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FMFB-A Evaluation Afghanistan IFC Evaluations in Access to Finance (A2F): Piloting a Social Performance Approach Gilles Galludec Principal, Access To Finance.

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Presentation on theme: "FMFB-A Evaluation Afghanistan IFC Evaluations in Access to Finance (A2F): Piloting a Social Performance Approach Gilles Galludec Principal, Access To Finance."— Presentation transcript:

1 FMFB-A Evaluation Afghanistan IFC Evaluations in Access to Finance (A2F): Piloting a Social Performance Approach Gilles Galludec Principal, Access To Finance Advisory Services IFC Presented in Berlin, Germany December 3, 2008

2 2 In emerging markets, roughly two-thirds of the population remain unbanked and underserved 2 231 projects active in over 90 countries worth over $310m at FY08 64% of FY08 approvals in IDA countries; 14% of projects in conflict affected countries Access to Finance Mission: Increase access to responsible finance in developing countries by building capacity of financial infrastructure, financial markets and financial institutions

3 3 M&E for A2F: Two-pronged approach including independent evaluations Independent Evaluation Ongoing Monitoring A2F standard indicators Plus additional performance and outreach indicators Program level impact assessments by external evaluators Rigorous methods using control groups and randomized experiments Progress AMSME client reporting tool going live Progress AMSME bank surveys ongoing

4 4 A strong focus on monitoring outreach results. Evaluate the benefits for the end users.

5 5 A2F results in FY08 Financing facilitated (US$b) 1 $1.6 $1.7 $2.5 $17.0 $24.6 $0.0$5.0$10.0$15.0$20.0$25.0$30.0 Microfinance Leasing Housing Finance Credit Bureaus SME Banking Number of people / entities reached 2 2.1 m micro enterprises 19,715 MSMEs 69,588 homeowners 34.7 m inquiries 3 175,221 SMEs Microfinance Leasing Housing Finance Credit Bureaus SME Banking Notes: 1. Outcomes as of end-December 2007, based on value (US$) loans outstanding data received from IFC stand-alone AS and investment related AS clients. 2. Ibid., based on number of loans outstanding data received. 3 Data from 10 bureaus with approximately 26 MM individual records according to DB 08.

6 6 IFC’s first impact evaluation in a conflict- affected country: The First Microfinance Bank of Afghanistan (FMFB-A) Objective: create sustainable A2F to underserved, incl. women; help develop/ promote best practice standards, including CG, anti-money laundering, social and env.standards Business model: TA + investment to provide comprehensive, three-year capacity building effort to build commercially viable institution Strategic partner: Aga Khan Fund for Economic Development (AKFED), broad strategy in country and region Funding:$4m 3-years (EU,Japan, KfW, Netherlands, Norway, USAID, IFC) Outputs achieved  The first of its kind - opened May 2004 as the first licensed microfinance institution in Kabul  Management team set-up, local staff trained, including women  New MIS procedures / processes implemented  AML/CFT policies and procedures were developed; environmental training completed  Group lending a new product in 2007, with gender strategy to increase outreach to women Outcomes achieved  Outreach increased with 13 branches  Over 27,000 borrowers, over 13,000 savers  Portfolio quality: PAR 1.33%  Efficiency: OER 15%, Cost per loan $179  Productivity: caseload 101 per loan officer  Profitability: ROI 29.4%, ROA 3%, ROE 5%, OSS 124%

7 7 Impact evaluation results: positive impact on micro, small businesses and households Mean Monthly Client All Non- Clients Business revenue $3,755$1,851 Profit drawn from business $586$263 Profit reinvested in business $1,201$361

8 8 Impact evaluation results: positive impact on poverty but can improve outreach to women, promote savings products FMFB-A reached MSME segment with current op. systems, outreach channels & products; began group lending in 2007, which is expected to help it go downmarket to further reach women, poor. Lesson: FMFB-A success with MSMEs provides opportunity to further expand savings product offering. Gender outreach only 18%, as compared to other MFIs with strong intent to reach women which achieved higher outreach results With introduction of group loans in 2007, outreach to women should increase Lesson: FMFB-A had no explicit gender focus (outreach mechanisms, product offerings) at the outset Expand IFC’s core A2F indicators to measure and report on SP – go beyond measuring outreach or outcome results of the MFI itself to achieve greater depth and quality of impact results, i.e. impact on gender, poor Promote SP approach/reporting among selected access to finance clients, focus initially on IFC MF projects Align M&E framework with best practice standards in microfinance, namely standards developed over the last 3 years by the Social Performance Task Force

9 9 Objectives of PBGI program and fit with social performance approach Social Performance Approach Effective translation of social goals into practice in line with accepted social values; includes sustainably serving increasing numbers of excluded people, improving quality and appropriateness of financial services, improving economic and social conditions of clients, ensuring social responsibility to clients, employees and the community they serve. Source: Social Performance Task Force. See also CGAP, Focus Note No. 41, “Beyond Good Intentions: Measuring the Social Performance of Microfinance Institutions”, May 2007. PBGI Program for A2F  Provides funding for access to finance (A2F) projects within a results oriented, performance based framework  Promotes innovative business models to broaden the range of financial services  Expands financial services to underserved segments  Signals to the private sector to go down-market, contribute to the reduction of poverty  Faciliates initiatives to scale up IFC’s frontier country strategy  Provides incentives to financial institutions to go beyond traditional zones of comfort

10 10 A2F Performance Based Grant Initiative (PBGI)  Armenia housing; SMEs (Inecobank)  Maldives housing (HDFC)  Sri Lanka microfinance, microleasing, housing  Pakistan microfinance (NRSP, FMBP, Pak Om); housing (FMBP)  Yemen microfinance (Tamkeen MF); leasing*  Ethiopia leasing (Access)  Madagascar leasing (Mada Finance)  Nigeria microfinance (Access Bank), housing*  Liberia (Access Bank)  Tajikistan microfinance (Tajik Access LFS) For approval by PBGI Committee  India low income housing  Cambodia microinsurance  Lao (ACLEDA)  Tunisia Housing & Microfinance (ENDA)  Morocco microfinance (Alamana)  Algeria microfinance (Advans Microcred*). Housing (Banque Numide)*. A2F Performance Based Grant Initiative Program Status at Nov 11, 2008 Approved by PBGI Committee  NE Brazil Microfinance  Guyana small business banking  Syria microfinance (AKAM)  West Bank microfinance; low income housing (Al Rafah); leasing*  Afghanistan leasing * Note: indicates countries with projects in the pipeline that are also of medium/low probability.  Bangladesh housing and Leasing  China microfinance (VTB/Accion) & leasing (JFLC)  Tanzania microfinance (Access Bank)  Bosnia leasing & EE  DRC microfinance (Advans). Leasing (Alios Finance)  Rwanda Leasing (CIM Leasing)  Zambia Leasing (Madison Group)  Senegal microfinance (FIDES, Microcred)  Aga Kan West Africa

11 11 Measuring Grants Benefits for The End Users Leverage: New loans generated with PBGI funding/PBGI contribution: (Portfolio growth/PBGI funding) should be > X 100 (TBD) Efficient Business Model: Total cost per client to be determined for each sub business line (Microfinance around $70-$80) Client Contribution: PBGI Contribution/Total project cost should be <50% Pef Focus: PB disbursements/seed grant (output) TBD (max 30%).

12 12 PBGI’s social performance approach looks at the entire process by which impact is created: proposed indicators What is the mission statement of your institution? with a list of social goals explicitly included: outreach to very poor, poor, low income, SME, underserved areas, women, employment creation, socially marginalized. In the governance: do you have linkage between executive compensation and achievement of social performance goals? Does the institution have policies for client protection? for social responsibility to staff, to community, to environment? INTENT & DESIGN STRATEGIES & SYSTEM ACHIEVEMENT OF SOCIAL GOALS Range of services provided: financial and non financial Methodologies used and conditions: collateral, min savings threshold, min loan size Staff incentives related to social performance goals Client satisfaction assessment Measuring Client Retention: drop out rates Social responsibilities to clients: disclosure of cost of effective interest in clear and understandable way, training on customer's rights and duties, collection process, safeguard of clients' privacy, policy to avoid over-indebtedness Geographic outreach: % urban, % semi urban % rural, % women Poverty outreach: Number of clients under national poverty line Average loan size/ % of GDP Source: Social Performance Task Force.

13 13 Social performance to be piloted with selected PBGI clients in early 2009 Maldives – low income housing Tajikistan – greenfield microfinance institution Ethiopia – leasing for MSMEs

14 14 IFC’s A2F M&E going forward: applying lessons learned to improve impact results Require social performance strategy and implementation plan from IFC clients participating in PBGI funded programs Collaborate with key members of Social Performance Task Force to support and provide technical expertise to help IFC clients implement social performance approach Coordinate within IFC/WBG to promote social performance approach and reporting, with initial focus on microfinance portfolio Promote reporting and/or benchmarking through MIX on SP indicators to be implemented by PBGI and microfinance clients Participate in future workshops to assess and share lessons from IFC’s preliminary experience with social performance

15 15 Annex

16 16 Impact results: summary of a recent evaluation completed by IFC Inputs Outputs / Outcomes Benchmarking Monitoring & Evaluation Framework Good TA overall Strong investment High leverage More TA coordination Excellent financials Positive client impact Market leader; best practice standards Excellent performance in Afghanistan Excellent performance among conflict affected countries Not possible to look at client impact Need shift to demand driven approach given market changes Some organizational improvements neeeded Coherent & broad Evolved since investment Improving, needs more depth; recommend applying new industry standards: social performance indicators

17 17 Social performance tools are used to focus on different steps in the process Source: CGAP, Focus Note No. 41, “Beyond Good Intentions: Measuring the Social Performance of Microfinance Institutions”, May 2007.

18 18 Results Measurement and Specific PB features Client’s strategy should include Social Performance Impact-SPI Effective translation of social goals into practice in line with accepted social values; includes sustainably serving increasing numbers of excluded people, improving quality and appropriateness of financial services, improving economic and social conditions of clients, ensuring social responsibility to clients, employees and the community they serve.

19 19 Impact Indicators - collected only for selected programs, where proxies can be validated; otherwise not collected for every A2F project LT results, reflecting where outcomes should bring IFC at the end of the project. Only one indicator (see point 2 below). (1) Dropped in FY08 (replaced with impact evaluations as per FMFB-A): Nb people positively affected: use Multiplier to calculate the nb of Households affected for the BLs. For sub-loans through SME Banks and other NBFI: total nber borrowers x nb employees/borrower type x average household size. The term borrower can be substituted for lessee or insured. Nb employees varies per borrower type. Based on conservative estimates from the IEG report: Small Borrowers: 20 employees / Medium Borrowers: 100 employees 3 are conservatively assumed to be the average household/family size For MFIs, Housing Finance and sub-BLs where primary beneficiaries are predominantly households, calculation only accounts for impact on households: Total nb borrowers x average household size of 3. For CBs, proxy used is nb individual records in CBs that were set up/improved by IFC x 3. 3 are assumed to be the average family size Nb of records data from Doing Business 2007, where available (2) Selectively collected FY08 (as noted above): Investment/financing enabled (US$): Value of investment/financing mobilized for the overall project, includes IFC and other contributions from co- investors/sponsors. Exception is CBs where proxies used to calculate investment/financing enabled is based on aggregate nb inquiries from bureaus set up/improved by IFC. Calculation: Aggregate nb inquiries from bureaus set up/improved by IFC x 50% acceptance rate x average loan size of $1000. Acceptance rates vary up to 70% depending on country and lending environment, 50% assumed as a conservative estimate. Average loan size of $1000 based on average size of loans given by IFC's investee clients that receive TA and provide micro, consumer and housing loan. Note additional factors (securitizations, deposits mobilized) may be included as relevant to the sub-BL, but will not be added at this stage as core impact indicators by the BL until these indicators have been further defined per sub-BL.


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