How does Social Performance Management (SPM) initiative translate into social returns (benefits and costs of SPM) Irina Ignatieva, Microfinance Advisor, Concern Worldwide

About Concern Worldwide Non-governmental, international, humanitarian organisation Dedicated to reduction of suffering and ultimate elimination of extreme poverty in the world’s poorest countries In 2008 worked in 30 countries and reached 10 million people directly Long-term development work: health, education, livelihoods, HIV and AIDS programmes Responses to emergency situations Addressing the root causes of poverty through its advocacy and development education work

Objectives of the Presentation  Review a case study of AMK, in Cambodia  Discuss Concern Worldwide’s approach to Social Returns and SPM

Where Concern Worldwide is involved in SPM in microfinance AMK, Cambodia –a subsidiary of Concern Worldwide in Cambodia; serving the rural poor; 200,000 clients across the country, 85% of clients are women –Concern Worldwide’s focus at AMK governance level - SPM committee in AMK: overseeing social research and reporting; advisory role to the Board Africa Microfinance Initiative –a joint initiative of Concern Worldwide and Agora Microfinance Fund, since 2009 –access to finance for the poorest where the need for access to financial services is the greatest and the supply is the lowest –green field microfinance operations in Sub-Saharan Africa; initially, Zambia and Malawi –defining and measuring social returns in Africa Microfinance Initiative with focus on mission, market and social research, setting reporting standards, ensuring SPM is imbedded in the operations

Financial performanceSocial performance GoalFinancial self-sufficiency: sustainable delivery of viable services Large number of the poor improve their livelihood options MeansAppropriate products and delivery mechanisms Appropriate products and delivery and client protection mechanisms Information source MIS, accounting system, audit Market and social research, MIS, HRM, audit IndicatorsOperational and financial self-sufficiency, ROE, ROA Depth of outreach, client satisfaction Financial and Social Performance in case of AMK, a non-deposit taking MFI

Costs of SPM in case of AMK as percentage of operating costs Direct field work (personnel, transport, data cleaning and entry) 1.3%0.7%0.9% Software development 0.3%0.0% Analysis and report writing 1.3%0.7% Workshops, meetings, conferences (internal, social performance committee, external) 0.6%0.4%0.6% Social performance committee (SPC) costs 0.8%0.2% Total research and SPC costs 4.2%2.0%2.3% Staff 3 of 1884 of 3495 of 519 Number of clients interviewed 450 of 67, of 120,1111,271 of 151,604

AMK’s accomplishments  System for balancing financial and social objectives at management and Board (SPC) levels  Commitment to long-term strategies that incorporate SP + FP when assessing if AMK is achieving its mission  Client-level data and “intelligence” for informing decisions  Know-how/expertise within AMK  self-reliance and culture of consultations/discussions

Working towards definition of social returns Focus on savings – tracking progress from subsistence to growth Moving from borrowers’ capital limited to the means of subsistence Through developing savings habit and providing loans for productive activities To savings as capital for investment in productive activities The indicator should be Comparable to return on equity (ROE) Measurable and verifiable Data available from MIS Reported on a monthly, quarterly, annual basis

Defining social returns: savings as a source of capital for the poor Financial returns: capital growth indicator in MFI = ROE We suggest social returns: capital growth indicator in client households = the borrowers’ average deposit amount change, viewing savings as clients’ capital

Comparing average deposit amount change and ROE, 56 sustainable MFIs,

Comparing social returns to financial returns Observation:  MFIs clients’ savings diminished: 2008 in 61% of MFIs; 2007 in 16 % of MFIs; 2006 in 18% of MFIs while the capital of the MFIs increasedConclusion:  If social returns reflect average savings amount growth in poor households, social returns in 34 MFIs (61%) were negative in 2008, while the MFIs’ financial returns were positive

Are social and financial returns (savings change and ROE) correlated? – No. Should they be correlated? – Yes.

What is the right balance between financial and social returns? A sample of 7 African Deposit-Taking MFIs,

Four scenarios = goal setting Social Returns can be I.Positive and exceed financial returns II.Positive and at the same level as financial returns III.Positive and at a lower level than financial returns IV.Negative

Decisions to be made by the stakeholders What is the expected level of financial returns for the social investors? Which returns should be maximised – financial or social? What is the desired balance between the social and financial returns?

Thank you ! Thank you ! Irina Ignatieva