APRIL 2010

Social Performance Framework and Initiatives

Part I: Defining Social Performance

Serving increasing numbers of poorer and more excluded people sustainably

Improving the quality & appropriateness of financial services through assessment of clients’ needs

Increasing clients’ social capital, assets, income, and access to services

Reducing clients’ vulnerability

Improving social responsibility of the MFI toward clients, employees, and communities

Definition of ‘Social Performance’

The effective translation of an institution’s mission into practice in line with accepted social goals such as:

Managing for Results

Performance is not incidental.

What is explicitly defined and measured is what is managed.

Need to define desired performance.

Need to measure results against desired performance.

Mission

Performance Management

Social Performance

Financial Performance

Dimensions of Social Performance

INTENT AND DESIGNWhat is the mission of the institution?Does it have clear social objectives?

INTERNAL SYSTEMS & ACTIVITIESWhat activities will the institution undertake to achieve its social

mission? Are systems designed and in place to achieve those objectives?

OUTPUTSDoes the institution serve poor and very poor people?Are the products designed to meet their needs?

OUTCOMESHave clients experienced social and economic improvements?

IMPACTCan these improvements be attributed to institutional activities?

Part II: Indicators and Tools for Social Performance

Social Performance Indicators Framework

Process

Results

Q1–Mission & Social GoalsQ2-Governance

Q3–Range of Products and Services (financial & non-financial)Q4–Training of staff on social performance Q5–Staff performance appraisal and incentivesQ6–Market research on clientsQ7–Measuring client retentionQ14–Poverty assessment

Q11- Geographic outreachQ12- Women outreachQ13- Clients outreach by lending methodology

Q17-ProductsQ18–Employment (Family & Hired in credit supported ents.)Q19–Children in School (girls/boys)Q20–Poor and very poor clientsQ21–Clients in povertyQ22–Clients out of poverty

Q8– Social responsibility to clientsQ9-Cost of services to clientsQ10–Social responsibility to staffQ15 – Social responsibility to the communityQ16–Social responsibility to the environment

MFIs that want to update their profile on MIX Market with the social performance indicators are expected to be able to report information on the 13 indicators contained in Part I of the report (indicators highlighted in yellow).

Assessing Social Performance - Initiatives and Tools

StrategyAchievement of Social Goals

Business

Planning

Outputs - Outreach

PPI/PAT – poverty levels at entry

MISION tools

Policies and Compliance

Smart Campaign client protection

MicroFinance Transparency – costs to clients

Human Resources Policy/

Manual

FMO – Health, Safety and

Environment

Market Research for product development, client satisfaction, exit surveys

Staff training, appraisal and incentives

MIS tracking – outreach to target areas; retention; dropout; gender disaggregation

Outreach OutcomesPPI/PAT– poverty levels of client households after 3 years

Tracking other profile indicators over time

Client Exit Rate (dropout or graduation?)

Audit Tools for Assessing Social Performance

Take into account an MFI’s records, statements, and internal processes/procedures related to social performance

Goal is to assess the quality and meaningfulness of an organization’s claimed social performance

Audit tools may or may not include outputs

Usually applied internally, sometimes externally (investors & donors) and internally

EXAMPLE:

Social Performance Indicators (SPI ) Tool

Standardized questionnaire

Evaluates whether actions & strategies are in line with social objectives

Over 250 MFIs have administered the SPI either alone, with their network, TA provider or social investors.

Developed by CERISE: www.cerise-microfinance.org

Rating Tools

External opinion on an MFI’s intent, and capacity to achieve their social mission and generate social returns

Examine MFI’s internal processes and analyses portfolio/client data (outputs)

Stand-alone or accompany a financial rating

Grading based on a standardized rating scale

EXAMPLE: Microfinanza Rating Social Rating

Focuses on consistency of practice with mission and values

Assesses: governance, business planning, market development, HR, MIS, and internal audit

Includes client level data to profile outreach and quality of services (questionnaire and focus groups); includes PPI

Stakeholders Invested in Social Performance

MFIsInvestors and DonorsNGO NetworksMicrofinance Associations

MFIs as Stakeholders

Social performance data inform management decisions and preempt problems.

Client-centered products and strong client protection attract and retain clients.

Strong social performance attracts donors/ investors.

Reporting social performance data demonstrates social focus and transparency to investors, donors, and the public.

MFIs in Practice

“Social performance management and reporting keeps a check on our strategies, planning processes, products, and programs, which in turn helps us to assess the changing needs of the community.” -Evangelical Social Action Forum (ESAF), India

“Social performance reporting should be as important to an MFI as financial reporting. Neither tells the whole story alone. Internally, we need to know whom we are reaching and if we are changing lives. Investors and donors deserve to know as well.” -FONKOZE, Haiti

Investors & Donors as Stakeholders

Social performance data inform investment decisions.

Social performance measurement, monitoring and reporting are superior to anecdotes.

Client-centered MFIs are a good investment because they attract and retain clients.

Social performance data are reported to fund investors who seek a social return on their investment.

Investors yield power over the data MFIs collect by the questions they ask & reporting requirements.

Investors & Donors in Practice

“We want our investments to go to the best problem solvers, not the best storytellers.” - Acumen Fund

“We want to invest in MFIs who retain their clients because they offer tailored services, pay attention to client satisfaction, are committed to client protection, and are making a difference in their communities.” –BlueOrchard

Part III: Living up to the Promise of Microfinance

Challenges for the Industry

Challenge 1: Representing ourselves accurately (honestly), recognizing that institutions have different aims

Challenge 2: Living up to the promise of microfinance—creating positive changes in the lives of clients

Challenge 1: Representing Ourselves Accurately

•Know who you are and do not claim to be more.

•Which type of MFI are you?•Which type of investor are you?

Challenge 2: Living up to the Promise of Microfinance

First step: Responsible finance—the practice of the six principles of client protection:

1.Avoidance of over-indebtedness2.Transparent pricing3.Appropriate collections practices4.Ethical staff behavior5.Mechanisms for redress of grievances6.Privacy of client data

First step: Responsible Finance

Responsible finance is essential to social performance, but not synonymous.

Mission is to provide the poor with access to financial services

MFI targets the poor with products & services that do not harm them.

Products and services delivered to the poor adhere to the client protection principles.

Does not address outcomes.

Second Step: Social Performance

Social performance is the effective translation of an institution’s mission into practice.

•Clients make progress out of poverty•Increased food security•Products and services meet diverse life-cycle needs•Clients are satisfied and have input•Non-financial services (health & education) speak to development needs•Staff & environment benefit

✔ ✔✔

Meeting the Challenges

The Social Performance industry has developed a variety of tools for meeting these challenges:

1.Define where you are on the spectrum with the SPTF/Mix Social Performance Indicators

2.Assess your compliance with the principles of client protection with the Client Protection Self Assessment

3.Measure your outreach to the poor—Poverty measurement tools. PPI and PAT

4.Microfinance Transparency – Interest Rate Calculator.

Meeting the Challenges (Continued)

5. Clarify your social goals and recommend solutions for improvement—social audit tools.

6. Validate and communicate your social strengths and weaknesses—social rating tools. Co-funding available from www.ratinginitiative.org

7. Measure client-level indicators—food security surveys; client satisfaction surveys; exit interviews; market research for product development.

Thank youFor more information:

• Contact Laura Foose at the Social Performance Task Force: LFoose@gmail.com

•Go to: www.sptf.info