I was delighted to be invited by Nancy Thomas, your new Head of Lendwithcare, to write a blog highlighting the work we have done at the University of Portsmouth to better understand the positive impact of Lendwithcare on the lives of loan recipients.
Of course, Lendwithcare aims to change lives through making loans that help some of the world’s poorest and most vulnerable entrepreneurs to work their way out of poverty. However, one key question surrounding the lending model is: does it make a difference? It’s surprisingly difficult to answer this question, since it is impossible to observe an alternative world in which entrepreneurs supported by Lendwithcare didn’t receive a loan. However, through carefully designed research, it is possible to strongly infer the likely impact.
Over a number of years, my colleagues and I at the University of Portsmouth have worked to provide rigorous and independent evidence that helps answer this question. In a study running between 2022 and 2024, we collaborated with one of Lendwithcare’s partners in Ecuador to collect information about a representative sample of 350 client entrepreneurs who had received loans. We observed how their family, household and business circumstances changed over a period of around 18 months.
To provide a reference comparison, we followed a similarly sized group of entrepreneurs who did not receive a loan and measured the same outcomes over the same period. Comparing the experiences of the two groups could then help us establish how the lives of clients had changed after receiving a loan.
One challenge was finding non-clients with sufficiently similar characteristics to the clients to allow an appropriate comparison. We needed to account for the possibility that there might be important underlying differences between the two groups that were beyond our control. Rather than simply comparing average outcomes between loan recipients and non-recipients, we used a specialised analytical approach that placed greater weight on comparisons between entrepreneurs with more similar profiles – for example, those working in the same industry, with similar levels of experience and similar household circumstances.
Using this approach, we found clear evidence that entrepreneurs who received a loan tend to experience a significant reduction in poverty compared with similar entrepreneurs who did not receive a loan. Our study therefore provides strong evidence that loans from Lendwithcare are typically successful in achieving their core aim of reducing poverty and really can help to change lives.
A more detailed analysis revealed that the effect was particularly strong among female entrepreneurs compared with males. This result is especially important given Lendwithcare’s focus on helping some of the poorest women and girls in the world to work their way out of poverty.
The research also gave us valuable insights into actions that Lendwithcare and its partners might take to make the impacts of loans more sustainable over the longer term. These measures include providing monitoring and training to clients to help ensure their businesses grow as much as possible.
Overall, our study finds clear evidence of poverty reduction among loan recipients, even over the relatively short period during which we observed them. It is possible that some impacts take longer to emerge, meaning that our findings may understate the true impact over the course of a recipient’s life.
We are keen to work closely with Lendwithcare and its partners to undertake further research that will help us better understand the specific mechanisms through which impacts are achieved, as well as the longer-term trajectories of its loan recipients.