MicroSave – Market-led solutions for financial services Offices across Africa, Asia and Latin America www.MicroSave.net info@MicroSave.net SOCIAL PERFORMANCE MANAGEMENT (SPM) TOOLKIT MANUAL Prepared By: Matt Leonard With: Chris Linder, Meryem E. Faris, Neeraj Lal and Alice-Mary Meggs November 2009
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SOCIAL PERFORMANCE MANAGEMENT (SPM) TOOLKIT MANUAL
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MicroSave – Market-led solutions for financial services
MicroSave – Market-led solutions for financial services
Table of Contents
I. Introduction: Putting Social Performance Management into Context .................... 1 What is Social Performance? .......................................................................................... 1
What is Social Performance Management? .................................................................... 3 What are the Various Tools used in Social Performance? .............................................. 3 What is MicroSave‘s SPM Approach and How is it Different? ..................................... 6 Why Opt for Social Performance Management? ............................................................ 8
II. MicroSave’s Social Performance Management Approach ..................................... 10 Mission and Governance............................................................................................... 10 Understanding/Responsibility to Clients ...................................................................... 12 Improving Performance: Client feedback ..................................................................... 13
Client Services .............................................................................................................. 14 Alignment of Strategy and Systems .............................................................................. 16 Strategic Business Planning (SBP) ............................................................................... 16
Understanding/Responsibility to Staff .......................................................................... 19 Other Key Categories .................................................................................................... 20
Responsibility toward Community & Environment ..................................................... 22
III. Preliminary Work: Determining the Role of Social Performance Management in
an MFI’s Institutional Strategy ................................................................................ 23 Creating a Socially Performing Institution? ................................................................. 23 Considering the MFI Expectations and Wishes ............................................................ 24
Assembling a Social Performance Management Team ................................................ 24
IV. The Process: Diagnosis and Analysis ...................................................................... 25 Auditing Internal Documentation ................................................................................. 25 Assessing Current Performance .................................................................................... 27
V. The Process: Analysing the Results .......................................................................... 37 VI. The Process: Developing a Strategic SPM Action Plan ........................................ 39
3. Social Performance Management (SPM) Indicator List ........................................ 51 4. Inventory of Staff and Client Interaction Tools ..................................................... 54
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Mechanisms for Redress of Grievances.
Privacy of Client Data
Q: Do you have policies or practices designed to protect clients? An MFI should maintain the privacy of client data (for instance, from prying husbands or local
politicians) unless they have permission otherwise. Likewise, policies or practices should be put in place
to ensure proper treatment and a non-discrimination of the clients from your field staff. A code of
conduct, signed by each loan officer might be used, as well as proper training and supervision of staff.
Q: Do you take measures to ensure Client Protection?
Clear instructions in the operations manual, well-informed and trained staff, as well as good supervision
of staff demonstrate an MFI‘s desire to protect its clients. These measures should be backed up with
interactions with clients and grievance policies to monitor actual adherence to client protection norms.
Transparency and Communication
Q: Are product terms and conditions, as well as the rights and responsibilities of clients, communicated
to them in a way that illiterate clients can understand and remember?
All documents and communication should be clear and, ideally, written in the local language, especially
in receipts and passbooks for one. The loan officer must understand (and be incentivised accordingly) that
ensuring clients understand the product and terms is just as important as disbursing the loan. This may
include communicating everything in a simple, clear verbal manner to those clients who are illiterate.
Q: Do you have a policy for supporting clients who face repayment difficulties due to factors outside of
their control?
One of the major risks in microfinance is an inability to pay due to illness, death or natural disaster. How
an MFI handles clients in these circumstances may tell a lot about its ‗social‘ orientation. There needs to
be a balance between maintaining credit discipline and working together with clients – through things like
insurance, an emergency fund, grace periods, advising and - in some cases - loan rescheduling.
Q: Do you have a policy to help avoid and monitor over indebtedness?
Over-indebtedness can be due to multiple borrowing (from formal and informal sources) or due to
loan/instalments size poorly fitted to clients‘ capacities, and can lead to tragic situations such as those that
occurred in Andhra Pradesh recently. It is the responsibility of the MFI to avoid this situation and conduct
a strict screening of the client as well as to create appropriate products. A client who can get a loan by
simply filling up a form is not sufficient, even with a group guarantee in place. Policies may be devised
that prohibit lending to those with multiple loans outstanding or insufficient income stream to support a
new loan. If operational needs, capacity and/or the situational (and competitive) context permit, an
income and cash-flow analysis is the best way to avoid client default and over-indebtedness.
Improving Performance: Client feedback
Regular Client feedback is the best way to ensure that an MFI ―does no harm‖ and is part of the customer
service culture an organisation should adopt for better social performances and transpose into effective
processes, internal audit and training of staff.
Q: Does your institution have client feedback and complaint mechanisms in place?
Clients should be able to point out poor service, product and transaction issues, etc. An effective
grievance mechanism –not just a suggestions box in a branch office that no one ever uses- should be
available. MFIs can provide a help line, give out the phone number of the branch manager, etc.
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Cost of Services
According to Chuck Waterfield, founder of MFTransparency.org, microfinance - though highly
transparent in some areas – has not been always consistent when it comes to accurately reporting the true
costs of its services. Perhaps, this is ―due to complications of market conditions and lack of regulation‖,
but the true price of loans, for instance, has rarely been accurately measured or reported. MFTransparency
believes there is a need to present information on credit products and their prices in a clear and consistent
fashion17
.
Q: Do your clients know the interest rate they are paying for their loans ? MFI prices will usually be higher than normal banks; however, it is important not to charge more than is
necessary or pass on the costs of inefficiency unduly to the clients. This may be particularly relevant in
areas with a charged political climate – where local politicians, activists or religious leaders may seize on
this as an example of an MFI charging ‗usurious‘ rates.
So many times, when one asks a client how much does he/she pays for interest rates, fees, premiums, etc,
he/she does not know the answer. Marketing materials and communication should give clients full
information about the true costs they are paying for loans and transaction services, and how much they are
receiving for savings. While all clients understand that paying a low interest rate on a loan is better, few
can calculate the effective interest rate when factoring in a declining (rather than ‗flat‘) rate of interest,
and associated fees such as loan origination charges, membership fees, compulsory loan insurance, etc.
Client Services
Special attention should be given to the lending methodology used by the MFI as well as the number,
variety, and features of products it offers. An MFI is considered to be performing better from a social
point of view when it offers a range of high quality financial products, including insurance and savings or
flexible services (terms, size, grace period and top up loans)to its clients and not just credit.
Understanding Client Needs Understanding clients‘ needs (e.g. market research) is one of the most important ways an MFI can
improve both its social and business performance. It helps to understand client needs and preferences, so
as to better tailor products (types, terms) and services. In a competitive market, it is also a way to
differentiate; while in a nascent one, it is a way to attract clients and deepen outreach. In any
circumstance, understanding client needs should be built into an MFI‘s institutional culture and it will
likely pay dividends in client retention, financial performance and growth. MicroSave‘s SPM approach
draws from its Market Research for MFIs and Customer Service toolkits, including the following tools:
ServQual/customer satisfaction surveys, Focus Group Discussions (FGDs), Drop-out
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ways more informally, including: monthly/quarterly meetings with clients, feedback mechanisms like a
drop box or phone line, informal client visits by supervisors, weekly/monthly debriefing with field staff
about client issues.
Q: How often does your institution use such means?
In order for an institution to be truly attuned to client needs and preferences, and particularly in a
competitive landscape, an MFI should obtain client feedback continually – not as a one off or rare event.
Q: Do you tailor your products to reflect those needs/preferences?
As with most areas of Social Performance Management, it is not enough that information is being
collected. It may actually be unproductive if so much data is captured about clients, but ends up gathering
dust. Information pertaining to client needs and preferences should be used to inform key decisions in
policy and strategy, and may eventually be utilised to further develop/tailor products (after a more in-
depth market analysis and product development process!) and services.
Client Outreach
This section deals mainly with the way an MFI targets its clients. A precise and qualitative selection
process is always valuable by helping an MFI reach the client it wants to reach per its mission statement.
Collecting outreach data often involves (but is not mandatory) assessing the level of income or the
standard of living of prospective clients during the application process. Here again, the alignment with the
mission regarding the geographic targeting (rural/remote area, urban/slums) as well as the population
targeting (low-income, entrepreneurs, active poor, etc.) is of strategic importance while appraising social
performance.
Q: Is there a clear selection process for geographic areas based on criteria that match your mission?
Not all MFIs need target the poorest of the poor. Some may target rural or urban areas, some those living
below the poverty line and others the vulnerable non-poor. What is important is that: 1) the target market
matches with what is stated in your mission; and, 2) that client/geographic selection operational processes
are aligned with successfully reaching this market. This will not only help an organisation to meet its
mission, but become more efficient operationally.
Q: Are you reaching who you think you are?
The question follows, for senior management and even branch managers, as a way to understand how
successfully they are reaching their target market and whether client composition reflects its mission. Do
they periodically check client applications, monitor field staff‘s weekly planning, guide or train staff in
outreach, or visit the field to meet clients and verify information? If not, then an MFI may not really know
who they are reaching. At one small MFI in central India, field staff had a habit of ticking off the ‗poor‘
category on client application forms regardless of income levels, simply because management wanted to
serve the poor.
Client Retention
Your client retention is your capacity to keep your clients after product cycles have concluded and
depends mainly on the quality of your products and services and the level of service they receive. Happy
clients obviously help the MFI‘s financial performance and sustainability in the long-run, but the
retention rate, or inversely exit rate, can also be an important indicator of social performance. If clients
are leaving an MFI‘s programme, then it is missing a chance to improve their well-being and serve their
MicroSave Resources
• Institutional and Product Development Risk Analysis
• Product Roll-out
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true needs. Furthermore, seasoned clients taking bigger loans are more profitable from a financial
standpoint - the cost of recruiting and training new clients is so much higher. For instance, Mibanco in
Peru estimates that it takes four loan cycles to recover the cost of attracting a new client18
.
Q: Do you calculate and report the exit/dropout rate?19
Retention rate = active clients at the end of the period
(active clients at the beginning of the period+ new clients)
Dropout rate = 1- Retention Rate
Source: Social Performance Standards Report, MIX Market. 2009
Calculating and reporting client dropout rate can be an easy way to put client retention on the
management dashboard. Furthermore, conducting Exit Surveys might be very useful – particularly when
client dropout spikes during a particular month or at a particular branch. By monitoring who is leaving the
programme and the reasons why, one can better adjust products and services to retain the bulk of the
MFI‘s clients and can also give MFIs a sense of how well staff is treating its customers!
Alignment of Strategy and Systems
Strategic Business Planning (SBP) The SBP process should ensure that social as well as financial aspects and objectives are covered. This is
the key document that reemphasizes the mission and vision of the MFIand, as such, forms the base of our
analysis. The mission should contain social concepts, and the business plan, through its key objectives,
should aim to fulfil the mission‘s stated goals. Every MFI has a different mission, and therefore, the
social performance analysis (and the tools to be used) will be different. For instance, for an MFI targeting
the poor, Poverty Wealth Ranking may be used, whereas for an MFI targeting women and aiming to
empower them, the Empowerment Focus Group Discussion may be used.
Q: Do you set targets based on social objectives?
The business plan should help the MFI act on the mission by setting objectives and determining measures
to achieve it. To probe this question, it is necessary to examine the KOGMA20
of the MFI. The MFI‘s
KOGMA should reflect the social objectives of the mission statement. If no social objectives are
established yet , a review of the SBP should be included in the SPM Action Plan (Day 5).
Q: Is performance against your social objectives monitored?
Setting objectives is one thing, monitoring their actual implementation and results is a far more difficult
to do. If performance is being measured, it demonstrates that the MFI already has a strong social focus.
However, equally importantly is what is done with the monitoring of social performance or of
achievement of its social objectives. This information should not sit on a desk, but rather it should be used
18 Campion et al. Putting the „social‟ into performance management. Imp-Act/IDS. 2008 19 Note: ―A drop-out is any client who has had no transaction with the MFI for the last 6 months.‖ Technical Note #1: Estimating
Client Exit Rate. M-CRIL. 2007. 20 KOGMA: stands for Key Objectives, Goals, Measures/targets and Activities – which together provide a clear, simple
framework for he implementation of your Strategy. From MicroSave‟s Strategic Business Planning for Market-led Financial
Institutions Toolkit
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to inform key decisions, form an integral part of regular reporting, and adjustments should be made if
performance is off target.
Human Resource Management Human Resource Management (HRM) tools and systems are critical in finding, training, managing,
motivating, and developing a team of staff who will effectively carry out an MFI‘s mission. By building
strong, well functioning human resource systems and tools, your institution will be poised for growth,
ready to manage the challenges of an evolving environment, and responsive to the needs of your clients.21
All employees, regardless of their position in your MFI, need the same things to be successful. Everyone
needs to:
1. Identify with your MFI‘s mission
2. Understand their role, and how that contributes to the mission
3. Know specifically what is expected of them
4. Have the capacity, resources, and environment that make success possible
5. Receive encouragement, constructive feedback, and opportunities to develop and improve
The job of the Human Resources Department is to implement systems and tools that will provide these
key elements to help the individuals within your MFI to be highly motivated and successful. In addition
to mission fulfilment and keeping employees happy, this will ultimately contribute to improved
efficiency, productivity and ultimately reduced costs.
Q: Does your induction / training include an emphasis on mission and social performance?
An MFI‘s staff members are the face of the organisation to clients and should mirror the MFI‘s values. A
social mission reiterated during induction, trainings, and staff communication help to create a strong
social performance culture in the MFI and encourage staff to ingrain this culture in their behaviour.
Q: On which areas of social performance does training focus?
If social performance is important to the MFI, then beyond an organisation‘s mission and values, training
may be designed to include modules on how to prevent client over-indebtedness, clear communication in
pricing and terms, and proper treatment of clients.
Q: Do your institution's staff performance appraisals of staff relate to social objectives?
In order to ensure that staff are following an organisation‘s social objectives and enacting them in the
field, staff performance appraisals should include such categories (e.g. reaching the rural poor, providing
client-friendly services). This gives a signal to staff that they are being measured in these areas and should
work towards those goals and objectives as part of their day-to-day activities.
Q: Does your institution have in place a staff incentives scheme related to its social objectives?
In the same way, an organisation‘s staff incentives should be well aligned with its mission. Many MFIs
reward staff for client outreach (number of new clients) or portfolio size (or interest income), but may
also wish to consider social parameters (customer satisfaction) or at least client retention (or total number
of clients) as a way to ensure strong social performance alongside financial performance.
Management Information Systems An MFI‘s management information system is the lifeline of effective management. Because good
information is essential for the institution to perform in an efficient and effective manner - the better the
information, the better the institution can manage its resources22
. An MFI should design and/or adapt its
21
MicroSave/MEDA. Human Resource Management Toolkit. 2007 22
Prakash, L.B. et Babu, S. Management Information Systems – A Practical Toolkit. MicroSave. 2008
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MIS to collect and report on those indicators of value to stakeholders and that match the institution‘s
overall mission. While oftentimes MFIs are reporting on key financial parameters - client outreach,
portfolio at risk, portfolio outstanding, etc. – social indicators which are linked to the mission are rarely
included in management reports. This has large implications, for if an MFI‘s senior management lacks
timely information then it cannot monitor achievement its mission. Social performance management
involves including social indicators in management‘s ‗dashboard‘ (or MIS and reporting systems) to
allow them to make informed decisions.
Q: Does your MIS contain social indicators linked to your mission? An organisation‘s MIS should be aligned with its mission and strategic plan. Possible indicators will vary
depending on the mission and region, but may include:
• Client dropout/retention statistics
• Client and staff satisfaction levels
• Outreach:
• Analysis by region – poorer or underserved districts
• Usage of products and services by client demographic categories, such as women, poor,
entrepreneurs
• Income or socio-economic level (if part of mission)
• Delinquency analysis by client type, industry, region, etc.
• Client outcomes such as client poverty assessment and/or trends out of poverty
• Women‘s empowerment (or # of women accessing health services, engaged in community
activities, etc.)
Q: Is social data properly analysed and used in decision-making? In many cases, an MFI may actually be gathering client level data on socio-economic status during the
intake or loan application stage. However, the data is usually left idle, even if entered into the MIS.
Adjusting the MIS‘s technical parameters to enable analysis of these parameters can be relatively easy.
For social performance management, one must follow the same process as when they are designing an
MIS: interviewing key stakeholders, determining what information is needed, deciding at what frequency
it should be reported; and collecting the necessary data. What is critical is that the information is properly
analysed and actually informs decision-making.
Some additional questions on MIS may be: Are reports covering SPM readily available, even at the field
level? Are the reports available based on institutional-wide, regional, branch and staff member levels?
Internal Audit and Controls Although the domain of internal audit and control in microfinance has typically
placed an emphasis on financial control and associated risks, mechanisms to
oversee and protect an organisation‘s social objectives and values is equally
important to an organisation‘s reputation and long-term sustainability23
.
Having internal controls in place relative to SPM can be evidenced in the
following key areas:
Client Protection: Proper internal controls play a key role in ensuring
strong mechanisms for client protection. Auditors or Supervisors should
ensure that client documents are complete and up to date, that clients are aware of product and
service terms and conditions, client privacy is maintained, and that no frauds are being committed
by field staff or group leaders
23
Campion et al. Putting the „social‟ into performance management. Imp-Act/IDS. 2008
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Timeliness of loan disbursement: Likewise, monitoring the timeliness of loan disbursement –
through talking to clients or reviewing loan documentation at the branch – is another key aspect
of internal controls
Proper treatment of clients: Just as an Internal Auditors and Supervisors ensure adherence to key
processes and procedures, they should also pay close attention to proper treatment of clients.
Appropriate behaviour with clients can be included in the code of conduct, but may also form a
part of training (through role plays, etc.). This includes how to treat clients who are delinquent or
absent to meetings– areas where pressure from senior management to meet targets may leave
room for abusive behaviour. Treatment of clients may be monitored through field visits and
talking to clients, but also may be checked if a functioning client feedback and grievance
mechanism is in place at the MFI.
Social Audits: Finally, an organisation may wish to do periodic social audits, ratings, or SPM
visits (done either themselves or through outside consultants) or integrate a robust social audit
into regular internal audit and control systems. This may include verifying the accuracy of data on
client outreach, poverty levels, impact or any other relevant indicators.
Q: Are social objectives and criteria integrated into the institution’s internal audit and control system? By integrating social criteria into an internal control system, not only does this help an organisation
manage social risk (or the risk of not adhering to its mission) but helps institutionalise social performance
management across core systems. Critical to integration is that findings are not only included in internal
audit/control reports, but that changes and follow up is done to ensure implementation.
Understanding/Responsibility to Staff
Responsibility to Staff
Q: Do you have a clear HR policy to ensure fair and equal treatment of staff?
First of all, the HR Policy should be clear and fair. An MFI should maintain and truly implement its HR
manual as a fundamental first step. It (or at least relevant portions of it) should be readily available for all
employees, in the relevant vernacular language. HR policy should also ensure all staff have an exhaustive
and detailed job profile, including social responsibilities and goals to help the MFI meet its mission
Q: Do you have a clear salary scale that reflects competitive or market rates?
Q: Does your institution provide staff with a full range of benefits (that truly provide benefit to your
employees)? Competitive salaries (for the marketplace and/or sector) and benefits are the minimum expectation an
MFI should address to take care of its employees. These steps help ensure staff retention (one of the most
difficult and costly challenges facing MFIs) and may also lead to higher staff performance levels. Many
MFIs in India in particular provide ―housing benefits‖; however, much of what is on offer is crowded and
sub-standard. Benefits that attract and retain staff may include things from health insurance, provident
fund/pension, vehicle allowances, staff personal/vehicle loans and other non-financial benefits (staff
picnic, awards, etc.).
Q: Are there clear policies for staff development (training plan, performance reviews, promotions)?
A performance appraisal and promotion policy aligned with your social objectives, is a good way to boost
staff efficiency as well as social performance. Ideally, a staff incentives scheme based on social indicators
is the best way to entertain a corporate culture around social performances.
Staff Feedback
Ensuring that staff can give inputs and have a voice in the MFI, and that their problems and concerns are
taken seriously, should be given due importance at an MFI and are assessed as part of an SPM visit. By
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monitoring employee satisfaction, implementing a grievance procedure, and monitoring staff turnover,
and MFI can help to retain and motivate its employees – thereby improving business as well.
Q: Do you have a grievance process in place to allow employees to report any misbehaviour in a non-
threatening, anonymous way, such as for cases of sexual harassment?
It is important to have a fair and functioning grievance mechanism for staff. This shows them that
problems need not fester, but can be resolved equitably at the organisation. There should be clear
procedures on who to approach, as well as ways to go around an offending party (such a supervisor) to
report an incident to a higher authority or even anonymously if necessary.
Q: Do you monitor employee satisfaction on a regular basis? How often do staff members receive
feedback and performance reviews?
One of the best ways of gathering feedback from staff is through regular staff satisfaction surveys. Staff
Satisfaction Surveys on a regular basis, an MFI can:
Assess the level of satisfaction of your employee
Convey the message that they being listened to
Get constructive feedback and suggestions
Such surveys take a barometer of staff feeling, and adding open ended questions may allow them to
pinpoint problem (or success!) areas. Likewise, staff themselves often want to understand how well they
are performing, what they do well and what they need help on. That is why regular staff performance
reviews are important to an MFI‘s ability to be responsible to its staff. Again, it‘s not enough to merely
collect such feedback/information. Senior management must take action based on any issues –include
increasing positives and decreasing negatives – in order to use such information effectively and make the
staff feel that their opinions are truly valid.
Q: Does your institution monitor staff turnover rates? High staff turnover can negatively impact an MFI‘s operational costs and sustainability. Staff turnover
rates thus offer a glimpse into how well an MFI is treating their staff and/or whether or not it is hiring the
right people for its positions. By keeping track of staff turnover – for instance, in monthly reports – MFI
senior management can quickly catch any abnormal movements and investigate/fix them (possibly by
using a staff satisfaction survey or analysis of exit interviews)
Q: Do you regularly perform exit interviews with departing staff?
Exit Surveys can provide useful information about your organisation when an employee leaves the MFI
for any reason and it becomes urgent particularly when staff dropout levels are abnormally high. Exit
surveys can help the MFI:
Have a clear diagnostic of what went wrong (or not)
Take measures to correct/improve certain practices
Avoid the situation happening again
Other Key Categories
Gender Approach/Non-discrimination
For those whose mission focuses on women, or whose clientele is predominantly
women, it is important to consider the gender policies and/or practices of the MFI.
For instance, some MFIs ensure women‘s rights to apply for and take on loans independently of their
husbands or apply zero tolerance policies for sexual harassment. Equally as MFI‘s often focus on those
excluded from formal financial non-discrimination is often another key area to assess during an SPM
intervention. However, as not all institutions have an exclusive focus on women, it is not a mandatory
field in the MicroSave SPM toolkit.
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Q: Do you have any gender policies/strategies to address gender inequality in your institution?
Gender equality and non-discrimination policies and practices towards staff should address not only the
organisation‘s hiring/recruiting, but also equal pay, training, promotion. These should be open to all,
male or female, and not be discriminatory based on caste, class, religion, tribe, sexual orientation or other
criteria. Likewise, there should be equal access to management and board positions, and no tolerance for
any form of sexual harassment. For instance, if most of the middle and senior management posts are held
by men and your MFI serves women clients, you may not have a strong policy of promotion and
advancement catered to everyone, regardless of gender.
Q: Do you have any policies/strategies to address gender inequality in society?
Gender equality and non-discrimination policies and practices is also very relevant when it comes to
treatment and outreach to clients. An MFI can reinforce its values by appropriate client targeting (what
time of day are meetings held – and is this convenient for women or outside of times for household
duties?), products (unsecured loans backed by group guarantee, school or house loans, emergency or
consumption loans, Islamic products, etc.) or methodology (e.g. group-based may be appropriate in some
cultural contexts, women loan officers in others).
Non-financial Services
Some MFIs provide a variety of additional services to enhance the provision of financial services and help
bring people out of poverty or exclusion. These are not a mandatory aspect of MicroSave‟s SPM
diagnostic, nor should MFIs necessarily try to do anything other than provide financial services, but it
may showcase an MFI‘s attention to its social objectives. The key to assessing such services is that they
are in line with the overall mission and objectives of the MFI.
Q: Does your institution offer any non-financial services to meet clients other needs?
The MFI may choose to provide non-financial services directly, through an affiliate, or through a third
party if the MFI feels that it does not have the capacity and that it should not overlap other service
providers. These services can include the following:
• Education: trainings dispensed by the MFI to increase the skills of its borrowers, sometimes
integrated in a value-chain project (e.g. sewing courses, etc.)
• Health services: nursing and hospital services
• Business development: helping the borrower to run a sustainable business
• Women‘s empowerment through social activities and trainings
• General empowerment programs of the poor and excluded, e.g. lower caste groups/tribals
It may be good to ask, if an organisation is providing such services, whether it is achieving maximum
leverage for the resources that are being utilised in these programmes.
Client Impact This section deals with how the services of an MFI may affect – or benefit – its clients in tangible ways,
through the asking of such questions as:
• Are you making an impact on client households and livelihoods?
• Are clients‘ lives improving or leaving poverty behind?
• Are they becoming empowered? Are more children in school?
Q: Does your institution track the changes in poverty (or any other socio-economic outcomes) over
time in its clients?
Again, the MFI‘s own mission will dictate what is set as objectives for impact and what should therefore
be measured or monitored. True impact assessment requires preliminary work whereby the MFI collects
all the baseline information that will subsequently allow monitoring of the evolution and appraisal of the
changes against this baseline. Often, measuring impact depends on the efficiency of the MFI‘s targeting
BEWARE! There is much evidence that impact studies and client tracking are fraught with issues
and often inconclusive. An MFI may want to let the clients define impact rather than use an
academic, quantitative approach based on assumptions made in an office rather than in the field.
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policy: a rigorous quantitative and qualitative client screening will help the MFI to evaluate properly
impact further on.
Responsibility toward Community & Environment
Responsibility towards both Community and the Environment is fast becoming a
norm across the social performance industry. Although not considered mandatory,
MicroSave has included it as a possible measurement in its SPM toolkit. Because
the borrower is himself/herself involved in a larger community, the MFI should
remember that all of its activities have an impact on the whole community.
Likewise, the environment may be affected by those activities undertaken by an
MFI.
Q: Do you have a policy for responsibility to the community? Or undertake other activities or initiatives
that benefit the community?
Responsibility to the community may take the shape of a lending policy prohibiting compromising or
damaging activities, such as child labour, liquor business, etc., or may also take the shape of sponsoring
activities that give benefit to the community (sponsored community events, health clinics, etc.).
Q: Do you have a formal/informal policy for responsibility to the environment for the type of client
enterprises/activities for which you give loans or internally, how you manage your resources?
Responsibility to the environment is applicable to those organisations that consider microfinance as a
―Triple Bottom Line‖ activity that has financial, social and environmental objectives. Although loan
utilisation can be difficult to monitor accurately, an MFI can protect the environment by monitoring the
kind of client businesses it funds (e.g. prohibiting activities that pollute and promote eco-friendly
activity). Likewise, it may become more ‗environmentally-friendly‘ by internally undertaking green
practices (e.g. conserving water/electricity, using clean/solar energy).
Remember: Community and Environment activities should be aligned with the MFI‘s mission
and institutional capacity. The MFI cannot fix all the world‘s problems but can work with
other organisations to accomplish tasks beyond its own capacity.
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III. Preliminary Work: Determining the Role of Social Performance
Management in an MFI’s Institutional Strategy
Creating a Socially Performing Institution? 24
There are several steps that can be taken to ensure alignment between your Mission, Vision and Values
and the MFI‘s actual social performance:25
Have senior management articulate the SPM Policy: The role played by senior management in
creating and maintaining a social performance culture within a financial institution is critical. The
importance that management places with social performance is quickly telegraphed throughout an
institution. Thus, management should articulate the role and importance of Social Performance
Management in what they say and in what they do. This means developing and communicating
social performance strategies and maintaining mechanisms for listening to both clients and staff.
Involve different levels of staff: All levels of staff are ultimately involved in producing
responsive and responsible financial services, directly or indirectly. Therefore, all staff should
have mechanisms for contributing to the development of the SPM Strategy and mechanisms for
providing feedback on the Social Performance.
Have SMART objectives: Focus the strategy on Specific, Measurable, Achievable, Realistic,
Time-bound (or Track-able) objectives.
Hold people responsible for achieving those objectives: If everyone in your institution is
supposed to be responsible for social performance, make sure your performance appraisal and
reward systems are designed to hold everyone accountable for their contributions to social
performance. This can go beyond mere individual performance to include the signalling of
problems and the identification of solutions.
Build on existing capacity: Few financial institutions have the capacity they need to implement an
efficient SPM strategy, especially when they are still in a growing phase. By necessity, financial
institutions need to build gradually. Their strategy needs to be grounded on a realistic assessment
of current capabilities and capacity will need to be grown as required to create better alignment.
Nurture an institutional culture: The culture of the institution needs to be shaped and nurtured so
that it embodies an appropriate social performance attitude and approach. This can be especially
challenging for financial institutions which have grown quickly.
Put commitments in writing: It is very necessary that the senior management commitments
relating to social performance should be placed in writing.
24 Adapted from Campion et al. Putting the „social‟ into performance management. Imp-Act/IDS. 2008 25 Adapted from MicroSave‘s Customer Service Toolkit Manual.
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Considering the MFI Expectations and Wishes
1. Preliminary call Since every organisation has a specific mission, the social performance management strategy of each MFI
will be different. MicroSave‘s SPM toolkit takes this into consideration and every visit starts with at least
one preliminary call with the CEO. This call aims first to present the objectives of the Toolkit and then, to
consider the MFI‘s vision of SPM. This will be strengthened later during the informal discussion
surrounding your introductory presentation on Day 1 of the assignment.
Keep in mind that the SPM visit requires the attention of every key member of the MFI. Choose a date
during which maximum of people are available, especially the management and a few board members.
Remember that Social Performance Management begins at the top. So, the team needs the CEO‘s support
during the week to facilitate access to all the information requested. The team will also need to meet the
board, senior managers, branch managers and field staff. Avoid weeks preceding big team meetings,
meetings with bankers or founders as well as the training weeks.
This call should also include a request of all the strategic documentation for the ―audit‖: Strategic
Business Plan, Operations Manual, HR Manual and any other useful document (see in section IV.A.2.).
The team should also submit the Staff Satisfaction Survey to the CEO or HR manager at this time, which
will need to be translated into the language of the institution and administered to every staff anonymously
(i.e. without writing names on the survey to allow staff to express themselves freely) prior to the visit.
2. Informal discussion The introduction presentation held on Day 1 of the visit often generates lots of discussion and is the
perfect moment to confirm the expectations of the management into account. If the participants are
proactive, they will already have a myriad of requests and ideas which should be your priority and area of
focus during the coming week. If not, the team‘s role is to lead the discussion to some strategic points
relevant with the organisation‘s mission.
Assembling a Social Performance Management Team
After the introduction presentation on Day 1 has been done and the objectives of the visit determined,
MicroSave will need to create an ―SPM team‖ composed of MicroSave‘s technical staff and two to three
of the MFI‘s employees who will participate during the visit, coordinate the entire field visit and local
language interpreter as needed. Ideally, this person can be the Operations Manager, the Area Manager or
HR manager.
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IV. The Process: Diagnosis and Analysis
Auditing Internal Documentation
One of the first steps in diagnosing how well an institution‘s social objectives are
included in its management systems is by reviewing its internal documentation,
existing written policies and the actual systems themselves. Often times, much of
this work can be done off site (if externally reviewed) and ahead of time by
requesting and reviewing documents and policy manuals before arriving at the
institution.
The core of the SPM toolkit revolves around reviewing the following critical systems. It begins with the
Strategic Business Plan (the vision which lays out key goals and objectives of an institution) and moves
into Operations (how these plans are operationalised), Human Resource Management (how well staff are
directed and managed towards achievement of key goals), and the Management Information System
(what data is collected and analysed in order to take decisions).
1. Key Systems
Strategic Business Plan: (Mission Clarity, Alignment of Strategies and Systems, Outreach,
Services, Responsibility to Client) The SBP is a key guiding and management document for any
institution. It should be reviewed with an aim to clarify the direction of the organisation, and to
determine if the mission is reflected in the setting of organisational goals, objectives, strategy and
activities. Clear indicators and targets in the SBP may reflect a desire to measure the
achievement of the mission.
Likewise, an institutions‘ mission can be evaluated on how well it balances the social and
financial goals. If the objectives are strictly financial, but the MFI also has a social objective,
then the guiding ‗system‘ is not properly aligned. To realise any goal, a plan should clearly
articulate the objective, the activities necessary to accomplish it, persons responsible, and the
targets. Then, these need to be measured, monitored and made a part of the management feedback
loop and decision making.
Human Resources- HR Manual / Training materials: (Systems Alignment, Responsibility to
Staff) Human Resource Management is central to an MFI‘s ability to mobilise its resources
effectively. An organisation‘s employees are the face of the organisation, and retaining them
(and keeping them happy and motivated) is a key part of effective service to clients. Not only
must staff be treated properly, but they must also understand the organisation‘s mission and social
goals as well as their own roles and responsibilities in achieving these objectives.
HR,in the context of social performance, encompasses recruitment and hiring, HR policies, salary
and benefits, performance appraisal and incentives, and employee exits. Some of this information
can be gathered from documents, e.g. the HR Manual or policy documents or any other staff
training material (induction, etc.) or appraisal/performance review (templates and completed).
The objective is primarily to see if employee hiring (staff selection), training (induction and
ongoing) and performance review, as well as staff incentives, are aligned with mission and social
objectives or not.
For example, an MFI that has social objectives may wish to cover the objectives in its orientation
training (e.g. a focus on mission, vision and values; proper treatment of clients). Likewise, they
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may also wish to include social criteria (e.g. customer service) in the appraisal and incentive
systems, rather than just the financial targets (e.g. number of new clients, portfolio outstanding,
PAR, etc.). To further assess how an institution fares in its responsibility to staff, one may also
review: job descriptions (what aspects of the job are emphasised), staff development / promotion
policy (what opportunities for growth are given to staff), salary and benefits (how the MFI fares
vis-a-vis its competition), and documents that show how effective are feedback and grievance
mechanisms (if relevant).
Operations Manual: (Responsibility to Clients, Services, Outreach) The Operations Manual is
critical for two reasons: 1) to understand the MFI better (for external evaluators) and 2) to study
the specifics around products and services, treatment of clients, delinquency management, and of
course - loan processes. The SPM team looks at the Operations Manual to better understand the
client targeting strategy along with village/area selection. This can then be cross-checked during
field visits and audits. For instance, if the target clientele is low income women living in rural
areas, and the clients one visits have higher incomes and many are living in urban or suburban
areas, then the alignment is off. An MFI may wish to redefine its target clientele or reassert its
targeting strategy through a combination of monitoring and incentives.
The Operations Manual can also give insight into the presence (or lack) of clear, standardised
systems and processes for efficient service to clients. For example, it can be useful to determine
time/steps from application to disbursement in ―should be‖ processes, and then cross-check this
with client feedback in the field. Furthermore, the SPM Team should look into whether or not
there are policies for proper conduct with clients, delinquency management, communication of
terms and conditions, and whether there are receipts or signatures in passbooks for all
transactions. This, when corroborated by field visits, can represent an MFI‘s responsibility to its
clients.
Management Information System (MIS)(Alignment of Strategies and Systems): An effective MIS
is key to monitoring both the social and financial progress of an organisation over time. It should
also provide information related to the achievement of the MFI‘s key strategic goals and
objectives. The SPM team should examine the MIS to determine: what information is being
tracked and reported on a regular basis, and whether this matches with what is articulated in the
mission and SBP. This will also help to determine if social, or only financial, information is being
analysed and used to inform management decisions. Typically, the MIS may include data entered
from loan applications on outreach (characteristics of clients), but may not have this data in an
analysable form and is not used in decision-making regardless.
Likewise, while measuring impact (changes in characteristics over time) may be a desirable
element in the MIS of an institution that aims to improve the status of its clients, it is not the only
way to integrate social objectives into its MIS.
Other indicators that may be relevant, depending on the context, can be: client dropout rates, staff
The PAR and RPR tools can be used with staff as well as
clients. This exercise often provides a thought-provoking
contrast, when results of what staff think is important to clients
is contrasted with what clients themselves think.
Exit Survey: The purpose of the Client Exit Survey is to find out and track the following
information:
1. When the client left the program
2. Why the client left the program
3. What the client thinks about the program‘s impact on her and her business
4. What the client thinks about the program‘s strengths and weaknesses, and
5. When (or if) the client will rejoin the program and/or recommend the program to friends
and family26
.
(Refer to SEEP/AIMS Tools – available online – for sample Exit Surveys)
26
Nelson, Candace and Garber, Carter. Learning from Clients: Assessment Tools for Microfinance Practitioners. The SEEP
Network. DC.
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• Discuss each subtopic in turn,
• Tabulate the information to
pullout key information
• Summarize the results, and
• Draw conclusions
• Cross-check your findings and
conclusions (e.g. with clients,
field staff)
• Use diagrams, matrices, ranking
methods, and other analytical
tools.
V. The Process: Analysing the Results Once the data gathering is complete, the SPM team must take some time to analyse and present the
information effectively. Typically on Day 4, the SPM team will spend time filling in any gaps or missed
information, and/or attending to further client- or staff-level research. However, the main purpose of this
time (entailing 1/2 to 1 full day) is analysing the results of the data gathered in order to complete the SPM
diagnostic.
1. Analysis is Ongoing27 Analysis is a continuous process of reviewing the information as it is collected, classifying it, formulating
additional questions, verifying information, and drawing conclusions. It is a process of making sense of
the collected information. It should not be left until all information has been collected. Indeed, the initial
analysis should influence the on-going SPM diagnostic process. For this reason it is essential to write
up your field notes at the end of every day - this will help you remember better, identify gaps/issues for
follow-up and prepare for the following day‘s work.
Every day, the SPM team should organise their notes using the analysis templates provided for
Interviews, Focus Groups, and PRA tools. Analysis should focus on emphasising key findings and key
divergences among the different team members. The overall basis for organising findings is the SPM
questionnaire. Each team member, on an ongoing basis, can answer and comment beside each of the
defined SPM categories and indicators. On subsequent days, the SPM team can revise and adjust based on
new findings (triangulation) from field and branch visits.
Prepare a list of key issues and arrange your findings according to this list. Rearrange, break up, and
reassemble pieces of information. Sort and sift through information and look for patterns, differences,
variations, and contradictions. Weigh the relative importance of the information. Be self-critical.
2. Preparing for Debriefing Strengths and Social Risks
The SPM team members, once they have completed there
individual analyses, should have a debate and discussion
concerning the findings based on each of the main SPM
questions and indicators. Based on the consensus around
findings, the team should then decide on what are the
principal strengths and social risks for the MFI in each of the
15 SPM categories.
Debriefing Preparation
The debriefing presentation is formulated around the most
important social strengths and risks identified in each of the
SPM categories. There needs to be time and attention paid to
effectively synthesising and analysing the information
gathered, as well as presenting SPM findings in a useful and engaging manner. Differing from more
formal audits, ratings or assessments, findings that are presented during an SPM visit are not meant to be
a fixed judgment, but may be further modified following the debriefing presentation and discussion with
the various MFI stakeholders present (usually senior management, some staff and Board members).
27
Adapted from MR4MF toolkit / PRA
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Debriefing Presentation
The debriefing presentation should at the very least involve those
who attended the introductory presentation about SPM on Day 1.
These stakeholders – possibly consisting of board members, senior
and middle management, field and support staff, and even clients –
will want to learn the outcome of the SPM diagnostic. It should be
conducted in a spirit of discussion and openness, and focus on
strengths to highlight and risks that feed into actionable items or
―quick wins‖. The structure of both the initial presentation on
SPM, and the debriefing and analysis, is such that it readily lends
itself to ideas around what the MFI may choose to do next. For
instance, many of the tools used doing the SPM diagnostic can be
utilised and applied by MFI staff going forward – e.g. staff
satisfaction surveys, customer service questionnaires. The next
phase, the SPM Strategic Action Plan, depends upon how
effectively findings are presented in the debriefing presentation and
the level of discussion around each of them.
Who should attend? Stakeholders such as senior and middle management
(CEO, OM, AM, BM), field staff and support staff.
How long should it take? 1-2 hours with discussion
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VI. The Process: Developing a Strategic SPM Action Plan
The final, and one of the most important, stages of an SPM exercise is the formulation of an MFI‘s
Strategic SPM Action Plan and thus adequate time (at least 2-3 hours) must be allocated to SPM planning
at the end of Day 5. If the team is not able to finish on Day 5, the group should decide to continue this
during a 2nd weeks or plan a second strategy planning/finalisation visit of 1-2 days after the MFI has had
a chance to consult with key stakeholders.
1. Why Develop a Social Performance Management Strategy? A Social Performance Management exercise is not concerned primarily with producing an assessment,
audit or rating. These may also be of use to a donor and even some organisations, but do not necessarily
lead to practical changes that can improve the social and overall performance of an organisation. Thus,
the purpose of the diagnostic is to identify opportunities to improve social performance and identify any
social risks or shortcomings. These should feed into the creation of a strategic plan to integrate SP
initiatives into the organisation‘s management systems.
2. How to Develop a SPM Strategy There are two primary ways of developing your SPM strategy:
1. Integrate SPM planning into the organisation‘s Strategic Business Plan: A business plan can be
modified and adjusted according to any new initiatives. This may be the most effective strategy
for institutionalising SPM and weaving into an organisation‘s DNA, particularly if an
organisation develops and monitors indicators and targets on a regular basis. Changes to an
institution‘s business plan has the added benefit of being submitted to the Board for approval and
thus may be one of the most powerful ways to internalise SPM.
2. Create a separate Strategic SPM Action Plan: A new, and separate, strategic SPM action plan can
be developed following the results and presentation of the SPM diagnostic. Planning should flow
directly from the discussions that occur during the debriefing presentation. Although outside
consultants may provide facilitation, all action items should come from the organisation‘s
leadership itself. This is critical to ensuring ownership of SPM initiatives, and preventing
impractical donor or consultant-led suggestions.
Questions to Ask
1. Revisit (if necessary): What is your mission and what are your social objectives?
2. Revisit (if necessary): What is the target clientele of your organisation and how will you ensure
that your reach them?
3. What factors can improve staff satisfaction, and thus staff retention and productivity?
4. How can you improve your organisation‘s responsibility to clients?
5. How can you improve your client‘s satisfaction levels and improve client retention?
6. What further market research, or changes in products and services are necessary to improve client
retention?
7. compete with other institutions
8. What indicators can use to measure achievement of your mission or social performance?
9. What tools can you adapt/use to improve social and overall performance?
3. The KOGMA Approach to SPM Just as in a Strategic Business Planning exercise, the KOGMA framework provides a way to effectively
organise your SPM strategy.
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KOGMA stands for Key Objectives, Goals, Measures/targets and Activities – together these provide a
clear, simple framework for the implementation of your SPM strategy.
Creating Key Social Objectives
To implement your strategy you will need to focus on these critical
issues that drive the Key Social Objectives. It is all too easy to get lost
in a wide variety of activities, but having too many objectives and
activities may result in failure to achieve any of them! The Key Social
Objectives necessary to implement your strategy will help you to:
• Prioritise and focus on the critical issues - What Really
Matters
• Help all staff see how their work contributes to the vision and
the strategy to achieve it
For example, one MFI may wish to focus on Client/Operational Issues and have the objective of
―Improving Client Satisfaction‖ or else on Governance and have an objective of ―Developing an SPM
Governance Committee composed of representatives from key stakeholders‖.
Determining Activities Necessary to Achieve Key Social Objectives
The next step is to set the activities that must be achieved in order to achieve the Key Social Objectives.
Again, one should focus on the issues that really drive the achievement of the Key Social Objectives. For
example, to improve Client Satisfaction, an organisation must first put in place a system or format to
measure client satisfaction regularly. Likewise, it must train its staff in how to deliver effective customer
service. Thus activities for this objective might include: developing a Client Satisfaction Survey, training
staff on how to administer the survey, and create a system of regular assessments and monitoring of
results.
Designing Measurable Targets to Guide Implementation and Follow Up
Initiatives taken by an institution, if not measured, become less effective as the impact of such initiatives
may not always be visible or tangible to staff and/or other stakeholders. Thus, it is important to identify
measurable targets which will help the institution to monitor the changes against the key social objectives
set. The variation in performance between the set targets and achieved target then helps analysis of the
performance of the programme. Selection of targets often requires development of systems and formats
which will enable the institution to use the measures.
For example, to improve client satisfaction, an organisation must first put in place a system or format to
measure client satisfaction regularly (e.g. client satisfaction surveys administered every quarter, MIS or
Excel chart for processing results). It must then determine what an acceptable score is (e.g. maintain 90%
client satisfaction scores) so that it may take action or do further assessments if these targets are not met.
Identifying Who is Responsible for What, and
By When
Finally, critical to implementation of any
plan is to identify who is responsible and by
when the various tasks and activities will be
accomplished. This ensures accountability
and division of labour so that plans are
realistic and achievable.
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4. Sample Strategic SPM Action Plan
In reality, for any well governed institution, this exercise may take as long as a month if the MFI seeks
inputs and buy-in from key stakeholders (Board Members, Investors, Community, Staff). Therefore,
while an outline of an SPM strategy may begin on Day 5 of a visit, in reality a follow up visit may be
necessary to finalise a Strategic SPM Action Plan.
Strategic Social Objectives: 1) To ensure policies are in place to protect clients; 2) To improve client
and staff satisfaction levels;3) To communicate policies and changes more effectively with staff
ACTIVITY INDICATOR PERSON
RESPONSIBLE
BY
WHEN?
1. Review/Revise Client
Targeting
1. Updated Poverty Assessment
Form w/ new or adjusted
indicators)
2. Communication / training with
staff on new Client Targeting
CEO
May 2009
June 2009
2. Explore Product
Diversification
1. Market Research Studies
2. Product Design w/Costing
3. Product Piloting
4. Launch of new product (s)
CMT led by CEO
September
2009
TBD
TBD
TBD
3. Client Satisfaction Surveys 1. Survey Tool chosen/ developed
2. Survey carried out every 6 month
3. # of FGDs/surveys conducted
4. Dissemination of survey findings
to staff
1. CMT led by
CEO
2-4. Ops Mgr
May 2009
From June
2009
July
2009
4. Client Protection
1. Development of Policy and
Inclusion in Operations Manual
2. Dissemination / Communication
to Staff
3. Creation of Public Relations cell
(PRC) at head office w/dedicated
staff, telephone line, and MIS
4. PRC begins operation
1-2. CEO
3. CMT (led by
CEO)
4.Dedicated PRC
staff member.
May 2009
June
2009
June
2009
July
2009
5. Activities Prohibited for
Lending policy
1. Development of Policy and
Inclusion in Operations Manual
2. Dissemination / Communication
to Staff
CEO May
2009
June
2009
6. Workshops on Organisational
Policies
1. # of workshops held
1st round
(HR/Incentives/Operations)
HR Manager (with
support of CMT)
End July
2009
7. Designing Staff Appraisal
Formats
1. New Formats in Developed
HR Manager (with
support of CMT)
September
2009
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What Other Tools Can We Use to Focus Our Research and
Analysis?
MicroSave Toolkits: Human Resource Management,
Market Research for Microfinance, Customer
Satisfaction, Strategic Business Planning & Process
Mapping
SEEP / AIMS Tools
2. # of Staff Receiving Assessment
October
2009
5. Implementation: Developing a Social Performance Management Culture MFIs should not rush to try to change everything and immediately adapt too many social performance
management ‗best practices‘. These may end up becoming overwhelming, or else a burden to MFI staff
and senior management. It is critical to understand the MFI‘s own social perspective, values and context.
Many times, an MFI may already have SPM elements in place – such as a drop box for client suggestions
or a basic staff satisfaction poll during quarterly staff meetings. Sometimes, these things may simply
need to be strengthened or improved. This may even begin with taking an organisation‘s mission and
communicating it more effectively to staff – at meetings, through posters or displays, on stationary, or
during orientation training. It is often better, therefore, to start off with small, simple steps that an
organisation can take, and which build on existing systems wherever possible –such as adding a question
about whether clients are clear on terms and conditions in an internal audit field visit guide.
Monitoring and Communication
Likewise, beyond setting achievable goals, part of building a Social Performance Management culture is
integrating this into regular monitoring and communication. The KOGMA exercise, or building a
Strategic SPM Action Plan, is designed to set targets and assign responsibility so that monitoring
becomes possible. Ideally, the action plan becomes absorbed in the Strategic Business Planning
document and process, and is thus woven into the DNA and everyday functioning of the MFI. Again,
SPM should not be an activity apart, but integrated into the day-to-day operations and communication
systems (flyers, notices, etc.) of an institution in order to truly see results – both social and financial.
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References
MicroSave Toolkits:
Mutesasira, Leonard, and Wright, Graham. ―Market Research for Microfinance Toolkit‖. MicroSave.
2004
Wright, Graham et al. ―Participatory Rapid Appraisal for Microfinance – A Toolkit‖. MicroSave.