Posted by: Mike Krell
A perennial problem here at MIX is that of self-reported data. While it’s true that the financials we display come by and large from independent auditors, social performance data—as well as institutional, outreach, and product information—is all self-reported and, for the most part, not externally audited. This fact brings with it an assortment of headaches, the majority of which stem from a simple question: how do we know whether such data is reliable?
There are many ways to increase the probability that a given piece of information is reliable. For example, we can check it for consistency. Is this piece of information logical? Does it follow from known trends or other givens regarding the entity in question? Does it make sense in the larger context within which that entity is situated? Etc. Solutions such as these, however, can only take one so far (the most obvious flaw being that there are many true data points in the world that fail tests of this sort). In the end, there is simply no way to attain the certainty one has regarding audited data short of, well, an audit.
This problem has proven particularly thorny where social performance information is concerned. In the financial realm, there exist long, time-honored procedures for establishing the validity of a given piece of information, some involving external audits and others not. While these procedures can vary maddeningly from country to country (as this analyst well knows), if you see a piece of financial data in a company’s annual report, you can usually accord it a very high degree of accuracy regardless of whether it comes from an external audit. When seeking such accuracy from social performance data, however, the choice is usually a stark one: either a given data point comes from a social audit or rating—although here too the procedures involved are still working themselves out—or it is essentially hearsay. Between the two lies a gulf…until now!
On Monday, the Grameen Foundation announced the launch of its new Progress out of Poverty Index™ (PPI™) Certification Program. Through this initiative, “microfinance institutions (MFIs) and other PPI users will receive a seal of approval signaling that they are using the tool correctly.” Already piloted by FINCA Peru and ESAF in India, this program adds unprecedented levels of reliability to what is already one of the best poverty measurement tools available. Increased certainty regarding poverty measurements has implications for microfinance stakeholders at all levels and its importance can hardly be understated. Furthermore, as the PPI is one of the only internationally benchmarked poverty tools out there, such an increase also translates to higher quality comparisons between markets, countries, and regions. (In connection with this last point, MIX is currently working to include MFIs’ PPI certification status on MIX Market.)
To sum up, as Ging Ledesma, Manager of the Social Performance Unit at Oikocredit, told Steve Wright in a recent blog post: “It is not enough for an organisation to claim that it is using the PPI. We need to be assured that the tool is being used properly and that the data generated can be relied upon. The certification process being launched today will go a long way in promoting these standards.”
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For more on the new PPI Certification Program, see Grameen Foundation's press release or Steve Wright’s blog post. For MFIs wishing to take part in the new program, here’s a link to their certification request page.
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