SOCIAL PERFORMANCE MANAGEMENT IN MICROFINANCE: TRANSLATING YOUR MISSION INTO PRACTICE Lalaine M. Joyas, MCPI 18 October 2007 / Quezon City, Philippines Asian Forum for Solidarity Economy

Context of the Microfinance Industry Broader context: Increasingly commercial approach to microfinance Professionalization of the sector Focus on Social Performance: –Has it been lost? –Is it taken for granted? –Is there “mission drift”?

The effective translation of an institution’s mission into practice in line with accepted social values that relate to: –reaching poorer and excluded clients; –improving the lives of clients and their families; –widening the range of opportunities for communities. What is Social Performance? Intent Operations Results Social Performance Pathway Common Framework for Social Performance Assessment

Social Performance Pathway

Social Performance Pathway: Strategy and Operations Goals Objectives Range of products and services System use Service delivery Human resources

Dimensions of Social Performance INTENT AND DESIGN What is the mission of the institution? Does it have clear social objectives? INTERNAL SYSTEMS & ACTIVITIES What activities will the institution undertake to achieve its social mission? Are systems designed and in place to achieve those objectives? OUTPUT Does the institution serve poor and very poor people? Are the products designed to meet their needs? OUTCOME Have clients experienced social and economic improvements? IMPACT Can these improvements be attributed to institutional activities? Common Framework for Social Performance Assessment

 Social Performance is defined in terms of both processes and results  Translating mission into practice is a deliberate and intentional process  Desired change in the lives of clients is the goal of this process and it is not automatic

Social Performance Management The process of translating mission into practice, including setting social objectives, tracking Social Performance, and using information to improve practice.

What SPM is… SPM is about having a clear strategy for reaching target clients, meeting client needs, as well as focus on the social outcomes of the MFI’s work. SPM is about decision-making, looking at why certain decisions are made, and the impact on clients. SPM is related to the overall performance management of the organization and the dynamics between social & financial objectives.

What SPM is not… SPM is not simply client-centered microfinance. Where MFIs are client-focused, there is a danger of focusing on particular products and services, or changes in methodology, without linking these to an explicit understanding of how MFI operations lead to benefits for clients. SPM is not simply providing non-financial services.

1. Developing social goals and objectives 2. Monitoring and assessing performance 3. Improving operations Social Performance Management Components

1. Developing social goals and objectives 2. Monitoring and assessing performance 3. Improving operations Social Performance Management Components

Types of Social Goals Reaching target clients Who will the MFI reach? Meeting target-client needs How will the MFI meet the needs of its clients? Change in target clients’ lives What positive changes will the MFI contribute to in the lives of its target clients?

People’s Bank Case Study: Mission Improve the well-being of large numbers of poor women and their families by providing long-term access to quality financial services

Reaching target clients: Who will the MFI reach? Meeting target client needs: How will the MFI meet the needs of its clients? Change in target clients’ lives: What positive changes will the MFI contribute to in the lives of its target clients? Improve the well-being of large numbers of poor women and their families by providing long-term access to quality financial services People’s Bank Case Study: Social Goals

SMART Objectives S Specific M Measurable A Achievable R Relevant T Time-bound

People’s Bank Case Study: Social Goals and Objectives Social GoalsSocial Objectives Reaching target clients: Poor women and their families In each of the next 3 years, deepen outreach of services to poor households, reaching at least 50% “poor” and 10% “very poor” among new clients Meeting target- client needs: Providing quality financial services Reduce client exit rate by 20% in the next 3 years Increase client satisfaction by 15% in the next 3 years Change in target clients’ lives: Improving their well- being In each of the next 3 years, reduce poverty level of clients and their families by moving at least 50% of clients up one level of the poverty scale

Clarity of purpose and strategy Clearly defined mission statement and goals and strategy to achieve it Holistic view of poverty – goals relate to: Food security Assets Literacy Education Life-skills & self-confidence Strategy: ‘Accompanying out of poverty’ Suite of programmes Financial and non-financial services

Clarity of purpose and strategy Targets rural agricultural households Risk and seasonality AMK attempts to minimise risks: Analysis of household cash flows Small loan size Group loans - complete flexibility of repayment Individual loans Savings Emergency loans and micro-insurance (planned)

Leadership and culture Does ‘passion for mission’ compensate for lack of systems? Organisational leadership and culture is key Commitment and leadership is not enough – needs to be systematised Many of partners have strong founder- leaders

1. Developing social goals and objectives 2. Monitoring and assessing performance 3. Improving operations Social Performance Management Components

To understand patterns and trends, you need some information on a routine basis, which we refer to as monitoring To understand the reasons underlying a trend, you may need additional information from time to time, which we refer to as assessment

Stakeholders and Information Uses StakeholdersRoles in SPMUses of Information for SPM Clients Field staff Management …etc…

You already have many sources of information Start with what you have, and expand from there only when there is a clear need Let your Social Performance Management system evolve over time, instead of trying to build from scratch

Information system Alignment with goals? Tools applied but not systematic in relation to social goals Impact assessments Client satisfaction interviews Client default study Client loyalty study CGAP social indicators SPI assessment MCRIL social rating

Information system Appropriate & cost effective information – fit for purpose? Progress out of Poverty Index (PPI) – integrated into MIS: Data from all clients/every loan cycle Segmentation and performance management

1. Developing social goals and objectives 2. Monitoring and assessing performance 3. Improving operations Social Performance Management Components

Decision-Making Key Points When managing Social Performance, it is important to understand the potential trade-offs or tensions that may exist between the pursuit of social and financial goals It is most important to consider short-term trade-offs if you consider that, as a social enterprise, your MFI’s mission, reflected in social goals and objectives, are ends, and financial sustainability is the means to achieving those ends

Organizational Areas to Review 1 Leadership: senior management and board Organizational culture Management approach & decision-making Gender awareness among board members, management and non-management staff Organizational policies and procedures Design of service delivery Range of products & services offered

Organizational Areas to Review 2 Client targetingService delivery Terms and conditions of products & services offered Human resources Management information system Marketing and product development Finance Partnership Communications

Social Performance Management Benefits and Costs What are the benefits of Social Performance Management? What are the costs and resources required? How do you verify that the system is cost- effective?

Benefits of Social Performance Management Information More appropriate products and services for clients Better service for clients Higher retention of clients Program growth Lower operational costs Demonstrate Social Performance to external stakeholders

Costs The cost of what? Management processes Information systems Product development: (Health protection: $15,000) Mini-surveys: Costs part of operations Monitoring: Costs part of operations Market research (Health protection: $3,000) Impact assessments: $4,500; $20,000

Costs and Resource Requirements for Social Performance Management Impact survey: high cost in terms of time and money Focus group discussions: low cost, but requires trained and experienced personnel Individual interviews: cost depends on number of interviews; requires trained personnel

Integrating Social Performance Management Into an Organization It is important to have a systemic view of Social Performance. It relates to your entire way of working and to the design of your organization Create an enabling internal environment for Social Performance Management by building buy-in, aligning systems, and establishing an organizational culture that supports the achievement of your mission

Alignment (systems) Governance AMK: SP committee reports to board Fonkoze: Two boards (Foundation and Bank) Prizma: Push within Board Human resources AMK: Induction spirit of mission AMK: Perf. assessment incl. behaviour with clients Staff incentives AMK: Increased in more difficult areas (low population density, more agricultural, flood or drought prone, poverty) SEF: Client retention

Tools for Assessing Social Performance Intent and Design Interna l system s/ activiti es Output s Outc omes Impacts CERISE SPI MFC Social Audit SPA ACCION SOCIAL Planet Rating Triodos/GRI - TSF FMO E&S Risk Audit M-CRIL Microfinanza Rating CGAP/Ford/Grameen PPI USAID/IRIS PAT FINCA FCAT Oxfam Novib SEEP/AIMS tools Common Framework for Social Performance Assessment

Social Performance Assessment Tools Tools that focus on Process: CERISE SPI MFC Social Audit SPA Audit ACCION Social Planet Rating Microfinanza Rating Triodos/GRI FMO E&S Audit Tools that focus on Outcomes: M-CRIL Social Rating CGAP/Ford/Grameen PPI USAID/IRIS PAT FINCA FCAT SEEP/AIMS Oxfam Novib Tools that are Self Administered: CERISE SPI MFC Social Audit Triodos/GRI FMO E&S Audit CGAP/Ford/Grameen PPI FINCA FCAT SEEP/AIMS Tools Externally Administered: SPA Audit ACCION Social Planet Rating Microfinanza Rating M-CRIL Social Rating Common Framework for Social Performance Assessment

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