Presentation by Laura Foose, Alternative Credit Technologies, LLC November 9, 2005 Social Performance in Microfinance
Mar 26, 2015
Presentation by Laura Foose, Alternative Credit Technologies, LLC
November 9, 2005
Social Performance in Microfinance
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Social Performance Task Force
Launched in March 2005 by CGAP, Argidius Foundation and the Ford Foundation
Membership: 52 organizations20 NGOs
9 Donors
9 Networks/Associations
2 Social Investor networks
4 Microfinance Raters
7 Action Research Programs/Universities
3 Consulting groups
Subcommittee structure used to work on a common agenda developed by the task force
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Objectives of Social Performance Task Force
• Strengthen understanding of social performance and learn about relevant initiatives and tools
• Promote social performance management at MFI level so as to ‘improve’ operations
• Bring various stakeholders together to establish industry-wide standards for social performance reporting, auditing, and social rating
• Exchange on current and planned work in social performance
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What is Social Performance?
Social performance is the effective translation of an institution’s social mission into practice
(actions, corrective measures, outcomes).
la actuación social de un instituto como la traducción efectiva de su misión social (acciones,
medidas correctivas, resultados)
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Social Performance Management Questions
1. What are your social performance goals?
2. How do you monitor who uses & who is excluded from using your services?
3. How do you monitor & assess the effects on current clients?
4. How do you monitor & assess the reasons why some clients leave?
5. How do you use information to improve your services & achieve social goals?
6. How do you review & improve the quality of your systems and processes?
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Benefits of Social Performance
Better management (balance financial/social objectives, base line info., performance tracking, early warning systems)
More client-responsive (appropriate services, more product choices, better customer service)
Improved outreach and services (portfolio segmentation, understand client use, innovations, verify impact of programmatic changes, track impacts on clients)
Improved financial performance (better client retention, growth, lower operational costs)
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Manifesto de Task Force
Promover Resultados Sociales en Micro FinanzasHacia una línea base doble
“Las Micro Finanzas funcionan mejor cuando se mide - y se revela- sus resultados. Información estandarizada y exacta sobre los resultados, tanto sobre los resultados financieros como los sociales, es indispensable.” (De “principios Claves” del CGAP aprobado por Los G-8).
Nosotros los subscritores, como líderes en el campo de micro finanzas:
1) Definimos la actuación social de un instituto como la traducción efectiva de su misión social (acciones, medidas correctivas, resultados)
2) Reconocemos que medir el resultado financiero no es suficiente para medir el impacto que tiene micro finanzas en la vida de la gente pobre. Una línea base doble define el éxito como buenos resultados financieros y sociales, y que a largo plazo estos se esfuerzan mutuamente.
3) Reconocemos además el creciente interés por donantes, redes, practicantes, fundadores y otros “stakeholders” en la evaluación, la aplicación y el mejoramiento de nuevas herramientas para fortalecer el desempeño social, monitoreo y informaciones.
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Manifesto con’t
4) Apoyamos el desarrollo actual en el campo de monitoreo de resultados sociales, para organizaciones que tienen el mismo objetivo de promoción de la actuación social, pero cada uno con enfoques y perspectivas diferentes.
5) Nos comprometemos a convertirnos en pioneros para poner en práctica el monitoreo periódico,
reportando y liderando los aspectos sociales de nuestras organizaciones y las organizaciones que apoyamos
Formular objetivos sociales claramente especificados por nuestro organización;
Diseñar, introducir y usar sistemas para manejar, examinar, monitorear y reportar sobre los resultados sociales dentro y fuera de nuestra organización;
Usar la información sobre los resultados sociales para mejorar el efectos social de nuestras operaciones
Estar abiertos a auditorias externas sobre los resultados sociales
Promover y intercambiar ideas e información sobre los resultados sociales
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Work Plan of Task Force 2006
Promote the spread and practice of Social Performance Management through training of practitioners
Establish industry social performance standards and a common reporting framework
Develop a common reporting site at the MIX to support reporting on social indicators and make double bottom line reporting a regular practice in the MF industry
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Social performance pathway
Design and inputs
Mis
sio
n
Obj
ect
ives
Goa
ls
Reaching Target Clients
ChangeService Design & DeliverySystemsMeeting Client Needs
Outputs Outcomes ImpactIntent
“Effective translation of mission into practice”
Governance/policies
management/strategy Outreach/ Changesservices
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Current Initiatives and Existing Tools
Existing Tools New Initiatives
Intention and design
CGAP Poverty Audit
CERISE
Social Rating
(M-CRIL
Planet Rating
Microfinanza etc)
Outputs
CGAP Poverty Assessment
MicroSave
USAID/IRIS AMAP
Accion
Council of MF Equity Funds
CGAP/ Ford
FINCA
Imp-Act SPM
MFC
Outcomes AIMS
Imp-Act
Grameen FND
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At the level of MFIs
Reporting system for stakeholders (MFI Board, management, external financiers, member- clients)
Information for MFI strategic decision making and improved SP management
At industry level
Greater transparency on social development achievements
At national and international level
To provide a base for comparison with other MFIs on the basis of widely accepted SP standards
CERISE-Argidius CERISE-Argidius SP Initiative: ObjectivesSP Initiative: Objectives
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IntentionDesign
Principles
ProcessActionOutput
Outcome Impact
Economic & Social
Performance
Conceptual Framework
The SPI approach: a self- assessment of principles, actions and corrective measures for internal use and external reporting.
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Outreach to the poor and excluded
Adaptation of services and products to needs of target clients
Improvement of social and political capital of clients
Social responsibility of the institution
Score of 25 points each
4 Dimensions of Social Performance
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mission of the MFI
geographic and socio-economic focus
tools for targeting
size of transaction
collateral
Dimension 1: Outreach to Poor and Excluded
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Dimension 2: Adaptation of Services
range of services
quality of services
non-financial services accessible to the clients
participation of the clients in the design
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Dimension 3: Social and Political Capital
transparency of the financial transactions
clients representatives for consultation, decision-making or control of the MFI
empowerment : social cohesion, voice of the clients with the national or local government
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Dimension 4: Social responsibility of institution
human resource policy
social responsibility towards the clients
social responsibility towards the local community
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Social Performance Management (SPM)
the systematic assessment of performance relative to social objectives and the use of information to improve practice
1) demonstrate program impact
2) improve program services
Assessment with Action
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Main components of Social Performance Management
• Developing a social performance strategy
• Monitoring and assessing social performance
• Institutionalizing and using social performance information
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Component 1: Developing SP Strategy
• Clarify mission and social goals
• Define clear and realistic performance objectives
• Set measurable performance targets
• Design program (operational plan)
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Component 2: Monitoring and Assessing SP
SP systems – two approaches routine monitoring
follow-on research
SP systems – design (key questions) What information is needed? Who needs it?
How will information be collected?
From whom will data be collected?
How frequently will the information be collected?
Who will collect, collate, analyze and report information?
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Component 3: Institutionalizing and
Using SP Information
• Ensure effective use of information feedback loop
• Institutionalize SPM through management/board commitment and staff buy-in
• Improve SPM system through periodic reviews
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CGAP-Ford Social Indicators Project
• Develop indicators to track MFI social performance through monitoring outreach to the very poor and changes in client well-being
• Create common reporting format for MFIs across countries standardization
• Report on social performance of MFIs on MIX Market
35 participating MFIs
16 Asia
6 Sub-Saharan Africa
1 Northern Africa
9 Latin America
3 Eastern Europe
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Methodology
Develop 2 sets of indicators
• industry indicators: 5 to 6 globally applicable indicators on different dimensions that can provide cross-country comparisons
• proxy indicators: simple context-specific indicators developed by each MFI
Proxy indicators will be benchmarked to industry indicators so that MFI context-specific reports can be compared globally
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Methodology (cont’d)
Criteria for selecting the indicators
Have reasonable reliability/validity
Relevance across a variety of national contexts
Cost-effective data collection
How is the information collected?
• Existing client information from application form
• Simple low-cost small sample surveys
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Initiatives in Social Rating
Sub-committee: M-CRIL, Planet Rating, Microfinanza, AccionWith contribution from: Imp-Act
OverviewFrameworksIssuesIndicators and methodsCost
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Rating and social performance
Social Rating must reflect and make explicit the:
social goals and objectives in microfinance systems within an MFI which are relevant to achieving those objectives environmental factors which affect MFI activity, and indicators of whether those objectives are [on the way to] being achieved.
SP definition: effective translation of social goals into practice
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Social Ratings so far: ‘pilots’
Excludes questionnaire tests which did not result in reports
Stand-alone reports: - complement to the financial assessment of credit rating- a direct comparison of the ‘double bottom line’- still some experimentation
Agency Region Complete In processTotal 7 11
M-CRIL S Asia 3 5Planet Rating E Eur 2 3Microfinanza E Eur 3NAR Africa 2Accion Lat Am 1
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Objectives
To contribute to: Investment decisions Transparency on social performance Benchmarking social performance across MFIs, and to Encourage MFIs to improve their social performance (specific recommendations possible)
Task: To simplify and measure quite complex ideas Adapt to different contexts and organisational models Provide validity – reasonable levels of rigour/precision Do so practically – at reasonable levels of time and cost
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Different frameworks
Cerise: social indicators project - dimensions of corporate social responsibility (CSR - clients, employees, community) + mF specific dimensions (depth of outreach and adaptation of services) [starting point for some rating agencies]
Rating agencies/M-CRIL: the Imp-Act pathway and credit rating approach (focus on MFI and clients)
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Working hypotheses in rating
the risk profile and creditworthiness of an MFI depends critically on its financial performance,
the social profile of an MFI depends critically on its outputs (depth of outreach and appropriate products),
but both are also affected by its managerial capabilities and governance
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Social performance pathway
Design and inputs
Mis
sio
n
Obj
ect
ives
Goa
ls
Reaching Target Clients
ChangeService Design & DeliverySystemsMeeting Client Needs
Outputs ImpactIntent
“Effective translation of mission into practice”
Governance/policies management/strategy Outreach/services
SOCIAL RATING
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Social benchmarking?
Generic social values (clear and agreed) – or specific to each MFI’s situation, model and stated objectives?
E.g. not all MFIs target women, target the poor, apply group based model (social collateral), can legally offer savings products
Considerable debate: try to balance both
Generic is important to compare across the industry (countries, models); and has to make sense for specific MFI
Reflected in selected dimensions and what is scored
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The dimensions of a social rating
1 Social mission, systems, strategy2 Outreach – depth and breadth3 Appropriateness of financial services4 Social responsibility to clients5 “ to staff6 “ to community
Similarity in scope and content:
Differences in grouping, and in scoring1-3 are fundamental, can be scored (equal weights)4 may be scored as part of 1 and 35-6 difficult to score; can be described
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Parameters: social mission & systems
Mission: clarity, communication, commitment (board/mang’t)
Systems aligned with stated mission: approach to targeting; staff incentives; reporting/monitoring and use of information/findings (e.g. market segmentation, client data/feedback, dropout data/feedback)
Relationship with clients: transparency, ensuring awareness
Provision of or linkage with non-financial services – described
Main
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Indicators: Outreach
Operations in poorer areas (more remote, poorer within more developed areas, e.g. urban slums)
Clients who are poor - % and numberHired employment in micro-credit supported enterprises
% clients not served by formal financial services% clients not served by other MFIs
% clients from marginal groups/communities
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Indicators: Financial services
Range of financial services (within regulatory guidelines) Process of product development
Client awareness/understanding Client satisfaction: products, EIR, timeliness, comparison with alternative sources
(if applicable) Effective group systems (regular attendance, updated passbooks, transparency of transactions)
Client exit – dropout rate Poverty assessment of dropouts, reasons for exit