area of microfinance, in addition to exploring the role of loan size in the effect of microfinance on poverty reduction.

This study aims to explore economic, social, psychological and political empowerment and dis-empowerment of women caused by microfiance interventions. Women tend to face the brunt of societal discrimination created by economic, social, psychological and political disempowerment. This led to the emergence of the microfinance model for the rural poor and specifically focused on women as an agency for social change.

This study is based on a systemic literature review to examine microfinance-led women empowerment to reduce the ambiguity in theoretical and empirical underpinning.

The study’s findings suggest that even though microfinance as a developmental model is not a runaway success, it did make some positive impact on the status of women.

This study shows that the microfinance program empowers women and reduces societal inequalities to some extent, but literature also suggests that microfinance as a model has failed to make the requisite socio-economic change, and in some cases, there is adverse impact.

This paper aims to investigate the effect of Islamic microfinance on poor households through the case of the IKSAR Qard al-Hasan Program in Turkey. To achieve this aim, it examined the changes in the socio-economic status of beneficiaries before and after the program.

This paper adopts the convergent parallel mixed method design. It conducted two surveys to micro-entrepreneurs: the first is when they received the loan and the second is when they finished their installments. In addition to the longitudinal data obtained from these two surveys, qualitative data were collected by participant observation and interview technique with visiting these people periodically throughout the interest-free loan (qard al-hasan).

According to the results obtained from the analysis of the pre- and post-surveys, a statistically significant increase of 35% was experienced in the monthly household income after receiving the qard al-hasan loan compared to before. Similarly, a statistically significant increase was found in the monthly expenditures of 23 out of 30 households after receiving the qard al-hasan.

There are two originalities of this study. To the best of the authors’ knowledge, it is the first research that examines the only Islamic microfinance program in Turkey. Second, it uses longitudinal data while examining the impact of Islamic microfinance on the welfare of the poor. In the relevant literature, no study has been identified that uses longitudinal data in Islamic microfinance. Similarly, a limited number of longitudinal studies examine the impact of conventional microfinance institutions on the poor.

This study aims to propose a hybrid microfinance model that integrates various Islamic commercial and social finance institutions through Fintech for efficient and impactful results. The microfinance model caters to the financial and social intermediation needs through a set of financial services and non-financial support.

The study uses both a mathematical model and an empirical estimation using micro panel data to establish the core problem in microfinance operations. Conclusions from the mathematical model and estimated results in the empirical analysis are used to suggest an institutional design which embeds technology in the delivery of Islamic microfinance in an integrated structure. For screening and incentive conditions, the study gives illustration through numerical examples.

The mathematical model highlights the need for financial sustainability, outreach, scale and complementariness of non-financial factors such as commitment, repayment incentives and skills enhancement multiplier. In light of this, the proposed Islamic microfinance model is outlined to create synergies by integrating a diversity of funding sources through social savings and impact investments. The programme also blends financial services with non-financial support to ensure engagement and commitment on a long-term basis. It uses Fintech in various demand and supply-side operations to show how technology embeddedness can help in achieving cost efficiencies and extend outreach.

It is the first study in integrated institutional design in Islamic microfinance literature that embeds Fintech in both demand side and supply side operations comprehensively. The proposed model is conducive for enhancing outreach, scale and impact in the Islamic microfinancial services.