Discussion Proposal SPTF Meeting Bern, June 2010 Towards a Social Performance Certification System

Contents 1)Why do we need a social performance certification system? 2)SP: What have we done, and what is missing? 3)What is the SPCS? What are its main objectives? 4)What are the main features and the scope of the SPCS? 5)What are the components of the SPCS ? 6)What is the outline of the standardization, accreditation and certification process? 7)What areas are standardized and certified? 8)The SP certification seal in microfinance 9)What are the benefits for certified MFIs? 10)What are the benefits for clients, social investors and other stakeholders? 11)Concerns 12)SPCS implementation phases

To differentiate the fulfillment of MFIs’ social role from other types of mandates, missions and goals. To demonstrate consistency betweeen mission and results – does not mean having “good social performance”. Generalization has led to doubts and interventions (contradictory regulatory frameworks, reduced funding sources) that affect the sustainability and progress achieved in favor of the poorest and most vulnerable. All interventions are valuable and operating strategies can be similar BUT it is important to differentiate between motivations and destinations of intervention benefits. Profit vs. social and economic development of the poorest and most vulnerable, etc. To recognize and reward MFIs that achieve certification. Why do we need a SP Certification System?

SP: What have we done and what is missing? What? INDICATORSStandards CONCEPTS Norms & Codes of Conduct SYMBOLIC RECOGNITION Rewards, Incentives SOCIALRATING Accreditation & Certification

What is the SP Certification System? A set of norms, processes and mechanisms certifying that a MFI plays a social development role and achieves results consistent with this mandate. Its main objectives are: Institute a SP Certification Seal to identify, value and differentiate MFIs with a social development mission and focus from those that prioritize seeking financial inclusion and/or demonstrating socially responsible management. Promote the adoption of principles, standards and best practices aimed at continuously improving, and ensuring the sustainability of interventions by MFIs focused on social development.

SPCS: Aim, Stakeholders and Processes? MFIs Certifying Agencies: (Rating agencies, MFI certifying agencies) Norms, Accreditation & Standards: Working Groups Certification & Reward: Technical Committees Social Investors, Cooperating Agencies

SPCS Main Features and Scope What type of MFIs are subject to certification? What is certified? MFIs stating a social mission and interventions focused on the social and economic development of the poorest and/or most vulnerable. (Non-profit-making organizations). o Approaches and results consistent with a social mission and development focus, as well as socially responsible management. o Not Social Performance Management processes or tools, although their legitimacy in generating stated results is valued.

1. STANDARDIZATION Universally applied standards defined by consensus in a Global Working Group involving all stakeholders Parameters used to assess compliance with standards are validated by National-Level Working Groups involving all stakeholders 2. CERTIFICATION Processes and agencies that assess/validate compliance with standards and award the SP Certification Seal 3.ACCREDITATION Mechanism that guarantees the technical capacity and objectivity of certifying agencies or other entities responsible for carrying out the certification process and awarding the SP Certification Seal. The creation of an Accreditation Board will be considered. What are the components of the SPCS?

Standardization, Accreditation & Certification Process Outline Certified MFI CERTIFICATION Certifying Agency ACCREDITATION Accreditation Board NORMS STANDARDIZATION Working Groups

Standardized and Certified Areas Process Results POVERTY GENDER RURAL AREAS POVERTY GENDER RURAL AREAS Intention & Design Internal Systems and Activities OutputsResults Impact REDUCED VULNERABILITY PROMOTION PRODUCTIVE DEVELOPMENT CONSOLID. SOCIAL CAPITAL REDUCED VULNERABILITY PROMOTION PRODUCTIVE DEVELOPMENT CONSOLID. SOCIAL CAPITAL  CONSUMER PROTECTION  COMMUNITY SR & ENVIRONMENT  PERSONAL SR/WORKING CONDITIONS  CONSUMER PROTECTION  COMMUNITY SR & ENVIRONMENT  PERSONAL SR/WORKING CONDITIONS FOCUS IMPACT SOCIAL RESPONSIBILITY SP Seal

Social Performance Seal in Microfinance The SP Seal in Microfinance certifies one or more MFI development approaches, one or more impacts and/or one or more areas of social responsibility. While achieving certification in all areas is not a requirement, efforts made to meet all the standards proposed are recognized. The SP Seal in Microfinance accredits the MFI with its stakeholders, recognizing that it voluntarily takes on the commitment to fulfill its social mission and development role. The SP Seal commits the MFI to the continuous improvement of its social role – not the end of a process but rather the beginning or ratification of a commitment with its stakeholders, particularly its clients.

Benefits for Certified MFIs Continuous improvement and social role sustainability benchmarks and tools Client and social investor attraction, loyalty and retention Strengthening of MFI image – certification differentiates the MFI as a leader in SP best practices Opportunity to communicate and generate SP culture internally and externally

Benefits for Clients, Social Investors and other Stakeholders CLIENTS Access to services that rather than prioritizing profit-making focus on making a positive impact on social and economic conditions. Identification of MFIs focused on and specializing in their specific needs. Certainty that rights and interests are effectively protected. SOCIAL INVESTORS, GOVERNMENT & OTHERS Opportunity to target interventions and monitor impact.

Concerns Should new organizations be created? The recommendation is to articulate and link interventions by existing organizations (networks, rating agencies, support organizations) rather than creating new ones, because of the costs involved and because it is not necessary. New conceptualization or adoption of existing conceptualization? Adoption and ownership of conceptual development generated at SPTF level, seeking to build on progress achieved. Additional duties and costs for MFIs or refocusing of current duties and costs? Functioning of the SPCS should not involve additional duties or costs for MFIs. Complete proposal or discussion proposal? This proposal is submitted for discussion and feedback from all those interested in the issues addressed.

SPCS Implementation Phases 1)Designing / validating universally-recognized standards and certification processes (awarding SP Certification Seal) 2)Adapting parameters based on local context and implementation – piloting in 3 countries 3)Defining accreditation mechanism for certifying agencies and implementation of SPCS

THANK YOU!

What is the current state of microfinance in LAC? DETAIL MFIs VC MFIs MS EFC/EFP Status Corporations Civil Associations & Foundations Corporations Civil Associations & Foundations Cooperatives Purpose Profit-making Non-profit-making Other Focus Commercialization of microfinance Reaching poor and vulnerable clients Autonomous development of clients Regulation Regulated Non-Regulated (exceptions) Regulated & Non-Regulated Market Urban -uRural & Periurban Rural Main Clients Microenterprises Women Peasants & Farmers Services & Products Microcredit, savings, SAF Microcredit & Community Banking Investment funding, SAF