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.

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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Non-Financial Services: SP Report Data Findings

Posted by: Taea Calcut

In keeping with our current theme of non-financial services, today’s Social Performance Indicators Blog post examines the services offered by 208 microfinance institutions (MFIs) from 69 countries worldwide, each of which submitted MIX Social Performance reports in 2008. (As explained in previous data posts, we draw readers’ attention to the fact that our current sample size remains too small to draw definitive conclusions. However, we present what information we have in the hopes of encouraging greater numbers of MFIs to submit Social Performance reports as well as to aid the formulation of research agendas in the future.)

Graph 1: Non-Financial Services Offered by MFIs (n=208)

First, we looked at the type and popularity of the services MFIs provide to their clients. As  Graph 1 illustrates above, we found that women’s empowerment services which aim to alleviate social inequalities and constraints faced by women rank among the most popular services and are offered by 98 (47%) of the reporting MFIs. Within this category, MFIs are most likely to offer business (82%) and leadership trainings (59%) to their female clients. The next most popular service offered by MFIs are enterprise services (95 MFIs; 46%), followed by adult education (77 MFIs; 37%) and health services (60 MFIs; 29%).

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.

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.

MFIs’ Financial Products and Services: An Overview of SP Report Data

Posted by: Taea Calcut

As mentioned in an earlier post, MFIs exist first and foremost to provide financial products and services to populations underserved or excluded by formal financial institutions. So, what have MFIs identified as the most important products and services to meet their clients’ needs?

Graph 1: Percentage of MFIs Offering Financial Products/Services (n = 166)

 

Using data from a sample of 166 MFIs that submitted social performance reports to MIX, we find that 100% of MFIs offer credit products to their clients, yet less than half currently offer additional products or services (Graph 1).  Of those MFIs that do offer additional products and services, insurance emerges as the most popular product type.

MFIs’ Environmental Policies: An Overview

Posted by: Taea Calcut

In a world where development discourse is increasingly peppered with terms such as "sustainability" and "green," what initiatives have socially-conscious microfinance institutions assumed to lessen the environment impact wrought by their clients as well as their own operations? Data from MIX Social Performance reports, which feature a "Social Responsibility to the Environment" (SRE) section regarding MFIs' environmental policies and activities, can help us to begin answering this question.

Graph 1: MFIs with SRE Policies Directed at Supported Enterprises (n=163)

First, what percentage of MFIs report having SRE policies directed at clients and client-owned enterprises? As seen in Graph 1, 81 or about 50% of 163 reporting MFIs claim to have written or informal policies, while another 11 or 7% are in the process of developing written policies.

Policies and Priorities on Social Responsibility to the Community: Determining Factors?

Posted by: Taea Calcut

In our last post, we discussed some of the ways in which MFIs demonstrate and prioritize social responsibility to the communities where they work. Today, we ask what exogenous factors might determine the likelihood that MFIs have formal social responsibility to the community (SRC) policies.

MIX Social Performance Report data on SRC policies remains limited at this time, given the small sample size of self-reporting MFIs.  However, we can explore correlations between MFIs' SRC policies and world region, working environment (i.e., rural, semi-urban, and urban), and regulatory status on preliminary basis.

So, what does the preliminary data reveal?

Table 1: MFIs with Written SRC Policies by World Region (n=133)

 
For the purposes of our review, we have defined MFIs having an SRC policy as those with written policies, rather than informal policies or policies under development. In Table 1, we find that the data  reveals little variation between MFIs with SRC policies by region at this time. (When “policy” is expanded to include written and informal policies, each region reports a majority of MFIs with SRC policies, yet the variations between regions remains similarly small.) 

Policies and Priorities on Social Responsibility to the Community

Posted by: Katherine Oglietti

An MFI can have a relevant impact in the community where it operates not only through the provision of financial services to its clients but also through the implementation of policies and actions aimed to support community development at large. The social performance indicator on social responsibility to community assesses the steps that an MFI takes in this direction. Of the 133 MFIs who reported on social performance to MIX, we find that the majority of MFIs demonstrate concern for their community-level social impact through their formal and informal policies. 

Graph 1: Current Types of Policies on Social Responsibility to the Community, in a sample of 133 MFIs

A combined 74% of MFIs have written or informal policies regarding social responsibility to the community. While only 26% of MFIs have a written policy, an additional 8% of MFIs that have no current policies are in the process of adopting written policies. This leaves only 11% of MFIs who reported on the indicator who do not have policies regarding social responsibility to the community. This data seems to show that the majority of MFIs who reported to MIX value the social impact that they have on the entire community, beyond the impact they have on their clients through offering financial services. 

Group Lending and Women’s Empowerment

Posted by: Katherine Oglietti

The solidarity group and village bank loan methodologies are common solutions that microfinance institutions utilize in order to reach clients who do not have the capacity to take out an individual loan. They arguably create social cohesion and build a community support network among the borrowers.

The data from MIX Social Performance Reports shows that the majority of group loans are consistently allocated to women. As we noted in a previous post, 110 of the MFIs surveyed report having women in their target market. Women make up 65% of all clients in those MFIs. When we divide loan methodology according to gender within those MFIs that target women, we observe that 74% of clients served by group-lending are women, while 53% of clients served by individual loan methodologies are women. 

Why do MFIs prefer group lending for women? Here are some common explanations.

1) Alternative for poor clients: Globally, women have lower incomes than men, and therefore are not determined creditworthy for larger, individual loans.

2) Social Collateral: Women may not have the collateral necessary for an individual loan, and the group loan creates social pressure to ensure repayment.

3) Empowerment: Women may benefit from the social cohesion created through group meetings. Solidarity groups are therefore generally considered to contribute to women’s empowerment.

4) Safety nets: Women have a lower propensity to take risks, and taking an individual loan involves greater risk due to the absence of group support. Also, individual loans are usually larger, which involves greater risk of not being able to repay if the investment is not profitable.