1. SPM Essentials Module 6- Social Audit & Social Rating

2. Social Audit Tools

3. Social Audit A diagnostic tool that assesses whether or not an MFI has the systems in place to achieve its stated social goals. It identifies strengths and weaknesses to prioritize areas for improvement.

4. SPS 6 Social Audit Example

5. The Social Audit Process MFI reviews social audit tool and decides which staff will be involved. For self- guided audit, MFI reviews guidance document. For externally- guided audit, auditor explains process. MFI staff complete each section of the audit using the template. Usually a full one-day process. Results are generated automatically for review by MFI staff. Strengths and weaknesses emerge. Management and Board reviews results and decides how to take action on the findings.

6. Areas covered by social audit Mission & Strategy Governance Decision-making & communication Management information system (MIS) Client targeting & outreach Products & services Human resources (some) SR to the environment and community

7. MFIs Use Social Audits to: Diagnose where they are in social performance Prioritize what to improve Provide evidence of SPM practices Prepare for a social rating MFI A Peer Group (same size MFIs)

8. Donors, and investors use social audits to: Diagnose social performance of investees/partners cost-effectively Identify areas for improvement that require TA and other types of support Monitor improvements in social performance Example: Oikocredit, Kiva

9. Social audit tools CERISE Social Performance Indicators (SPI) ▫www.cerise-microfinance.org/-impact-and-social- performance- EDA Rural Systems Social Audit ▫www.edarural.com Global Reporting Initiative (GRI) ▫http://www.globalreporting.org/Home MFC Quality Audit Tool (QAT) ▫www.mfc.org.pl/spm Microsave SPM Toolkit http://www.microsave.org/toolkit/social- performance-management

10. Social Rating Tools

11. Social Ratings Purpose: Provides an external opinion on an MFI’s capacity to put their mission into practice and achieve social goals. Motivation: ▫Financial performance is only half the story for most MFIs ▫Systematic, relatively quick approach ▫Quicker and cheaper than ‘impact assessment’ ▫Focuses on improving management rather than trying to prove impact ▫Demonstrate social performance to external stakeholders

12. Most ratings examine six areas of Social Performance: Country development indicators Microfinance regulation and competition Socioeconomic context Balance between social and financial objectives Systems’ adequacy to achieve social mission Mission, Strategies, Systems Target clients- geographic distribution, gender, etc. Client retention Outreach Data collection and feedback from clients MIS for social data Client monitoring Toward clients (consumer protection), staff, community Environmental performance analysis Social Responsibility Diversity and appropriateness of products and services Quality of services

13. Three Types of Social Ratings Standard Social Rating: As described on previous slide Social Rating Plus Field Data Collection: ▫Survey of clients and focus groups with clients “ Microfinance Institutional Rating” ▫A combined financial and social rating—combines financial analysis with an opinion on risks (incl. SP risks) and client protection practices. ▫It will replace the current financial rating product.

14. The Social Rating Process MFI fills out standardized forms prior to visit from the rater Rater on-site: meets with managers and select staff; Reviews MIS and available documents Rater visits several branch offices; Interviews with staff and clients; Review of available documents Optional: Rater conducts focus groups and surveys with staff and clients for deep, field- level data Final report reviewed by MFI then published with standardized rating

15. Social Rating Benefits For the Industry ▫Increases transparency in the industry ▫Allows comparisons in social performance across MFIs For MFIs & Associations ▫ Provides a clear diagnostic of social performance strengths and weaknesses, an important step towards the establishment of an effective social performance management system ▫Facilitates access to financial capital For Investors and Donors ▫Provides information for resource allocation decisions ▫Supplements the due diligence process

16. Social Audit vs. Social Rating Social AuditSocial Rating Not graded, usually not public Guided self evaluation (but can also use external consultant) Primarily internal: Used by the MFI to examine its own strengths and weaknesses Beneficial for MFIs at all stages—especially those getting started with SPM For MFIs of all kinds– regardless of size, or commercial orientation Graded, can be published Independent evaluation (on- site by rating agency staff Primarily external: Used by investors, donors, public to appraise the MFI Beneficial for MFIs with established SPM For MFIs of all kinds– regardless of size, or commercial orientation

17. Social Rating Agencies ▫M-CRIL: www.m-cril.comwww.m-cril.com ▫MicroFinanza Rating: www.microfinanzarating.com www.microfinanzarating.com ▫MicroRate: www.microrate.comwww.microrate.com ▫Planet Rating: www.planetrating.comwww.planetrating.com User Reviews ▫http://www.sptf.info/page/user-reviews-of-sp- toolshttp://www.sptf.info/page/user-reviews-of-sp- tools