Social Performance Indicators Blog

New Research Results on Trade-offs and Synergies between Social and Financial Performance

Posted by Adrian Gonzalez

A few months ago we presented a MIX Research Agenda to explore relationships between social and financial performance. Now we are ready to discuss the main results from this research, based on the social performance data collected for 2008. When reviewing the findings, the reader should keep in mind that they are based on regression analysis that controls for other factors known to impact financial performance (such as age, loan size and lending methodology) in order to isolate the specific set of relationships being investigated.

The research investigates whether social and financial performance interact to lead to important trade-offs or synergies in terms of MFIs' achievement of their double bottom line. For those who like to visualize data, Figure 1 summarizes the expected relationships between financial performance (FP, down the first column) and social performance (SP, across the top row) goals, with green indicating synergies, and red indicating trade-offs, as discussed in the original posting laying out the research agenda.

Figure 1: SP and FP Expected linkages

  

+:   Expected relationship is positive, meaning that an increase in the respective SP is associated with an increase in the respective FP, and a decrease in the respective SP is associated with a decrease in the respective FP.  In other words, the variables move in the same direction. 
-:   Expected relationship is negative, meaning that an increase (decrease) in the respective SP is associated with a decrease (increase) in the respective SP. In other words, the variables move in the opposite direction. 
++, --: These are the areas where strong relationships between SP and FP are expected. 
0:   No relationship (effect) expected at all. 
?   Expected sign of relationship cannot be determined.

Announcement: Fill MIX’s Social Performance Standards Report through CERISE’s Social Audit Tool

 

 

 

Translated and posted by: Mike Krell

MFIs using CERISE's SPI social audit tool can now provide their core social performance data to MIX without any additional effort. In fact, the SPI questionnaire contains all of MIX’s core indicators. By using the CERISE/SPI method of evaluation—a method recognized and valued by numerous investors, funders, and regulators—MFIs can not only conduct an internal diagnostic and commit themselves to improving social performance, but can also export all of their social data to the MIX format in a single click with the electronic SPI. This new functionality allows microfinance service providers to improve their transparency as well as their visibility at the international level (MIX/SPS).

New Resources for Social Performance Management from the Imp-Act Consortium

Guest Post by:
Veronika Thiel, Microfinance Research Consultant

The primary goal of microfinance has always been to help people out of poverty through the provision of financial services to people who were previously thought to be unbankable. After a period of growth and going from strength to strength, there has been a tendency to focus too much on the financial stability of microfinance institutions (MFIs) rather than on the social impact they are creating. There has been the assumption that a financially-viable organization is automatically creating beneficial social outcomes. Following a series of articles and academic research that highlight serious problems with overindebtedness and the destruction of savings in certain contexts, the microfinance sector is being challenged to revisit their approach to effectively achieve their social mission. Financial viability needs to be seen again for what it is – a means to an end rather than an end in itself. The achievement of social outcomes is not an automatic side effect of having a financially viable organization – social performance management (SPM) needs to take center stage.

In other words, microfinance needs a social performance approach that measures and monitors the social impacts organizations’ work have on the lives of their clients and the communities they operate in. Do organizations help or hinder? Do they reach the clients they seek to reach? Do their products help clients reach their goals? Are MFIs creating a lasting legacy or do they unintentionally destroy existing assets? To find this out, MFIs have to become as attuned to social indicators as they are to financial ones. By mainstreaming social performance management across an organization, they can ensure that they track social – and financial – performance in a meaningful way.

The Imp-Act Consortium, a partnership of nine organizations operating worldwide, has over the past 10 years demonstrated that most MFIs can improve their services with relatively small and affordable changes, and that social performance needs to be integrated into management for social goals to be achieved. Their work has promoted the mainstreaming of SPM into microfinance by providing practical guidance and research on how to do so. The underlying idea of marrying social and financial outcomes to help MFIs fulfil their promise is also reflected in a set of principles for SPM endorsed by the Social Performance Task Force in June 2009. Over 75 MFIs have signed to these principles already.

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. 

New Social Performance Data Collection Has Begun!

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MIX is pleased to announce that it has begun data collection for the FY 2009 Social Performance Reports.

The 2009 Social Performance Report templates are now available on MIX website at: www.themix.org/standards/sp-reports in English, Spanish, and French. The templates in Arabic, Russian and Bahasa Indonesia will be coming soon.

MFIs already registered on MIX Market can submit the completed SP Report via MIX Market until September 30, 2010. For any questions regarding the social performance program, please e-mail MIX’s Social Performance Manager Micol Pistelli at mpistelli@themix.org 

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Incorporating Poverty Assessment Data into MFIs' MIS

Posted by: Taea Calcut

The Social Performance Indicators Blog speaks frequently about the need for microfinance institutions (MFIs) to collect information on the populations they serve to determine if their activities are aligned with their social missions. However, data collection is only a first step. Following its collection, data must be properly stored, organized, and analyzed to ensure its use by MFI staff in decision-making processes.

Last week, Grameen Foundation released a working document, Basic PPI MIS System Requirements, to address the question of how MFIs can incorporate poverty assessment data captured by its Progress out of Poverty Index^TM (PPI^TM) into their management information systems (MIS). The document is meant to serve as a guide for MFIs' IT staff and consultants and Grameen Foundation welcomes comments from MFIs on their experiences to further refine it. 

For more information on the working document, please visit Grameen Foundation’s Progress out of Poverty Blog. For discussions on how MFIs have put the PPI^TM to use in their social performance measurement and management activities, please visit our blog posts on PRISMA in Peru, Fonkoze in Haiti, or our poverty measurement archives.

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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Announcement: PPI™ Initiative in Africa

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The Grameen Foundation made an announcement today that it will begin an initiative with three MFIs in Sub-Saharan Africa to use the PPI™ (Progress out of Poverty Index™) to assess client poverty levels, better target poor clients, and track how they are moving out of poverty. The initiative, the first of its kind in Africa, is being facilitated by the PPI™ Users Collaborative in Africa (PUCA), a new, multi-stakeholder group that unites five charter partners—Oikocredit, Catholic Relief Services, Terrafina Microfinance, Planet Rating and Grameen Foundation—with the national microfinance networks APIM/Mali and  APSFD Senegal. As Sub-Saharan Africa is the poorest region in the world, it is particularly important for MFIs of that region to measure whether and how MFIs are able to contribute to poverty alleviation, improving their strategies accordingly.

More information on this initiative is available on the Progress out of Poverty Blog and the Grameen Foundation webpage.

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Support Haiti through Microfinance

Posted by: Katherine Oglietti

Following the earthquake in Haiti, we featured guest posts from Sogesol and Fonkoze affiliates because we were able to make rapid contact with them, yet these MFIs are not the only ones who need support. It is necessary to emphasize that each of the microfinance institutions in Haiti and their clients have suffered greatly as a result of this catastrophe, and each will have much rebuilding to do. They have born losses of staff members and damages to their institutions. They are struggling to overcome these heavy blows to their organizations while redoubling their efforts to provide desperately needed loans and financial services to their clients. 

Photos by Leigh Carter, Fonkoze USA

As the rubble is cleared and the dust settles, microfinance will become an essential component of the rebuilding process, helping microentrepreneurs get back on their feet. MFIs have the capacity to offer loans for rebuilding homes and businesses; the ability to offer such financing will be contingent upon a large increase in funding. Please consider channeling your support for Haiti’s continual and sustainable development through one or more of these microfinance institutions who have been working to support Haitian microentrepreneurs and families for many years. 

MIX Market has information on six microfinance institutions from Haiti. Please find below the information that we could find on each of these organizations, as well as how to contribute to their funds for relief efforts.

Announcement: Social Performance Task Force Annual Meeting

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Social Performance Task Force Annual Meeting

June 28, 2010 – July 2, 2010
Bern, Switzerland

Sponsored by the Swiss Agency for Development and Cooperation, Liechtenstein Development Service, CGAP, and the Ford Foundation

For more information, please see the attached invitation letter, city guide, and hotel reservation form.

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