Audit of USAID/Lebanon's Investment in Microfinance Program

The program aimed to increase sales, create jobs, and advance economic growth by providing grants to eight microfinance institutions (MFIs) serving various markets and specialties. As of March 21, 2013, the mission had obligated $8.8 million and spent $7 million. The program generally improved access to credit by providing loans to more than 6,300 borrowers. While 21 of 25 borrowers interviewed reported increased income and appeared to have benefited from the loans, the sample was not statistically representative, and data were not available to confirm their claims. The program contributed to the creation of some jobs but took credit for creating jobs that existed before the program began. However, the audit identified several problems, including the fact that program indicators did not measure progress toward goals. The monitoring and evaluation plan did not have any indicators to measure sales or income, and the mission did not obtain sustainability commitments from two of eight MFIs. Additionally, the mission did not measure training results. To address these problems, the audit recommends that USAID/Lebanon collect and document data on the number of jobs created separately from data on the number of jobs maintained. The mission should also implement a formula or method to measure income proxies of borrowers and define "job created" in writing for microfinance reporting purposes. Furthermore, the mission should implement a monitoring procedure to track microfinance partner progress toward sustainability and amend the Lebanon Investment in Microfinance program monitoring and evaluation plan to include an indicator measuring training results. The audit found that the program's indicators were not sufficient to measure the stated result. While the primary goals include increasing sales and income of micro-credit loan borrowers and creating jobs, the monitoring and evaluation plan does not include indicators that measure sales or income. Additionally, IESC included all jobs in all businesses in the indicator that tracks jobs created because of the program. However, many of the jobs they had were stable before receiving the loan, and therefore, the reported results did not reflect the number of jobs created. The agreement officer's representative said the mission did not measure sales or income data because borrowers in general did not have adequate bookkeeping, and mission employees did not think they could get accurate information. Audit site visits to loan recipients' businesses confirmed this difficulty. For example, the owner of a small convenience store said her sales grew by 50 percent because she used loan funds to buy a refrigerator, but she had no documents to support this claim. The Agency has developed official methods that other missions implementing microfinance activities use to assess poverty, but none exists for Lebanon. Using an informal poverty assessment method could help the staff estimate changes in sales and income. Monitoring plans and accompanying indicators should guide managers in making decisions, provide objective evidence of progress, and motivate staff. When plans lack adequate indicators, these goals cannot be met. Unclear definitions also led to unreliable reporting.