Social Performance State of Practice in the Microfinance Industry

Agenda Overview of State of Sector – The Questions We Face Map of Social Performance Initiatives Universal Standards for Social Performance

Microfinance Under Scrutiny Microfinance is no longer accepted at face value. We must respond to these questions: Is governance capable and socially motivated? Are clients being harmed? What value does microfinance create for clients? Are MFIs focused on clients or numbers? Are profits too high? What interest rates are being charged? Do we have data to back up our social claims? Can microfinance help reduce poverty? What are the motivations of investors? The Smart Campaign MFTransparency Principles for Investors in Inclusive Finance Corporate governance initiatives SPTF Imp-Act Consortium Seal of Excellence for Poverty Outreach and Transformation MIX Market Integrated Platform

Agenda Overview of State of Sector – The questions we face Map of social performance initiatives Universal Standards for Social Performance

Do No Harm! Improve Clients’ Lives Client Protection Social Performance MFT CampaignSmart Invest in systems to manage double / triple bottom line Measure social goals Tailor services to client need and vulnerability Seal for poverty outreach and transformation + Social Commitment Principles for Investors in Inclusive Finance Certification Program for Poverty, Rural Development and Gender

Agenda Overview of State of Sector – The questions we face Map of social performance initiatives Universal Standards for Social Performance

SPTF Universal Standards for Social Performance - Proposed Standards to which any double or triple bottom line institution should be held. Incorporates the work of all the initiatives. Individual standards are organized into six categories: 1.Governance and Staff Commitment to Social Goals 2.Client Protection 3.Products and Services that Meet Client Needs 4.Social Responsibility to Staff 5.Client Monitoring 6.Responsible Financial Performance

The Standards can guide the work of multiple stakeholder groups Double- and triple-bottom line microfinance institutions : ─ Set expectations ─ Evaluate their performance ─ Self regulate Investors and donors : ─ Position their expectations for investees/partners ─ Inform due diligence and monitoring processes Networks and associations : ─ Position their expectations of members ─ Educate / inform membership of standards Social raters and auditors : ─ Inform their social performance evaluation products

Standards as a Tool to Improve Practice Proposed Standard: The individual standards that make up the Universal Standards Objective: A description of why the financial service provider should strive to meet the given standard Benchmarks/Guidelines: Specific targets that measure the financial service provider’s achievement of the given standard

Member Feedback Quotes From Members: Stakeholder Groups: “If these standards are adopted … This would be really a milestone in the measurement of social performance.” “Less than 20% annual staff attrition is difficult to achieve. Where did you get this number?!” “SR to the environment?”

SPTF Standards: Going Forward Collect feedback from participants at 2011 SPTF annual meeting, Den Bosch Create working groups to develop/fine tune benchmarks and indicators Solicit additional feedback from experts both inside and outside the Task Force, summer/fall 2011 Finalize standards by end of year 2011

Proposed timeline to build universal standards of social performance for MFIs Preliminary work (e.g., early drafts and comments) Official Kick-Off – to Task Force – Goal is to come to agreement on the Standards Comment period, revisions, data gathering Finalize standards, finalize bench- marks where possible, data gathering Draft remaining bench- marks, comment period Finalize and present remaining bench- marks Continued review and updating of standards based new data Jan – Jun 2011 Jun 2011 annual mtg Jul – Oct 2011 Oct – Dec 2011 Jan – Jun 2012 Jun 2012 annual mtg 2012 and beyond…