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 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?

OUTPUTDoes the institution serve poor and very poor people?

Are the products designed to meet their needs?

OUTCOMEHave clients experienced social and economic improvements?

IMPACTCan 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 Social Performance ManagementManagement

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

1.1.Developing social goals and Developing social goals and objectivesobjectives

2.Monitoring and assessing performance

3.Improving operations

Social Performance Management Components

Types of Social Goals

• Reaching target clientsWho 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-beingof large numbers of

poor women and their families by providing long-term accessto quality financial services

People’s Bank Case Study: Social Goals

SMART Objectives

SSpecific MMeasurable AAchievable RRelevant

TTime-bound

People’s Bank Case Study: Social Goals and Objectives

Social Goals Social 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

2.2.Monitoring and assessing Monitoring and assessing performanceperformance

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

Stakeholders

Roles in SPM

Uses 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 systemAppropriate & 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

3.3.Improving operationsImproving 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, managementand non-management staff

Organizational policies and procedures

Design of service delivery

Range of products & services offered

Organizational Areas to Review 2

Client targeting Service 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

CostsThe 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

Internal systems/ activities

Outputs

Outcomes

Impacts

CERISE SPIMFC Social Audit

SPA ACCION SOCIALPlanet Rating

Triodos/GRI - TSFFMO E&S Risk Audit

M-CRILMicrofinanza

Rating

CGAP/Ford/Grameen PPIUSAID/IRIS PAT

FINCA FCATOxfam Novib

SEEP/AIMS tools

Common Framework for Social Performance Assessment

Social Performance Assessment Tools

Tools that focus on Process:CERISE SPIMFC Social AuditSPA AuditACCION SocialPlanet RatingMicrofinanza RatingTriodos/GRIFMO E&S Audit

Tools that focus on Outcomes:M-CRIL Social RatingCGAP/Ford/Grameen PPIUSAID/IRIS PATFINCA FCATSEEP/AIMSOxfam Novib

Tools that are Self Administered:CERISE SPIMFC Social AuditTriodos/GRIFMO E&S AuditCGAP/Ford/Grameen PPIFINCA FCATSEEP/AIMS

Tools Externally Administered:SPA AuditACCION SocialPlanet RatingMicrofinanza RatingM-CRIL Social Rating

Common Framework for Social Performance Assessment

For more information on Social Performance Management,log on to the following websites:

www.microfinancecouncil.org

www.Imp-Act.org

www.cgap.org

www.microfinancegateway.org

Learn more

Thank you!Thank you!