Social Performance for Credit Unions Day 1 Isabelle Kidney Bless Darkey CuTRAC, Kasoa, Ghana

Session 1 Advisor Introduction Name Occupation/job Background Brief information regarding role in this project

Participant Introductions Name Role Experience – other positions Length of time, etc.

Learning Objective and Sessions, 27 th Nov Objective: To help cultivate a pro-poor orientation of the CU movement by familiarising participants with the concept of Social Performance Management, Assessment, existing initiatives as well as poverty dynamics of the different regions (and The Gambia) Session 1: Introductions and Regional Poverty Characteristics Session 2: Reporting to the Group on Regional Poverty Characteristics Session 3: What is Social Performance, why is it important and who is doing what in this field? Session 4: Group work exploring cost benefit of SPM

Timetable: Day 1 8:30 – 10:15 Session 1: Getting to know the group: introductions, expectations, and start of Presentation by Regional Managers 10:15 – 10:30 Break 10:30 – 12:00 Session 2: Presentations by Regional Managers 12:00 – 01:00 Lunch 01: :30 Social Performance Management 02:45 – 04:15 Exercise on Social Performance

Day 1Day 2Day 3 Social Performance Management Social Performance Assessment Poverty Assessment Tools Session 1 Introductions and Orientation Session 1 Orientation and Social Performance Mgt. Session 1 Poverty Assessment Tools Session 2 Regional Characteristics of Poverty Session 2 Social Performance Appraisal Session 2 Poverty Assessment Tools: Application Session 3 Social Performance Management: Overview Session 3 Social Performance Appraisal Ends Session 4 Social Performance Management: Exploration Session 4 Social Performance Appraisal: Application

A note on the delivery Technical Language Misunderstanding Note any word or term I use, which you think needs a definition or clarification ASK ! Mark Twain – “the only dumb (silly) question is the one you don’t ask”

Quote The most important thing you bring to the table is your brain -Edward Filene, Credit Union Pioneer USA

Expectations What do you expect to get from these two and a half days?

Social Performance Management Knowledge Management Expansion into Under- mm served mm areas Capacity Building National apex body developed & strengthened Credit Unions & member-ship Poor and Extremely poor Regional Hub & Steering Group West African Credit Unions Against Poverty Programme

Exercise Each Regional Manager to Develop Flipchart Presentation on their own Regions – Highlight: -Geographical characteristics -Political factors -Demographic characteristics (population size, whether high level of female headed households, migration etc.) -Education levels -Health and nutrition issues -Issues around access to services (schools, infrastructure, clinics, extensions etc.) -Economic characteristics -Wealth and Welfare indicators (typical rich, middle, poor characteristics)

Session Two: Presentations Flipchart Presentation on Regions highlighting: -Geographical characteristics & infrastructure -Political factors -Demographic characteristics (population size, whether high level of female headed households, migration etc.) -Education levels -Health and nutrition issues -Issues around access to services (schools, infrastructure, clinics, extensions etc.) -Economic characteristics -Wealth and Welfare indicators (typical rich, middle, poor characteristics)

The Definition of Social Performance The effective translation of an institution’s mission into practice Vision: your idea of a better world Mission: your idea of how to bring this about

Starting Point for Social Performance Management What is the mission of your credit unions?

Missions Banks ▫ Maximize profits / shareholder value Credit Unions ▫ Build democratic institutions with strong common bond Microfinance Institutions ▫ Alleviate Poverty ▫ Help clients build livelihoods, improve wellbeing

What do we mean by ‘Social’?

What qualifies as ‘social’? Who you are reaching based on poverty or vulnerability criteria Expanding access to financial service for economic development Reaching women / providing opportunities for families Promoting equity Promoting progress towards Millennium Development Goals Fostering participation and empowerment

Common Social Missions: Serving increasing numbers of poorer and more excluded people sustainably Improving the quality & appropriateness of financial services through assessment of members’ needs Increasing members’ social capital, assets, income, and access to services Reducing members’ vulnerability Improving members responsibility of the institution toward clients, employees, and communities

What is Social Performance? The effective translation of an institution’s social mission into practice ▫ No Social Mission ▫ No Social Performance ▫ No Social Performance Management

Who is working for who?

The effective translation of an institution’s mission into practice relates to: Reaching target market Delivering high quality and appropriate financial services Responding to the needs of members, their families and communities Ensuring responsibility towards: Its members Its employees, volunteers, the community it serves and the environment

Results Reaching target members Meeting target members’ needs Change in target members’ lives Results Reaching target members Meeting target members’ needs Change in target members’ lives 23 Social Performance Pathway OperationsStrategy Information use

Poor households have very active financial lives and different needs.

Photos credit: Fonkoze, Haiti

Trends in Microfinance Double bottom line: changing context Growth and competition Commercialisation & legal status Skepticism Social Performance Cannot Be Taken for Granted

Big Problems?

What Went Wrong ?  Commercial Mission Drift:  Fast growth (15-30% + p.a)  High competition  Market saturation  Coercive collection practices  Over-indebtedness …  Financial Mission Drift:  High return on investment expected  Minimize costs, maximize profits  Fast profitability  Few products  IPOs (stock market launch) …

Open Floor Discussion What are the dangers in the Ghanian / Gambian context??

Core Problem If you can’t measure it, you can’t manage it No Action Talk Only – NATO Social Performance Measurement Backlash ▫ Donors ▫ Investors ▫ TA Advisors

Client protection Development standards, good practices, certification 7 principles endorsers from 120 countries Responses of the Sector … Microfinance Transparency Campaigns for fair and transparent pricing 28 countries More than 1000 different loan products Seal of Excellence for poverty outreach and Transformation in Microfinance To recognize those institutions doing the most to help families lift themselves out of poverty Platform for dialogue, learning and collaboration Facilitating engagement and advocacy Setting industry standards for social performance management Promoting good practices Gathering quality evidence and research

SP vs. SPM Social performance ▫ Whether or not you achieve your social goals Social performance management ▫ How you achieve your social goals.

The Definition of “SPM” The processes an institution uses to translate its mission into practice. These include: ▫ Setting social targets ▫ Measuring the progress toward these targets ▫ Using the results for strategic decision-making- namely, to improve products, services, and delivery channels

Achieve Your Mission Through Performance Management Mission Performance Management Social Performance Financial Performance

Managing for Social Results Define desired performance Measure progress toward desired performance Use performance results to improve products, services, & systems 30% new members are female New membership recorded by CU staff and reported to board CuTRAC training led to more inclusion of women

AMK Company Profile Largest number of borrowers in Cambodia : > 300,000 Outreach to > 10,000 villages: > 70% of the villages in Cambodia Absolute Commitment to Mission: 50% of new clients in 2011 were below the Cambodia Rural Food Poverty Line Leader in Social Performance Management and Responsible Finance Finance at Your Doorstep Methodology: Loan disbursement and collection at community level Average Loan Size lowest of nationwide MFIs in Cambodia: USD 172; 94% of loans are for less than USD 300 Lowest interest rates in the group lending market Key Stats Population: 14.1 million GNI per capita, Atlas method: USD 750 Poverty Level: 30% Mature SPM Example – AMK Cambodia AMK Client Profile 50% are below Poverty Line 87% of clients are female 63% of clients are literate, and 81% attended some school Average household has 5.2 persons including 3 income earners Clients are predominantly rural, but 63% of clients’ main source of cash inflow is non-farm activity; 35% is farm activity Food is one of the top three expenditures for 96% of clients 83% of clients own land, but 76% of clients have no toilet facilities 33% of clients’ economic situation stayed the same in the previous 12 months; 55% improved, and 13% worsened

AMK SPM Framework

Social Performance Progress and Challenges Strengths: ▫Synergies between social and financial performance ▫Practical way to answer critics ▫Tools, approaches and support are good Challenges ▫Confusion of tools ▫Verification process / credibility ▫Developing process, practices and internal accountability ▫What about impact?

Cost benefit of SPM

Trade offs: - Individual targeting of poverty - Non financial services - Client protection (early stage) Synergies: - Geog. targeting & participation improve productivity - Quality of services & reasonable interest rates improve portfolio quality - Service adaptation improve efficiency Links between social & financial performance (Cerise)

Other studies on the SP/FP correlations (Cerise) A rating agency: Microfinanzas Rating ▫Financial cost of poverty outreach, but ▫Positive Correlation between staff prod/pov outreach, OSS & SR staff, OSS & breadth of outreach – 36 MFIs, verified data A platform for reporting: Mix Market ▫Cost per borrower increases with targeting very poor/poor ▫But SR staff linked with better productivity and SPM training linked to better PAR – 204 MFIs, self reported

Overall, same trends in data analysis SP/FP Costs of individual/direct targeting of the poor But other means to reach poor people: geographic, methodologies, clients’ participation SP & FP are compatible when different dimensions of SP are taken into account

Different levels of support for the MFI Purely self assessment: The MFI fills in the questionnaire alone Accompanied self-assessment: The MFI fills in the questionnaire with support from an external reviewer ▫The external reviewer knows the SPI tool and can answer to the questions of the MFI ▫Final doc= full questionnaire / excel data-graphs Self-assessment with external audit ▫The auditor verifies the quality of the information ▫At least one day for external audit ▫Final doc= full questionnaire/ Excel data-graphs/2p summary Purely external assessment : done by the external auditor

Group Work In small groups, answer the following questions: 1.In your opinion, why do social performance? 2. How can social performance of credit unions be improved? 3. What are the resource implications of introducing social performance?

Wealth Ranking Exercise There are 10 households in this small but typical village. Make up fictitious names and divide them into Well Off, Middle Ranking and Poor. Allocate how many you think will be in each category Describe each category Report back on Flipchart Paper

Recap Questions 1.List 3 common social missions of financial service providers 2.What does NATO stand for? 3.Why was the microfinance sector’s reputation damaged? 4.What is meant by the term ‘double bottom line’?