Social Performance Ratings - University Meets · PDF fileSocial Performance Ratings ... nA...

JUNE 2010

Social Performance Ratings

University Meets Microfinance«Measuring the Impact and Social Performance of Microfinance»

Planet Rating13 rue Dieumegard 93400 Saint-Ouen France Tél : 33 1 49 21 26 30 – Fax : 33 1 49 21 26 27 [email protected] – www.planetrating.com

Presented by: Edouard Sers, Expert [email protected]

June 18th, 2010 – Hannover1

University Meets Microfinance - «Measuring the Impact and Social Performance of Microfinance»

About Planet Rating



PlaNet Finance (www.planetfinance.org)

n A leading French NGO that aims to alleviate poverty worldwide through the development of microfinance.

n Paris-based with 1,000+ employees in 80 countries; 2008 resources of 9.4 million EUR

COFACE Group (www.coface.com)

n COFACE provides 4 product lines: credit information and corporate ratings, receivables management, credit/guarantee insurance, export guarantees and factoring. FitchRatings (A+), S&P (A-), Moody’s (A2).

n Paris-based with 6,800+ employees in 67 countries; 2008 revenues of 1.68 billion EUR

CDC Group (www.caissedesdepots.fr)

n CDC Group is the leading French manager of public savings deposits and pension funds. It is also a leading investor in social housing and regional/local development projects throughout France. FitchRatings (AAA).

n Paris-based with 5,200 staff in 80 countries; 2007 assets of 221 billion EUR and net income of 2.5 billion EUR

Viel & Co. Finance (www.viel.com)

n VIEL & Cie is one of the world's top three brokers in financial (money markets, bonds, interest rate, currency/ credit derivatives, equities, equity derivatives, interest rate & index futures) and commodity-related products.

n Paris-based and Euronext-listed, VIEL operates in 27 countries; 2009 revenues of 920 million EUR

Knowledgeable & Committed Shareholders

Planet Rating is backed by solid shareholdersPlanet Rating is backed by solid shareholders



Planet Rating: The Global Microfinance Rating Agency

Offices

Missions

Created in 1999 and became a private independent rating firm in June 2005

Planet Rating has the most extensive global coverage, thanks to a network of 6 officesspread over 4 continents

n Paris HQ: covering Eastern Europe

n Lima Office: covering Latin America & the Caribbean

n Dakar Office: covering West & Central Africa

n Nairobi Office: covering East & Southern Africa

n Beirut Office: covering Middle East & North Africa

n Manila Office: covering Asia

Qualified & experienced team

n Each senior analyst has conducted at least 12 rating missions on 3 different continents

n Analyst backgrounds: investment banking, management consulting, non-profit, microfinance



Social Performance Rating Methodology



n First tests in 2005/2006 on several MFIs across the world using the CERISE SPI and the USAID AMAP tools and later a pilot methodology

n Finalization of the V1 in 2007

n Rating methodology in line with the framework defined by the Social Performance Task Force based on good practices adopted in the industry

nMethodology updated (V2) in 2010

n After three years of implementation of the v1: close to 40 social ratings between 2007 et 2010 for Planet Rating, and presumably close to 150 for all rating agencies

n According to our clients’ feedback and to the latest trends in the industry

nNext updates shall further incorporate the latest developments/findings from impact studies in microfinance

Social Performance Rating development

Rating Methodology developed since 2005 and still evolvingRating Methodology developed since 2005 and still evolving



Social Performance Framework

n Rating agencies have adopted a common framework of analysis and each one developed its own rating methodology

n Conclusions about impact are crucial to update the framework used in social ratings and SPM in general

Social Performance Management Impact

Social Performance Management is defined as the processes through which MFIs 1) define and formalize their social goals, 2) design the systems to put these intentions into practice, 3) measure actual outcomes and 4) use these results to refine systems and improve practice

Scope of social performance ratings

Social Performance Ratings provide an opinion on “the capacity of an MFI to achieve its social goals”



Social Rating Scale: What Do We Measure?

Negative: No intention to reach social goals; mismanagement leads to negative social performance.

0+0

Intangible: Intention to reach social goals is non tangible; low level of management of social performance.

1+11-

Incipient: Clear intent to reach social goals; low capacity to manage social performance.2+22-

In progress: Clear intent to reach social goals; social performance management systems being implemented.

3+33-

Convincing: Clear commitment to social goals; reasonable management of social performance and social responsibility risks; institution likely to achieve its social goals.

4+44-

Advanced: Long-lasting commitment to social goals; efficient management of social performance and social responsibility risks; institution very likely to achieve its social goals

5+55-

DefinitionRating

n Scale with strong emphasis on the evaluation of the Social Performance Management systems; considered as a strong predictor of performance; Currently measurable and comparable

n Information and evidence of performance needed to reach the higher levels of the scale



We rate an MFI’s capacity first to improve and prove its social performance

Social Rating’s Approach

Design YourSOCIAL MISSIONobjectives, target, service offering

Design and buildINDICATORS Collect INFORMATION

SETtargets

TRACK targets

Take correctiveACTIONS

Evaluate RESULTS

Revise your procedures and social mission



Five Social Performance Rating Domains

n Social Performance Management

n We rate the intent to achieve the social mission, its institutionalization, organizational buy-in, the quality of performance measurement and tracking as well as the risk of mission drift.

n Financial Inclusion

n We rate the MFI capacity to reach the underserved (poor or excluded), and offer them an adapted range of services in an efficient manner.

n Client Protection and Ethical Finance

n We measure the MFI’s level of compliance with the six Client Protection Principles (as defined by CGAP and ACCION), whether the MFI has a fair pricing and how it mitigates risks of Money Laundering

n Human Resources Policy

n We evaluate labor conditions (through the professionalism of HR Management and its compliance with labor laws and ILO standards), the MFI’s compensation policy and whether staff benefits from equal rights.

n Social Change

n We evaluate how non-financial services offered by the MFI may contribute to social change as defined in frameworks of reference such as the UN Charter, Human Rights and MDGs. à à à à à

25%

25%

30%

20%

Notch



Case Study



Presentation of Al Majmoua, Lebanon

n Al Majmoua, started its operations in 1994 as a program from Save the Children (USA) and registered as an independent NGO in 1998.

nHeadquartered in Beirut with a network of 10 branches across the country

nOutstanding portfolio of 14.2 M USD as of December 2009, reaching out to 18,001 clients

nGroup loans (10%) and individual loans (90%) ; Av. loan disbursed at 1,178 USD (14% of GDP per capita) ;

n Al Majmoua’s vision is to “be the leader in creating an inclusive financial system where all people in Lebanon have access to affordable services”.

n Its mission is to “improve the economic and social conditions of individuals, with limited income, micro and small entrepreneurs in particular, in all areas of Lebanon, by providing access to quality financial and non-financial services”

Institutional PresentationInstitutional Presentation



II. Financial Inclusion

nOutreach to the Underserved

n Adaptation of the services

n Cost of the Services

n Branches opened in priority in the poorest areas of Lebanon

n Individual targeting based on the income levels but the actual poverty level of the clientele cannot be compared to international benchmarks

n Financial services have been well adapted to address the clients’ financial needs

n Range of services so far limited to lending and credit life coverage

n Competitive pricing for group loans

Rating Factors 25%Rating Factors 25%

Al Majmoua – HighlightsAl Majmoua – Highlights 3+

n/a35,0%Effective Interest Rate

n/a68,7%Retention rate (Schreiner)

(13.9% PIB/h)1 178 USDAverage amount disbursed

12,5%2,0%Penetration Rate

n/a22,3%% clients with social collaterals

12,8%49,4%% rural clients

51,0%41,3%% female clients

28,6%30,0%% poor in areas of operations

LebanonAl MajmouaExample of Indicators



III. Client Protection and Ethical Finance

n Prevention of over-indebtedness

nTransparency of services

nResponsible pricing

n Appropriate collection practices

n Good procedures to prevent clients’ over-indebtedness and ensure a minimum level of transparency.

n However, the lack of credit bureau and communication of flat rates at their nominal value call for sector-wide initiatives in Lebanon.

n The implementation of formal mechanisms to redress client grievances and better prevent inappropriate collection practices is planned.

Rating Factors 30%Rating Factors 30%

Al Majmoua – HighlightsAl Majmoua – Highlights 3+

n Ethical staff behavior

nMechanisms for redress of grievances

n Privacy of client data

n Ethical finance

FlatType of interest rate

98%Context: Literacy rate

0%% loans checked with a credit bureau

20,7%% clients visited by non operational staff

YesCommission

93%% clients bearing the Foreign Exchange risk

72%% clients with credit life insurance

33%Max. Installment / Disposable Income

5-10%% loans checked with other MFIs

2009Example of Indicators



Contacts

n Global Headquarters

13 rue Dieumegard

93400 Saint-Ouen Paris – France

Tel: +33 1 4921 2630

Fax: +33 1 4921 2627

n Latin America

Francisco de Paula Ugarriza 813 – Oficina 301

Miraflores, Lima 18 – Peru

Tel: +51 1 242 4597

Fax: +51 1 242 4597

n Asia

444 EDSA 21st floor, Guadelup Viejo

1211 Makati, Manila – Philippines

Tel: +63 907 385 0035

n Middle East & North Africa

Piccadilly Bldg #407

Hamra Street

Beirut – Lebanon

Tel: +961 1 35 32 10

n West Africa & Central Africa

Immeuble Sokhna Astou Lo

4ème étage – Sacré Coeur 2

BP 5695 Dakar – Senegal

Tel/Fax: +221 33 825 75 40

n East Africa & Southern Africa

Shelter Afrique House – Mamlaka Road

PO Box 16658, 00100 Nairobi – Kenya

Tel: +254 20 271 42 20

www.planetrating.com - [email protected]

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