Social Performance Indicators Blog

Geographic Outreach: A Review of SP Report Data

Posted by: Taea Calcut

MFIs seek to provide financial products and services to those excluded from formal financial systems. A variety of factors can contribute to individuals' exclusion, one of which is their geographic location. In this post, we examine the geographic outreach of 201 MFIs worldwide that submitted MIX Social Performance reports in 2008, exploring their targeted and real market locations, services offered where no other financial services exist, and the effects of country-level factors like population density and urbanization levels on MFIs' operations. (Note: in all examples discussed below, we recognize that sample sizes remain too small to draw definitive conclusions. However, we present information with the goal of encouraging greater numbers of Social Performance Report submissions as well as framing potential research questions for the future.)

Graph 1: MFIs’ Geographic Outreach by Region (n=201)

  

First, are there trends in MFIs' geographic outreach by region? Graph 1 above illustrates the breakdown of MFIs serving majority populations in rural or urban/semi-urban environments. We find that, in our sample, MFIs reporting from the East Asia & Pacific (EAP), South Asia (SA), and Sub-Saharan Africa (SSA) regions are more likely to have the majority of their client populations residing in rural areas. Alternately, MFIs reporting from the Eastern Europe & Central Asia (ECA), Latin America & Caribbean (LAC), and Middle East & North Africa (MENA) were more likely to have the majority of their client populations residing in urban/semi-urban areas.

Rural Outreach through Credit Unions: ASC Union, Albania

Posted by: Katherine Oglietti

Interview with: Gentain Cane

Marketing, ASC Union, Albania

ASC Union is a voluntary union of individual Savings and Credit Associations (SCAs), which are village financial institutions that are created and managed by their members and administrated by its member-elected Board of Directors. Each member makes a minimum deposit into the SCA, which constitutes the majority of the financing for loans and represents over a quarter of loan portfolio funding at the Union level. ASC Union supports its SCAs financially and technically, with the aim of promoting productive activities in rural areas. It is the first microfinance provider in Albania, out of a total of 7 microfinance providers registered by MIX in the country. In the following interview, Gentain Cane of ASC Union describes how the union reaches rural clients at competitive interest rates while covering its costs. 

MIX: In the MIX Social Performance Report, ASC Union states that its social mission is "to provide financial services to the clients living mainly in rural areas and practically excluded from the conventional financial institutions." How does ASC Union use its market studies and client satisfaction surveys to design loan and savings products to meet the needs of its low-income clients in rural areas specifically?

Gentian Cane: The services offered and provided by ASC Union are primarily at the micro level. In contrast to commercial banks, microloans are offered to our clients at an interest rate approved by the ASC Board of Directors at the beginning of each year, (currently 11-16% depending on loan type) which is kept at a fixed rate throughout the year. ASC offers the most competitive interest in the rural areas where we work in order to both meet the social component of our mission as well as to mitigate the needs of low-income clients. 

Announcement: French Translator Wanted

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The Social Performance Indicators Blog has an immediate need for a part-time French translator. Ideal candidates are native or fluent French speakers who are familiar with microfinance and development terminology and have professional writing, editing, and translating experience. The translator will be asked to translate one blog post primarily from English to French on a 24-hour turnaround basis about 3 times a week. All work will be conducted by telecommute. If interested, please forward a letter of interest and resume to Taea Calcut at tcalcut@themix.org.

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MIX Research Agenda: Linkages between Social Performance and Financial Performance

Posted by: Adrian Gonzalez and Micol Pistelli

One of the main goals of MIX Social Performance research is to understand the links between social performance and financial performance outcomes by microfinance institutions (MFIs). In particular, we are interested in understanding whether significant relationships between social and financial performance exist and if these relationships lead to trade-offs in terms of MFIs' achievement of their double bottom line.

Analyzing the correlation between financial and social performance will help us to:   

• Identify links to the MIX Global 100 and make recommendations for a set of new, more comprehensive rankings; and

• Identify links between MFIs’ performance and product development.

Going the Distance: MFIs' Geographic Outreach

Posted by: Taea Calcut

 

The provision of financial services to different geographic areas can support income and employment generation among underserved rural and urban clients. In the coming days, the Social Performance Indicators Blog will examine MFIs' geographic outreach through data from over 200 MIX Social Performance reports and interviews with select MFIs. We will explore issues including the percentage of clients served in different geographic locations, particularly those below the national average of development, as well as the services offered by MFIs to clients living where no financial services are provided. Remember -- readers' thoughts on this topic are, as always, welcome in the comments below!

Socially Responsible Investors: The MFI Perspective

Posted by: Katherine Oglietti and Taea Calcut

Over the past three weeks, the Social Performance Indicators Blog has presented guest posts and interviews from socially responsible investors who spoke about the relationship between financial and social performance and how their companies promote social returns on investment. But what is the MFI perspective on socially responsible investments? To answer this question, we recently asked five MFIs from around the world that work with our featured investors and other socially-oriented firms to discuss their own experiences with the due diligence process. Specifically, what aspects of social performance do MFIs find investors to be most interested in assessing? Do investors’ priorities align with the MFIs' missions? Do MFIs see socially responsible investing as a means to contribute to the achievement of their social goals?

The majority of the MFIs interviewed affirmed that investors evaluate social performance as part of the due diligence process, but one mentioned that some investors took social performance as a given and did not evaluate it. When asked which social performance indicators the investors were most interested in assessing, MFIs gave a variety of answers, demonstrating, as one MFI put it, that “investors generally look at the majority of the indicators, since ultimately they are looking for a balance between financial, social, and environmental parameters.” They did, however, state that indicators of interest to the investors were among the 22 core indicators standardized by the Social Performance Task Force (SPTF) and captured within the MIX Social Performance Report.

Oikocredit's New Department: Social Performance and Financial Analysis

 

Guest post by: Ben Simmes

Director Social Performance and Financial Analysis, Oikocredit, Netherlands

 

In July 2009, Oikocredit began a Social Performance and Financial Analysis department. This reflects the importance Oikocredit gives to social performance. From a long term perspective, we may say that microfinance has entered a third stage of development with its recent focus on social performance.

The first stage was the recognition of the importance of microfinance as a way to reach out to millions of poor people around the world who had no access to financial services. In 1975, Mohammad Yunus and also Oikocredit started to give loans to poor people. This first stage was extremely difficult as many did not believe that microfinance would work. The general opinion was that the loans would not be repaid, but the contrary was true. Loans were repaid and gradually more and more organizations joined Yunus’s efforts. NGO's began to specialize in offering credit; some of them transformed into non-banking financial institutes and even banks. Along with development agencies and social investors, commercial investors started to look at microfinance as a meaningful investment.
 

Calvert Foundation: A Social Perspective for “Good Business”

Posted by: Katherine Oglietti

Interview with: Eliza M. Erikson

Portfolio Manager, Calvert Foundation

 

The Calvert Foundation is a nonprofit organization that, according to its website, uses “investment capital, rather than conventional philanthropy, to create a sustainable, scalable model that enables nonprofit organizations and social enterprises to address critical social problems.” The Calvert Foundation offers a Community Investment Note, where individuals have the option to target their investment in different nonprofit sectors. Investors choose a 0-3% interest rate on this managed bond, opting at times for a 0% financial return in order to maximize their investments’ social returns in areas such as affordable housing, microcredit, small business development, community facilities, and social innovations. In the following interview, Eliza Erikson, who manages the Calvert Foundation’s international microfinance portfolio, describes the link between strong social performance, healthy portfolio quality, and client satisfaction.

MIX:  Does social performance reporting influence Calvert Foundation's choice to invest in a given MFI? If so, in what way?

Ms. Erikson: I would not say that social performance reporting alone influences our choice to invest in a given MFI. From the outset, we want to be sure that the MFIs accessing our loan capital have a strong focus on delivering essential products and services that are affordable, accessible, and appropriate for lower-income clients living at the “Bottom of the Pyramid.”  That strong client orientation should not only be the foundation of an MFI’s social mission, but at the heart of its business model and financial performance. It keeps their clients coming back for more and attracts new clients, sometimes away from the competition. This strong focus on the lower-income client and their perspective is not necessarily “social” in nature. I would argue that it is good business, especially if you are in the microfinance business.

BlueOrchard’s Initiatives in Social Performance

Guest Post by: Sarah Leshner
Senior Investment Analyst, BlueOrchard

BlueOrchard has, since inception, consistently used widely understood and accepted tools and benchmarks for analyzing the financial and operational performance of the MFIs in our portfolios.  In January 2009, the CEOs of BlueOrchard Finance and BlueOrchard Investments jointly proclaimed the firm’s ambition “to improve our capacity to collect quantitative and qualitative data on the social performance of our lending activities.” We are proud that in the past year we have indeed begun developing similarly rigorous systems and tools to assess, monitor, and articulate the social performance of our investments.

The mission statements of MFIs that BlueOrchard works with typically include a core objective to provide financial products to low-income clients that will help them grow their businesses, thereby improving the quality of life for themselves and their families. They often include as well the specific objectives of empowering excluded segments of the population and contributing to the socio-economic development of the community. BlueOrchard recognizes that in the context of MFIs’ tremendous growth around the world over the last several years, and the associated need for increased efficiency, scale, and profit, it has become ever more critical to ensure that institutions remain true to their mission, tailor products to meet their clients’ needs, and lend responsibly by fully disclosing all costs and properly assessing appropriate debt levels for their clients. This is at the heart of an MFI’s social performance.