SEPTEMBER 2007

Increasing Transparency on Social Performance

Presented by: Gema PerezE-mail: gperez@planetrating.com

Planet Rating

13 rue Dieumegard 93400 Saint Ouen France

Tél : 33 1 49 21 26 30 – Fax : 33 1 49 21 26 27

contact@planetrating.com - www.planetrating.com

        November 16th to16th 2007 Measuring social performance of MFIs

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

Planet Rating: The Global Microfinance Rating Agency

Planet Rating has the most extensive global coverage:

Paris HQ: covering Eastern Europe & Asia

Lima Office: covering Latin America & the Caribbean

Dakar Office: covering West & Central Africa

Kampala Office: covering East & Southern Africa

Beirut Office: covering North Africa & Middle East

Most diversified rating team in the industry:

Multicultural: American, Canadian, Colombian, Dutch, French, Lebanese, Senegalese, Spanish, Ugandan, Peruvian, Vietnamese citizens

Multilingual: Arabic, Dutch, Italian, English, French, Lugandan, Spanish, Portuguese, Vietnamese, Wolof speakers

Qualified & experienced team:

Planet Rating’s Managing Director is the only head of rating agencies that has operational microfinance experience; he was former General Manager of SPBD – Samoa’s largest MFI

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

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

        November 16th to16th 2007 Measuring social performance of MFIs

Planet Rating is one of the most experienced microfinance rating agencies in Eastern and Central Europe and NISPlanet Rating is one of the most experienced microfinance rating agencies in Eastern and Central Europe and NIS

We have rated MFIs of all sizes, types, legal statuses and stages of development:

Bosnia and Herzegovina: Mikrofin, EKI, Partner, Sunrise, LOK micro, MI BOSPO, Benefit, Prizma

Russia: FFECCC, RWMN, VRFSBS

Armenia: Aregak, MDF Kamurj

Mongolia: Khan Bank, Xac Bank

Moldova: MicroInvest

Serbia: AgroInvest

Georgia: Constanta

Kosovo: KEP

        November 16th to16th 2007 Measuring social performance of MFIs

Planet Rating and our reports are recognized by microfinance investors

Many key investors (e.g. FMO, Blue Orchard, responsAbility, Oikocredit, KfW) prefer our detailed and deeply analyzed reports

EBRD and EIB – the leading European microfinance investors – are frequent readers of our rating reports

Wide Report Distribution

Our reports are distributed to and read by all 76 microfinance funds and investors and numerous donors such as development banks and bilateral agencies

Get rated by Planet Rating means instant recognition and credibility with investorsGet rated by Planet Rating means instant recognition and credibility with investors

        November 16th to16th 2007 Measuring social performance of MFIs

We value what we measure: measure your social performance!

For most MFIs, institutional sustainability is only a means to an end: achieving their social goals.

Transparency on financial performance, with the existence of clear financial performance standards, regular reporting, external evaluations and ratings, has played a significant role in the development of strong microfinance institutions. In order to further strengthen the sector, increased transparency and accountability on the capacity of MFIs to effectively achieve their social goals is needed.

Social Ratings are now available for MFI that wish to complement their institutional and financial rating and provide a comprehensive information to their stakeholders (Boards, Management Team, Fund providers, Supervisory Bodies) for an optimal decision-making.

        November 16th to16th 2007 Measuring social performance of MFIs

Social Rating: A tool to improve your social performance

Social ratings include an audit of your Social Performance Management systems conducted with a transparent methodology and in an interactive mode to ensure an optimal appropriation of the conclusions of the audit Interviews with management team, board, field staff Verification and validation of social performance information and

indicators Document review (communication documents as well as internal)

For institution where social performance management systems are only incipient, our Social Ratings can be complemented by a one-day training for MFI staff on concepts and best practices currently being developed in the field of social performance management (optional)Social Performance Management is defined as the processes through which you define and formalize your social goals, design the systems to put these

intentions into practice, measure actual outcomes and use these results to refine systems and improve practice

        November 16th to16th 2007 Measuring social performance of MFIs

Social Rating: A tool to communicate about your social performance

Our Social Rating standardized and comprehensive rating reports are designed to suit the information needs of all MFI stakeholders (Boards, Management Team, Fund providers, Supervisory Bodies)

Socio-economic environment

Outreach and microfinance service offering in the country

Social performance indicators (with benchmarking)

Concise and clear justification of conclusions

        November 16th to16th 2007 Measuring social performance of MFIs

Social Rating: Reduce risk, create opportunities

Improve your social performance management systems Identify weaknesses and learn about best practices

Reduce reputation risks Demonstrate efforts made towards client satisfaction and client

protection

Build an image of socially responsible institution Differentiate your MFI from competitors to attract skills or funds and

enhance staff motivation

Increase transparency Comply with stakeholders information requests (fund providers,

regulators, clients)

        November 16th to16th 2007 Measuring social performance of MFIs

Social Ratings: What do we rate?

Intentions clarity and consistency Clarity and visibility of intentions (translation into clear and binding

documents) Relevancy given the MFI context and maturity Consistency of main decisions with stated goals and intentions

Implementation efficiency Efficiency of processes Availability of necessary resources Integration of these processes in the control/ audit / verification cycle

Results comparison with benchmarks Opinion on the reliability of indicators Comparison with national / international microfinance benchmarks Comparison with internationally approved Corporate Social

Responsibility objectives (MDG; ILO; Global Compact; UN Charter)

        November 16th to16th 2007 Measuring social performance of MFIs

Social Rating Scale

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

Rating Definition

5

Advanced: Long-lasting commitment to social goals. Efficient management of social performance and social responsibility risks. Institution very likely to achieve a positive social impact.

4

Convincing: Clear commitment to social goals. Reasonable management of social performance and social responsibility risks. Institution likely to achieve a positive social impact.

3In progress: Clear intent to reach social goals. Social performance management systems being implemented.

2Incipient: Clear intent to reach social goals. Low capacity to manage social performance.

1Intangible: Intention to reach social goals is non tangible. Low level of management of social performance.

        November 16th to16th 2007 Measuring social performance of MFIs

Synergies between Social Rating and GIRAFE Rating

Because the sustainability of an institution is key to its social performance (by allowing it to provide service in a durable way), Social Ratings are only conducted for MFIs that have already undergone an institutional rating (with Planet Rating or another reputable microfinance rating agency)

Social Rating missions can be conducted at the same time as GIRAFE rating missions, but it is not mandatory

Stand alone Social Rating mission, depending on the size of the institution and the type of information available, takes 2-4 days on-site

Combining both processes provides efficiency gains that are reflected in the prices

        November 16th to16th 2007 Measuring social performance of MFIs

Institutionalization of the Social Mission

Social Mission and Strategy Does the institution have a clear social goal, shared by all stakeholders?

How is it defined? Is the social mission integrated in the main decisions of the MFI? Is there a risk that the institution might loose its social focus?

Social Performance Monitoring Has the institution put tools and systems in place to measure and track

its social performance?

Staff Mobilization Are processes in place to involve/motivate staff in/towards the

achievement of social goals?

Social Rating framework ( )

        November 16th to16th 2007 Measuring social performance of MFIs

Social Rating framework Outreach

Client targeting Has the institution defined its target population? Has the institution put systems in place to know its clientele? Has the institution put systems in place to reach out to its target

clientele?

Outreach to the poor and excluded Is the institution providing financial services to persons usually excluded

from financial services (poor, rural, specifically disadvantaged groups)?

Breadth of Outreach Is the institution reaching out / likely to reach out to a significant

number of poor or excluded people?

Social Rating framework ( )

        November 16th to16th 2007 Measuring social performance of MFIs

Social Rating framework Service offering

Service design and client satisfaction Does the institution have a good understanding of the financial needs of

its clients and does it have processes to tailor the products to these needs?

Are services adapted to the various financial needs of the target population (diversity of services, amounts, terms, repayment schemes, collection methods, guarantees, operational processes)?

Are client satisfied with the services?

Cost of the services Is the institution actively looking for ways to reduce the cost of the

services for the clients?

Social Rating framework ( )

        November 16th to16th 2007 Measuring social performance of MFIs

Social Rating framework Social responsibility

Customer protection Are there systems in place to guarantee that clients will be treated with

respect and dignity? (transparency, fair treatment, prevention of over indebtedness, respectful collection mechanisms)

Human resources Are all staff recognized equal rights? Are all staff receiving a fair compensation (financial and non financial)

for their work?

Social responsibility to the community Is the institution contributing to the community development with other

means than financial services? (fair and responsible behavior on the market; promotion of fundamental human rights; respect for the local culture)

Social Rating framework ( )

        November 16th to16th 2007 Measuring social performance of MFIs

Planet Rating Social Rating experience

Our social rating methodology has been refined through on-site testing and collection of feedback from actors of the sector (MFIs, investors, donors, social performance specialists) during 2005 and 2006

The draft methodology was used for the social performance evaluations of six MFIs in Mali in 2006

The final methodology has been used for four social ratings in Ethiopia in July 2007

        November 16th to16th 2007 Measuring social performance of MFIs

Contacts

Global Headquarters

13 rue Dieumegard

93400 St-Ouen Paris – France

Tel: +33 1 4921 2630

Fax: +33 1 4921 2627

Latin America

Francisco de Paula Ugarriza 813 – Oficina 301

Miraflores, Lima 18 – Peru

Tel: +51 1 472 5988 / 471 9526 / 470 2666

Fax: + 51 1 4716816

West Africa

Boulevard Djily Mbaye

Immeuble FADH, 14th floor

BP 5695 Dakar – Senegal

Tel/Fax: +221 821 79 39

East Africa

Plot 23b Bandali Rise – Bugolobi

PO Box 36179 – Kampala – Uganda

Tel: +256 414 236 745

Middle East & North Africa

42 Mariam Geahchan Street

Ashrafieh, Beirut – Lebanon

Tel: +961 3 11 96 81