Social Performance Framework and Initiatives

1. Social Performance Framework and Initiatives April 2010

2. Part I: Defining Social Performance

3. Definition of ‘Social Performance’ The effective translation of an institution’s mission into practice in line with accepted social goals such as: • 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

4. Managing for Results Mission Performance is not incidental. What is explicitly defined and measured is what is managed. Social Performance Need to define desired performance. Need to measure results against desired performance. Financial Performance Performance Management

5. 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? OUTCOMES Have clients experienced social and economic improvements? IMPACT Can these improvements be attributed to institutional activities?

6. Part II: Indicators and Tools for Social Performance

7. Social Performance Indicators Framework Results Process Q3–Range of Products and Services (financial & non-financial) Q4–Training of staff on social performance Q5–Staff performance appraisal and incentives Q6–Market research on clients Q7–Measuring client retention Q14–Poverty assessment Q8– Social responsibility to clients Q9-Cost of services to clients Q10–Social responsibility to staff Q15 – Social responsibility to the community Q16–Social responsibility to the environment Q1–Mission & Social Goals Q2-Governance Q11- Geographic outreach Q12- Women outreach Q13- Clients outreach by lending methodology Q17-Products Q18–Employment (Family & Hired in credit supported ents.) Q19–Children in School (girls/boys) Q20–Poor and very poor clients Q21–Clients in poverty Q22–Clients out of poverty 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).

8. Assessing Social Performance - Initiatives and Tools Achievement of Social Goals Policies and Compliance Strategy Outputs - Outreach PPI/PAT – poverty levels at entry MISION tools Smart Campaign client protection MicroFinance Transparency – costs to clients Human Resources Policy/ Manual FMO – Health, Safety and Environment Business Planning 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 Outcomes PPI/PAT – poverty levels of client households after 3 years Tracking other profile indicators over time Client Exit Rate (dropout or graduation?)

9. 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

10. 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

11. Stakeholders Invested in Social Performance • MFIs • Investors and Donors • NGO Networks • Microfinance Associations

12. 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.

13. 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

14. 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.

15. 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

16. Part III: Living up to the Promise of Microfinance

17. 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

18. Challenge 1: Representing Ourselves Accurately • Which type of MFI are you? • Which type of investor are you? • Know who you are and do not claim to be more.

19. Challenge 2: Living up to the Promise of Microfinance • First step: Responsible finance—the practice of the six principles of client protection: • Avoidance of over-indebtedness • Transparent pricing • Appropriate collections practices • Ethical staff behavior • Mechanisms for redress of grievances • Privacy of client data

20. 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.

21. 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

22. Meeting the Challenges • The Social Performance industry has developed a variety of tools for meeting these challenges: • Define where you are on the spectrum with the SPTF/Mix Social Performance Indicators • Assess your compliance with the principles of client protection with the Client Protection Self Assessment • Measure your outreach to the poor—Poverty measurement tools. PPI and PAT • Microfinance Transparency – Interest Rate Calculator.

23. 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.

24. Thank you • For more information: • Contact Laura Foose at the Social Performance Task Force: LFoose@gmail.com • Go to: www.sptf.info