Advocating for Financial Performance Indicators: What Can We Learn from Efforts in Social Performance?

Guest Post by:
Drew Tulchin, Managing Partner, Social Enterprise Associates
Leah Nedderman, Consultant

Most advocates of social performance acknowledge that financial performance indicators are more widely recognized than social measurement indicators.  Financial value is considered less subjective and financial metrics are more widely utilized. For example, the CEO of a microfinance institution (MFI) is more likely to track and report return on equity (ROE) than clients’ progress out of poverty. A country’s central bank is more likely to have portfolio at risk (PAR) requirements than client protection requirements in evaluating the success of an institution being regulated.

However, those of us promoting financial performance standards still find considerable challenges when encouraging the revision and adoption of new financial standards, particularly since there is a revision and update to current standards underway.

What can be learned from the work of social performance advocates, particularly in terms of reaching out to stakeholders with targeted and consistent messages?

First, the challenge: The SEEP Network, an international membership association based in Washington, DC, has launched a revision of the SEEP Framework for Reporting, Analysis, and Monitoring—a tool for MFIs and stakeholders to generate comparable and internationally accepted financial information. The Microfinance Industry Reporting Standards Initiative is a formal mechanism to maintain and update the standards.  This is the first time in 6 years an update has taken place. 

The time for updating the standards is upon us, and the challenge is to garner input from all number of stakeholders—MFIs, investors, donors, regulators, and others. The standards must be as practical and transparent as possible, and we must begin creating interest for the adoption of the revised standards.

Now, the possibilities: SEEP Network has launched an international campaign to publicize the public comment period of the standards setting process. From now until the end of June, all microfinance stakeholders can review and comment on the revised ratios by visiting www.reportingstandards.org.

During the next two months, people who have a stake in the financial performance of the microfinance industry will have their say. The industry will continue to evolve and be shaped by those who care deeply to see it succeed.

Learning from Social Performance: How can this initiative learn from the ongoing initiative to promote social performance indicators? What is the best of social performance to apply to financial performance?

We can start by making the initiative personal and consistent. We are in a “public comment period,” but who is the “public?” Social performance initiatives reach out to distinct stakeholder groups with targeted messages about the benefits of social performance.  They also promote a unified message—social performance is the translation of mission into practice, and indicators are essential for benchmarking, measuring, and reporting.  For such a new movement, the messages around social performance have reached far and wide. We aim to create a similar level of buy-in and interest around the SEEP Microfinance Industry Reporting Standards Initiative.

Let us know what else we can learn from social performance—and in particular, the campaign to promote the use of social performance indicators among practitioners. Think about what has been done well and review how far social performance has come in a short time.  We welcome your thoughts.