Social Performance Indicators Blog

Innovating Microinsurance

Guest Post by: Craig Churchill - Head of the Microinsurance Innovation Facility, International Labour Organization (ILO)

 
MiBanco, Peru, and the insurance company it now owns, Protecta.

Craig Churchill is the head of the ILO's Microinsurance Innovation Facility, launched in 2008 with a grant from the Bill & Melinda Gates Foundation to promote better insurance products for more low-income households. In this post, he evaluates the pros and cons of implementing microinsurance policies, and offers specific guidelines that MFIs can follow to increase their leverage and negotiating power.

Many microfinance institutions (MFIs) are looking beyond credit to see what other financial services they can offer their clients, and in those discussions insurance invariably is raised as a possible option. But should an MFI get involved in offering insurance?

When microfinance institutions are interested in insurance, their primary motivation is often to reduce their credit risk in the event that borrowers or their family members experience death, illness or other losses. If insurance can help protect the households in such circumstances, it will indirectly safeguard the MFI’s portfolio.

Another significant motivation behind the interest in insurance is to improve the welfare of their clients. MFIs typically have dual missions to alleviate poverty or promote economic development while generating a profit (or covering their costs). The social mission of improving the welfare of poor households can be enhanced through the protection provided by insurance.

There are also a number of legitimately commercial reasons why MFIs might be interested in providing insurance, such as enhancing retention, improving product profitability, diversifying their income streams and reaching out to new markets.

Worse than a War Zone: Sogesol Assesses the Damage in Haiti

Guest post by: Melissa Lumpkin, ACCION International

 

Melissa Lumpkin is a member of ACCION’s Africa & Haiti Global Programs team.  Based in Washington DC, she is the project manager and board representative for ACCION’s partner in Haiti, Sogesol.  She can be reached at mlumpkin@accion.org.

Anyone who has experience living, traveling or working in Haiti will tell you that life for most Haitians is tough – and this on a good day.  The impact of last week’s earthquake has been catastrophic and the country will face immense challenges in rebuilding.

For the past decade, ACCION has worked with Sogesol, the microfinance arm of Haiti’s largest bank, to bring microfinance services and hope for a better future to Haiti’s self-employed poor. Over the past week, we’ve remained in close communication with the President and Directeur Général of Sogesol. The DG confirmed that she, along with several staff and ACCION’s resident advisor, were at the Sogesol headquarters in Petion-Ville when the earthquake hit. Fortunately, they were able to get out of the building and safely home. Yet, a disaster of this magnitude leaves no one untouched – all have lost many close friends and witnessed widespread destruction. Our own resident advisor wrote, “Melissa, the conditions here in Haiti are unimaginable. Please… whatever ACCION can do to help.  It is worse than a war zone.”   

Back to Basics: Financial Services and Social Performance

Posted by: Taea Calcut

The core function of microfinance institutions is to provide financial services to populations traditionally marginalized from countries' formal financial sector. Over the next two weeks, the Social Performance Indicators Blog will return to the basics of microfinance, examining its broad range of financial offerings through a lens of MIX Social Performance Report data and interviews with MFIs that have pushed the boundaries of product innovation to meet target clients' unique needs and constraints.  

Promoting Environmentally Sustainable Enterprises among Indigenous Populations: REFICOM-CDRO

Posted by: Katherine Oglietti

 
A CDRO client plants a tree as part of a reforestation project.
 

Interview with: Mirna Elizabeth Chaclán
Marketing and Social Performance, REFICOM-CDRO, Guatemala

CDRO was founded in 1981 by leaders of Mayan communities in Western Guatemala in order to promote integrated rural development in indigenous communities through an approach that respects Mayan Quiche traditions. CDRO works in conjunction with REFICOM (Red Financiera Comunitaria- The Community Financial Network). Due to its goal of assisting indigenous populations who are closely attached to the land, social responsibility to the environment is essential to CDRO’s programming. MIX interviewed Mirna Elizabeth Chaclán of REFICOM-CDRO, who gave us an overview of their written and informal policies on social responsibility to the environment.

REFICOM-CDRO created a written policy on environmental protection in 2008, promoting social responsibility to the environment among the enterprises it supports. Mirna explains: “We live in an important environmental zone, so we feel it is important to conserve the environment. We feel it is very important to establish an environmental policy to value the resources that we have, and secondly to have principles and norms that allow us to practice microfinance without affecting our environment.” The first way it works towards this goal is through classifying microenterprises according to their potential environmental impact in three tiers: high, medium, and low impact.

MFIs Respond to Disaster: Fonkoze in Haiti

Posted by: Leah Nedderman

Leah Nedderman is a microfinance consultant based in Washington, DC and former Director of Social Performance Management for Fonkoze.  She can be reached at Lnedderm@gmail.com.

As a former Fonkoze employee and resident of Port-au-Prince, I have a sense for the catastrophe that has occurred, and the challenges that lie ahead for Fonkoze and other institutions who serve the poor of Haiti. 

This afternoon, I spoke with Fonkoze employee Natalie Domond, where she called from a friend’s home in Port-au-Prince. She and the other Fonkoze staff safely exited the central office in Port-au-Prince on Tuesday. Outside, dust and screams filled the air. She recounted gruesome scenes at every turn.

Institutions like Fonkoze, who exist to provide services to the poor, will require support now more than ever.  Just fifteen months ago, Haiti was hit by several powerful tropical storms and a hurricane. Fonkoze responded by mobilizing leaders in forty communities throughout the country to assess the damage, account for members, and generate information for relief agencies. Almost immediately, Fonkoze was able to offer new financial products to affected families so that they could get their micro-businesses up and running again, re-stock their goods, and begin recovering their livelihoods. I am confident their response to the current crisis will be just as resolute.

The name Fonkoze stands for “Shoulder to Shoulder Foundation” in Haitian Creole. It reflects the commitment of the institution and its staff to standing in solidarity with the Haitian poor. This commitment comes from loan officers who work with rural women to establish small businesses in a despondent economy, in the dogged determination of literacy trainers who travel sweaty miles to hold classes for illiterate members, and in the steely resolve of the members who toil year after year to provide food and schooling for their children.

Today, Natalie remarked that this incredible event is a defining moment for the international community. She believes that with assistance, Fonkoze will recover, and will be a leader in the recuperation of the country. 

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You can help Fonkoze by making a donation to the Fonkoze USA “Earthquake Relief and Rehabilitation Fund” today. To follow Fonkoze earthquake news and updates click here.

MFIs’ Environmental Policies: An Overview

Posted by: Taea Calcut

In a world where development discourse is increasingly peppered with terms such as "sustainability" and "green," what initiatives have socially-conscious microfinance institutions assumed to lessen the environment impact wrought by their clients as well as their own operations? Data from MIX Social Performance reports, which feature a "Social Responsibility to the Environment" (SRE) section regarding MFIs' environmental policies and activities, can help us to begin answering this question.

Graph 1: MFIs with SRE Policies Directed at Supported Enterprises (n=163)

First, what percentage of MFIs report having SRE policies directed at clients and client-owned enterprises? As seen in Graph 1, 81 or about 50% of 163 reporting MFIs claim to have written or informal policies, while another 11 or 7% are in the process of developing written policies.

The Triple Bottom Line: MFIs' Social Responsibility to the Environment

Posted by: Taea Calcut

The impact of microenterprises' activity on the environment can be particularly significant due to the low technological level, general lack of regulatory supervision, and absence of supporting infrastructure and services in their country of operations. Given these challenges, what role can MFIs play in mitigating the environmental impact of financed enterprises to satisfy a "triple bottom line" of sound financial, social, and environmental performance? Over the next two weeks, the Social Performance Indicators Blog will explore the ways in which MFIs have demonstrated their social responsibility to the environment (SRE), highlighting social performance data reported by MFIs to MIX as well as interviews with MFIs featuring SRE policies and initiatives.

 

Social Responsibility to the Community: Improving Workplace Safety in Egypt

Posted by: Richard Carothers, PPIC-Work project and President of Partners in Technology Exchange Ltd.

Even items in a small family-owned restaurant can cause significant injuries, especially to young workers

In a previous post, “Defining Social Responsibility to the Community: Occupational Safety and Health,” guest contributor Dr. Richard Rinehart outlined some of the ways in which hazards might present themselves in businesses supported by microloans. In this post, guest contributor Richard Carothers explores an example of how an MFI can assist in improving workplace safety.

The PPIC-Work project, working with the Egyptian Association for Community Initiatives and Development (EACID), has begun to develop a pragmatic approach for improving workplace safety that can be incorporated into routine visits by loan officers. Dual purpose loans provide the basic support for the business as well as additional funds to cover the costs of improving workplace safety.