Social Performance Indicators Blog

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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Happy Earth Day!

Posted by: Taea Calcut

A SABR microfinance client harvests lemons in Uzbekistan

In celebration of Earth Day 2010, we invite our readers to review the Social Performance Indicator Blog's previous Social Responsibility to the Environment posts, which examined the roles MFIs play in mitigating the environmental impact of financed enterprises. Feel free to share environmentally-conscious activities your MFI is doing in honor of the holiday (or year-round) in the comments section below!

A Holistic Approach to Gender Equality: Financial and Nonfinancial Services at SABR, Uzbekistan

Posted by: Katherine Oglietti

SABR clients engaged in a training session

Interview with:
Madina Rakhimova, Executive Director and Saodat Akhmedova, Deputy Director, Socio Economic Development Centre (SABR), Uzbekistan

Socio-Economic Development Centre (SABR), based in Samarkand City, Uzbekistan, is an NGO founded in 1996 to support women survivors of domestic violence and their children. SABR seeks to “work with and for women and children in difficult socio-economic situations, providing support, encouragement, and the opportunity for an independent life in a safe environment.” SABR added a microfinance component to its operations in 2001, and officially became a microfinance institution (MFI) in 2006. The MFI aims to improve the socio-economic conditions of the most vulnerable layers of the population by strengthening their abilities to lead independent lives in a secure environment.

MIX: What led to the decision to include a microfinance component into your programming?

SABR: The results of socio-economic surveys in rural areas of Uzbekistan proved that the roots of gender inequality and violence against women are not found only in the gender stereotypes and traditions prevalent in a given society, but also in women’s economic dependence on their families or husbands. To address this problem, the priority of our programming became involving women from rural areas in entrepreneurial activities. The most appropriate means of supporting the startup of individual businesses is through microlending. At the time in 2001, microlending was the new and developing mechanism to support the low income layers of the population in Uzbekistan.

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%).

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.

Enhancing Financial Inclusion: The Role of Non-Financial Services

Posted by: Taea Calcut

Earlier this year, the Social Performance Indicators Blog explored the range of financial products and services offered by microfinance institutions (MFIs) to meet the unique needs and constraints of their clients. However, recent research and industry discussions suggest that the achievement of MFIs' social performance goals may be better met with the additional provision of non-financial services that complement MFIs' core business and help clients best utilize the financial products and services available. To examine this issue further, the blog will present data and innovative approaches to non-financial services including enterprise services, adult education, health services, and women's empowerment using MIX Social Performance reports and interviews with select MFIs over the coming weeks.

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.

Rural Outreach through Credit Unions: ASC Union, Albania

Posted by: Katherine Oglietti

Interview with: Gentain Cane

Marketing, ASC Union, Albania

ASC Union is a voluntary union of individual Savings and Credit Associations (SCAs), which are village financial institutions that are created and managed by their members and administrated by its member-elected Board of Directors. Each member makes a minimum deposit into the SCA, which constitutes the majority of the financing for loans and represents over a quarter of loan portfolio funding at the Union level. ASC Union supports its SCAs financially and technically, with the aim of promoting productive activities in rural areas. It is the first microfinance provider in Albania, out of a total of 7 microfinance providers registered by MIX in the country. In the following interview, Gentain Cane of ASC Union describes how the union reaches rural clients at competitive interest rates while covering its costs. 

MIX: In the MIX Social Performance Report, ASC Union states that its social mission is "to provide financial services to the clients living mainly in rural areas and practically excluded from the conventional financial institutions." How does ASC Union use its market studies and client satisfaction surveys to design loan and savings products to meet the needs of its low-income clients in rural areas specifically?

Gentian Cane: The services offered and provided by ASC Union are primarily at the micro level. In contrast to commercial banks, microloans are offered to our clients at an interest rate approved by the ASC Board of Directors at the beginning of each year, (currently 11-16% depending on loan type) which is kept at a fixed rate throughout the year. ASC offers the most competitive interest in the rural areas where we work in order to both meet the social component of our mission as well as to mitigate the needs of low-income clients.