Social Performance Management (SPM) - What is it? - Where did it come from? - How does it Impact Credit Unions? February 17th 2015

Missions Banks ▫ Maximize profits / shareholder value Credit Unions ▫ Alleviate Poverty ▫ Help clients build livelihoods, improve wellbeing ▫ Build democratic institutions with strong common bond Microfinance Institutions ILCUF IPC September SPM Workshop

Common Social Missions: Serving increasing numbers of poorer and more excluded people sustainably Improving the quality & appropriateness of financial services through assessment of members’ needs Increasing members’ social capital, assets, income, and access to services Reducing members’ vulnerability Improving social responsibility of the institution toward members, employees, and communities ILCUF IPC September SPM Workshop

The Definition of Social Performance The effective translation of an institution’s social mission into practice. ▫ No Social Mission ▫ No Social Performance ▫ No Social Performance Management ILCUF IPC September SPM Workshop

Big Problems? ILCUF IPC September SPM Workshop

What went Wrong ?  Commercial Mission Drift:  Fast growth (15-30% + p.a)  High competition  Market saturation  Coercive collection practices  Over-indebtedness …  Financial Mission Drift:  High return on investment expected  Minimize costs, maximize profits  Fast profitability  Few products  IPOs … ILCUF IPC September SPM Workshop

Core Problem If you can’t measure it, you can’t manage it No Action Talk Only – NATO Social Performance Measurement Backlash ▫ Donors ▫ Investors ▫ TA Advisors ILCUF IPC September SPM Workshop

Social Performance Cannot Be Taken for Granted Member dissatisfaction, distress (and exit) Over-indebtedness or multiple loans Lack of understanding of costs related to terms and conditions Complaints about staff Limited benefit of financial services for the member Unserved segments of the community Unmet needs

Client protection Development standards, good practices, certification 7 principles endorsers from 120 countries Responses of the Sector … Microfinance Transparency Campaigns for fair and transparent pricing 28 countries More than 1000 different loan products Seal of Excellence for poverty outreach and Transformation in Microfinance To recognize those institutions doing the most to help families lift themselves out of poverty Platform for dialogue, learning and collaboration Facilitating engagement and advocacy setting industry standards for social performance management Promoting good practices Gathering quality evidence and research ILCUF IPC September SPM Workshop

Achieve Your Mission Through Performance Management Mission Performance Management Social Performance Financial Performance ILCUF IPC September SPM Workshop

SP Assessment vs. SP Management SPA a measure of how well CU uses its systems and operations to generate social benefits SPA a measure of how well CU uses its systems and operations to generate social benefits SPM the use of this measure to make decisions ILCUF IPC September SPM Workshop

Levels of support for SP Assessement Purely self assessment:  CU fills in questionnaire alone Accompanied self-assessment:  CU with support from external reviewer  Reviewer knows the SPI well Self-assessment with external audit  Auditor verifies the quality of the information  At least one day for external audit Purely external assessment:  Done by external auditor ILCUF IPC September SPM Workshop

ILCUF SPM Assessment Questionnaire - Outreach & Inclusion - Member benefit & welfare - Governance - Responsibility to Staff & Volunteers - Community & Environment - Cooperation amongst Cooperatives ILCUF IPC September SPM Workshop

ILCUF SPM Assessment Questionnaire How it works -Questionnaire administered by managers to board member, staff member and CU manager -Takes between 1.5 – 3 hours to complete and the same amount to time to compile -Under each heading there are a number of questions under a set of sub-headings

Look through the SPM Appraisal Tool Flick through each page of the SPM Appraisal Tool -The ‘Home’ page registers headline information -The ‘Instructions’ page provides details on how to administer the tool -The ‘Outreach’ page looks at where and what segments of society the CU is reaching -The ‘Member Benefit and Welfare’ page asks about the suitability, transparency and scope of services offered -The ‘Governance’ page covers issues such as representation & equity -The ‘Staff and Volunteers’ page examines responsibility to staff and volunteers in terms of facilities, potential for development & addressing grievances -The ‘Community and Environment’ page looks at social responsibility & environmental protection -The ‘Cooperation between Cooperatives’ page looks at aspects relating to participation and cooperation -The ‘Score’ and ‘Graphic’ page aggregate results automatically and present results in a visibly easy fashion

ILCUF SPM Assessment Questionnaire How it works -For scoring purposes, each sub-heading is weighted as ‘critical’ (most important / essential), ‘high’ (important), or ‘medium’ (desirable, relevant) -Team picks a statement that most closely matches their CU -Automatic scoring on table and ‘web’ graphs -Report back to board and member AGM -Conduct on an annual basis

ILCUF Social Performance Assessment Questionnaire Sample questions from the Excel based questionnaire. Section 1: Outreach & Inclusion Poverty Outreach Goals Question: Does the credit union sets out and manages its poverty outreach goals? The Credit Union chooses the most appropriate answer from these choices Less than 10% of members are classified as poor based on the poverty line or Apex Body Guidelines. More than 10% but less than 30% of members are classified as 'poor' based upon the poverty line or Apex Body Guidelines The percentage of poor members in your credit union is greater than the overall poverty level nationally as defined by the government or the Apex Body ILCUF IPC September SPM Workshop

Section 2: Member Benefit & Welfare Savings Products Question: Does the credit union actively offer a variety of savings products to meet its members needs? The Credit Union chooses the most appropriate answer from these choices The credit union has only one single standard savings product The credit union offers several savings products, but staff are not clear about how or who to promote each product The credit union offers a variety of savings products and staff know about how each product can benefit individual members ILCUF Social Performance Assessment Questionnaire Sample questions from the Excel based questionnaire ILCUF IPC September SPM Workshop

CU Social Performance Assessment Results Basic Data on CU Date Established: 2001 Total membership: 1,340 Savings (Nov 2013):€56,000 Loan (Nov 2013)€44,000 SPM Dimensions CU Score 1) 25% Outreach & Targeting: 13% low 2) 25% Member Benefit/Welfare: 7% very low 3) 20% Governance: 5% low 4) 10% Staff & Volunteers: 6% medium 5) 10% Community & Environment: 5% low 6) 10% Cooperation among Cooperatives: 8% high 100%Overall SPM Score: 44% ILCUF IPC September SPM Workshop

CU SP Assessment Results ILCUF IPC September SPM Workshop

Social Performance Drivers Member Level Organisational Level Underserved people (women, youth, rural): Financial Inclusion Poorly managed remittances: Product and Service Development Need for linkage with non financial support: Product and Service Development Low usage of certain products: Member satisfaction Loan repayment problems: Member protection CUs focus is on financial performance: Double bottom line CU staff use coercive practices to get high repayment rates: Member protection CUs face difficulty in retain good staff: Staff satisfaction Fierce competition between providers: Member protection