A Framework for Understanding the Financial Health of MSME Entrepreneurs

This paper presents CFI’s conceptual framework for understanding MSME financial health along with a survey instrument that measures indicators for each factor in the framework.

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AUTHORS

Eric Noggle, Jacqueline Foelster, Tess Johnson

Topics

Micro, small, and medium enterprises (MSMEs) play an important role in economies across the globe. As crucial as they are for economies, MSMEs face a number of challenges when it comes to financial health. The entrepreneurs of these businesses navigate a complex web of exogenous and endogenous obstacles, ranging from discrimination based on gender or caste to challenges acquiring and implementing business skills.

While there has been extensive research done and data collected on financial health, there is a relative lack of surveys that seek to capture a holistic understanding of MSME financial health in one document. This tool seeks to close that gap.

This combined framework and survey tool is intended for policymakers, financial service providers, and NGOs so that they can learn about their MSME constituents. These entities will be able to use this survey to segment MSMEs based on their performance and drivers of it, in turn allowing them to better target policies, products, and services. While broadly applicable to MSMEs globally, CFI took a specific interest in microenterprises — both formal and informal — in emerging markets, and the survey instrument is ideally suited for that segment.

Authors

Eric Noggle

Former Senior Research Director

Eric oversaw a portfolio of research projects examining consumer financial behavior and its determinants from 2018 to 2021 and led CFI’s workstream on the role of financial services in helping low-income communities mitigate and adapt to the effects of climate change.

Prior to joining CFI, Eric served as research director at Microfinance Opportunities. While there, he led numerous research projects — including nearly a dozen Financial Diaries studies — examining financial inclusion and its intersection with energy poverty, labor conditions, and smallholder farmers, among other topics. In addition, Eric analyzed the transaction data of numerous large financial service providers to identify insights that influenced policy, product, and service development. Prior to working in financial inclusion, Eric worked as a high school mathematics teacher.

Eric holds a master’s degree from the Maxwell School at Syracuse University and bachelor’s degrees in economics and political science from the University of Nevada, Reno.

Jacqueline Foelster

Former Consultant

Jacqueline has nearly a decade of financial inclusion experience conducting research and implementing projects in emerging markets. In her previous roles as Senior Research Specialist and Consultant for CFI, Jacqueline contributed to research on various topics, such as financial capability and women’s financial inclusion. Prior to joining Accion, Jacqueline worked as a consultant at the International Finance Corporation supporting the Asia Pacific gender team on data collection and monitoring activities for a variety of projects aimed at improving women’s leadership and combatting gender-based violence. Jacqueline also spent several years working at MIX, where she led the deployment of a series of IVR-based surveys called the Voice of the Client. Jacqueline is a Fulbright Scholar and holds a bachelor’s degree in general business from the University of Maryland, College Park, and a master’s degree in international economics and Southeast Asia studies from Johns Hopkins School of Advanced International Studies (SAIS).

Tess Johnson

Former Research Associate

Tess worked to advance CFI’s research agenda on topics ranging from financial health and financial capability to alternative data and emergency cash transfer program design. Tess joined CFI in September 2016, initially supporting project management of the CFI Research Fellows Program, the HBS-Accion Program on Strategic Leadership in Inclusive Finance, and other research efforts. She oversaw project management of the MSME financial health workstream in Indonesia and India as part of CFI’s partnership with Accion. Tess holds a master’s degree in international relations and international economics from the School of Advanced International Studies (SAIS) at Johns Hopkins University, and a bachelor’s degree in political science and human rights from the University of Connecticut.