SOCIAL PERFORMANCE MANAGEMENT Implementation Strategy for Networks _____________________________ Jordan June 5th, 2012

_______________________________________________________________ Introduction to MFIN _______________________________________________________________ Established in December 2009 as the Self-regulatory organization (SRO) for the Indian Microfinance industry. MFIN currently has 46 of the leading NBFC-MFIs as its members. The combined business of MFIN member MFIs constitutes more than 85% of the Indian microfinance sector (excluding SHGs). As of March 2012, the combined client base of member MFIs is ~23 million and a portfolio outstanding equivalent to USD 2.8 Bn.

MFIN - Mission Help provide inclusive financial services to 100 million low income households by the year 2020, in a responsible & transparent manner.

MFIN & Social Performance Management _______________________________________________________________ Synergy with MFIN’s mission and objectives: Transparency Client Protection Responsible and inclusive financial services for the un-served and underserved Robust development of Microfinance sector Political and regulatory risk management

SPM & Microfinance in India _______________________________________________________________ Emerging Risks within the Industry Reputation risk Regulatory risk Political risk Growing evidence of the positive implications of Social Performance Differentiation in funding market Better clients retention & portfolio risk management

GAP ANALYSIS – KEY FINDINGS ____________________________________________________________ 41% of member MFIs have conducted social audits and 36% have conducted social ratings. Inadequate emphasis by funders and investors cited as one of the primary reasons for not undergoing social performance assessments Only 33% of member MFIs have conducted CPP assessments. Staff Incentives not aligned with SPM. 50% of member MFIs use some poverty indicator to track the poverty profile of clients and assess their movement out of poverty. 78% of member MFIs report social data to MIX Market. A whopping 94% of member MFIs conduct some financial literacy or financial education programme. 67% of members offer Microfinance “PLUS” services such as health camps, support for tuition of clients’ children, livelihoods training etc.

CHALLENGES & LESSONS LEARNT SO FAR _______________________________________________________________ SPM v/s CSR The business case for SPM - prioritizing SPM in a challenging business environment Implementation of new processes and guidelines in a changing regulatory environment Consensus building on SPM benchmarks among MFIs and stakeholders

STRATEGY FOR IMPLEMENTATION & THE WAY FORWARD _______________________________________________________________ Buy-in of MFIN Board and member MFIs Educating funders, investors, and other stakeholders on relevance of SPM and SP metrics Differentiation through social performance transparency – MFIN Score Card Identification of relevant partners – SMART Campaign MFIN guidelines for corporate governance Endorsement of PPI Partnership with MIX & MFTransparency Creating platform for partnerships with livelihood development programs

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