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Social Performance in Microfinance

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Presentation on theme: "Social Performance in Microfinance"— Presentation transcript:

1 Social Performance in Microfinance
Presentation by Laura Foose, Alternative Credit Technologies, LLC November 9, 2005

2 Social Performance Task Force
Launched in March 2005 by CGAP, Argidius Foundation and the Ford Foundation Membership: 52 organizations 20 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

3 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 The task force is not imposing SP systems on MFIs, but rather facilitating such systems to develop in a way to meet local situations and specific cultural circumstances. Social Performance information can be used to “prove” outreach/outcomes to donors and can be used more importantly to “improve” operations…..making use of the information collected to respond to the needs of clients. The task force promotes this management foremost.

4 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) Social performance is not just about measuring the outcomes but also about the actions and corrective measures that are taken to bring about those outcomes.

5 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?

6 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)

7 Manifesto de Task Force
Promover Resultados Sociales en Micro Finanzas Hacia 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.

8 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

9 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

10 Social performance pathway
“Effective translation of mission into practice” Reaching Target Clients Mission Goals Objectives Systems Service Design & Delivery Change Meeting Client Needs Intent Design and inputs Outputs Outcomes Impact Governance/ policies management/strategy Outreach/ Changes services

11 Current Initiatives and 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

12 CERISE-Argidius SP Initiative: Objectives
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

13 Conceptual Framework Intention Design Principles Process Action Output Outcome Impact Economic & Social Performance The SPI approach: a self- assessment of principles, actions and corrective measures for internal use and external reporting.

14 4 Dimensions of Social Performance
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

15 Outreach to Poor and Excluded
Dimension 1: Outreach to Poor and Excluded mission of the MFI geographic and socio-economic focus tools for targeting size of transaction collateral

16 Adaptation of Services
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

17 Social and Political Capital
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

18 Social responsibility of institution
Dimension 4: Social responsibility of institution human resource policy social responsibility towards the clients social responsibility towards the local community

19 Assessment with Action
Social Performance Management (SPM)  the systematic assessment of performance relative to social objectives and the use of information to improve practice demonstrate program impact improve program services Refer to guidelines in the binder Assessment with Action

20 Social Performance: Six Key Questions
what are your social performance objectives and how do you plan to achieve them? Who uses your programme’s products and services? Who is excluded? Why and when do clients leave or fail to fully utilise the available services? What is the effect/impact on current clients? How will you use information to improve your services? How do you maintain and improve the quality of the systems you use to answer these questions?

21 Main components of Social Performance Management
Developing a social performance strategy Monitoring and assessing social performance Institutionalizing and using social performance information

22 Component 1: Developing SP Strategy
Clarify mission and social goals Define clear and realistic performance objectives Set measurable performance targets Design program (operational plan) Social peformance indicators cannot easily be globally applicable like financial performance indicators. Example of housing improvmeent that is very context specific, in Nicaragua could mean bringing in electricity, in rural Mali, would be more like getting a kerosene lamp in the home.

23 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? Early warning == (early warning, base line info., tracking client use) Follow on research == (explore trends in routine monitoring, etc.)

24 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

25 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

26 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

27 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

28 Initiatives in Social Rating
Overview Frameworks Issues Indicators and methods Cost Sub-committee: M-CRIL, Planet Rating, Microfinanza, Accion With contribution from: Imp-Act

29 Rating and social performance
SP definition: effective translation of social goals into practice 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.

30 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

31 Objectives To contribute to: Investment decisions Ø  Transparency on social performance Ø  Benchmarking social performance across MFIs, and to Ø  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

32 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)

33 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

34 Social performance pathway
“Effective translation of mission into practice” Reaching Target Clients Mission Goals Objectives Systems Service Design & Delivery Change Meeting Client Needs Intent Design and inputs Outputs Impact Governance/policies management/strategy Outreach/services SOCIAL RATING

35 Generic social values (clear and agreed) – or specific to
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

36 The dimensions of a social rating
Similarity in scope and content: Social mission, systems, strategy Outreach – depth and breadth Appropriateness of financial services Social responsibility to clients “ to staff “ to community Differences in grouping, and in scoring 1-3 are fundamental, can be scored (equal weights) 4 may be scored as part of 1 and 3 5-6 difficult to score; can be described

37 Parameters: social mission & systems
Main 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

38 Indicators: Outreach Operations in poorer areas (more remote, poorer within more developed areas, e.g. urban slums) Clients who are poor - % and number Hired employment in micro-credit supported enterprises % clients not served by formal financial services % clients not served by other MFIs % clients from marginal groups/communities

39 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

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