The number of microfinance institutions (MFIs) offering business and financial literacy education programs to their clients is increasing.  While there are several potential benefits to these types of programs, such as better financial decision-making, lower default rates, increased loan sizes, and expanded client base, there are some potential downsides as well.  If, for example, the education program requires clients to spend more time at regular center meetings, this could lead to a higher dropout rate.  In addition, providing education programs to the clients can be costly for the institution.

Considering the possible benefits and costs, it is critical for an MFI to evaluate the impact of these education programs on both the institution and the clients.  For this study, IPA partnered with FairBank, a rural bank based in northern Cebu province, to measure the impact of the financial literacy and business education programs on its group-lending clients. Trainings are based on Freedom From Hunger and International Labour Organization (ILO) financial education modules.

The evaluation takes place in two stages to allow us to test the independent and joint impacts of a) financial literacy training and b) business/entrepreneurial training. First, half the lending centers in the study will be randomized to receive financial literacy training (treatment) and half will not (control). After 3-6 months, those that received literacy training are randomized into two more groups: one group receives entrepreneurial training and one that does not. Individuals in the control group for the first randomization wave then continue without training.