Grameen Foundation Announces First Fully Certified PPI™ User: PRISMA Microfinance in Peru

Posted by: Mike Krell

In the latest PPI news, Grameen Foundation's Progress out of Poverty Index™ (PPI™) Certification Program has announced its first fully certified PPI user. Last week, PRISMA Microfinance of Peru became the first MFI to be validated in all three categories of certification: basic, advanced, and tracking over time. I’ve already written elsewhere about why the certification process itself is such a welcome development, but I’d like to tease out some implications of the PRISMA case.

There are two aspects of PRISMA’s experience that strike me as particularly significant. The first is that PRISMA used the PPI to modify its own operations. PRISMA’s PPI results showed that its poorest clients were in rural areas and that, among these clients, women tended to be poorer than men. Furthermore, it found that village banking was the methodology best suited to serving this segment of PRISMA’s clientele. In response to these findings, PRISMA has “redoubled its efforts to reach more women in rural areas, [in order] to fulfill its mission of serving the poorest.” It also plans to increase the proportion of its portfolio represented by village banking clients from 46 to 70 percent.

This is the essence of good social performance management. PRISMA’s mission is to serve the poorest strata of society. It introduced a process to quantify and track the poverty levels of its clients to assess whether it was actually accomplishing that mission. After measurement, PRISMA found that it was indeed reaching the poor but that that there was still room for improvement. Finally, it altered its operations in such a way as to focus even more on its target market and it did so in ways suggested to it by the PPI. As PRISMA is also using the PPI to track clients’ poverty levels over time, the institution will be able to infer whether its operations are effectively promoting these clients’ economic development (it found that 2.6 percent of a sample of new clients had moved above the poverty line between 2009 and 2010).

My second point has to do with the funding implications of PRISMA’s PPI use: “Over the past year, MF PRISMA has also received preferred lending terms from seven major investors because its PPI results demonstrated that it was targeting the poorest people in Peru.” Based on the strength of these results, PRISMA received better terms on its own borrowings from socially responsible investors. One can only assume that, by modifying its operations to further target the very poor, PRISMA will continue to attract this sort of preferred lending.

While these two points are only tangentially related to the issue of PPI certification, they demonstrate the effect that proper use of the PPI can have on a socially oriented MFI and, hence, its value as a social performance management tool. Certification itself is a clear sign to all stakeholders that (a) PRISMA is serious about targeting the poor and (b) it is employing the right tools in the right way. By ensuring that the PPI scorecard is being used properly, certification increases confidence in the scorecard’s results. PRISMA used these results to sharpen its operations and was also rewarded with more resources to devote to its mission – a double payoff!

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You can read Grameen Foundation’s press release about PRISMA’s certification here. They have also published a case study about PRISMA, available here.