Stefan Dercon - acting on evidence

Stefan Dercon DFID(UK)

Acting on Evidence The case of microfinance

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Overview

1. Stating the Problem: Using Evidence to Inform Action 2. The Compelling Case 3. The Hard Core Case 4. The Religious Case 5. The Keynesian Case With illustrations from microcredit and microfinance

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Stating the Problem

•  Development business: –  driven by a passionate identification of need –  a commitment to spend cash and time sensibly on achieving

change •  The business in practice

–  Those controlling the purse want the best ideas to spend the marginal £ on

–  A commitment to changing lives, including via financial inclusion

–  Variety of outcome indicators (incomes, financial security, stability, broader development outcomes)

–  Financial inclusion: a theory of change that this leads for many if not all people to positive outcomes in terms of the above

2 © 2010 The Actuarial Profession � www.actuaries.org.uk



















My question

•  How do we and can we use evidence, not least from impact evaluation, to inform these decisions? –  Starting from how decision making typically works –  Acknowledging the state and nature of evidence

•  Evidence has always mattered – it is the way we produce and use it, that has changed

•  and let’s not forget: the importance of evidence was not invented in the last 1990s.




















The Compelling Case

Develop the strategic case and need: •  “get a compelling story” with good foundations in theory and

experience •  get examples to prove the point




















The compelling case Feature Microcredit Microinsurance Roots in experience and evidence of problem

Poor strapped of cash, including to invest in their own activities; Existing credit sources restricted, or even exploitative.

Poor face vast array of risks, such as drought, health, etc. Informal risk sharing and management imperfect.

Theory of the market

Good reasons for its failure and for substantial consequences, justifying to act

Good reasons for its failure and for substantial consequences justifying to act

Narrative • Poor so provide cash • Encourage them to invest • But ensure they repay

• Disaster looms around the corner • Protect against disaster • So they do more positive things

Development narrative

Responsibility, Enterpreneurship = positive, easy sell

Security, Rights, Protection = more negative, difficult sell

-  Large take-up not difficult -  Much traction -  Evidence on problem and

market failure

-  Take –up problematic -  Limited traction -  Evidence on problem and

market failure 5































market failure


market failure 6































market failure


market failure 7






























Result -  Large take-up not difficult -  Much traction -  Evidence on problem and

market failure


market failure 8






























Result -  Large take-up not difficult -  Much traction -  Evidence on problem and

market failure


market failure 9



















The Compelling Case

Develop the strategic case and need: •  “get a compelling story” with good foundations in theory and

experience •  get examples to prove the point

It is the world we still largely live in…

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© 2010 The Actuarial Profession � www.actuaries.org.uk



















Overview


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The Hard Core Case

•  Let’s decide all spending on the basis what works •  Get some help from bright sharp minds to help us decide what

works: doing the full cost-benefit analysis •  Get high quality methods to get at outcomes and impacts of our

interventions •  Ensure clear cost information •  Find out what ‘has high return’ in development terms, •  Invest in highest return for marginal £




















How feasible?

Pro: •  Forces us to use all evidence to get average and distribution of

impact •  Humility and possibility of transparency about what we know

and don’t know •  Avoids ‘bias’ of example as in compelling case •  And huge incentives to invest in more evidence to improve




















How feasible?

•  The problem with evidence –  the gold in the gold standard is at times impure –  “external validity” of the experiments

•  More crucially: –  Evidence is vastly incomplete

– Cost curves and impact curves and scale? – Context specificity and complexity of interventions –  Evidence is by its nature “with margin of error”

–  While pressures of need remain




















Example of microcredit

•  Microcredit is probably one of the most researched and evaluated interventions

•  When focused on impact of the poorest, hard to find strong evidence of positive impact, in systematic way –  E.g. systematic reviews by DFID – but still below 30 studies

to be included –  Roodman’s book – sourced more widely –  Or CGAP recent notes

•  But each microcredit intervention is a bit different, different political economy, economy, institutions.

•  Hard to include in CBA




















Example of microinsurance

•  Evidence much thinner •  Many studies suggesting uptake problems •  But enough ‘not to act’? Wait for another 10 years?




















Overview


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The religious case

•  The evidence from impact evaluation is flawed –  Let’s attack the evidence

•  Evidence of no evidence is enough to justify? •  Policy making by example

–  Compelling case squared –  Comms dominating evidence or caution

•  “millions of clients cannot be wrong” –  Average impact, distribution of impact




















Overview


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The Keynesian case

“when the facts change, I change my mind” J M Keynes •  Decision making as “error-correction”: use evidence to change

course •  When to act?

–  Negative role of evidence: if you fail to find any impact in various attempts, become more cautious

–  Note this is average impact – direct resources to find out who may be negatively affected (and don’t just look for the positive stories and examples)

•  Always be open about learning




















conclusions

•  Always a business where “compelling case” matters •  we cannot get full information on what works as guide to

development – –  evidence will always be less than perfect due to its nature

and nature of problems we want to address –  so hard core view is not quite achievable

•  But we should guard us to “religious” fanaticism against reason and the misuse of example-based evidence.

•  Move towards an ‘error-correction’ model of evidence?


Stefan Dercon - acting on evidence

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