Social Performance Management

MicroFinanzaRa,ng:SocialPerformanceManagement

MarcoBoa

MicroFinanza

2010RBAP‐MABSNa.onalRoundtableConferenceHya=HotelandCasino,ManilaJune2‐3,2010

SocialPerformanceManagement

Concept


3

Performance Management

Social Performance

Financial Performance

Mission

Social performance is not just about measuring short and long term results that an MFI achieves, but also concerns the processes of the MFI, the activities it undertakes, the products it offers and the organizational values and behavior it promotes not only results but also the process to achieve these results

What is explicitly defined and measured is what is managed

SocialPerformanceMeasurement

4


Howtomeasure?

SocialRa.ng

6

It provides an opinion on the capacity of an MFI to put its social mission into practice and to achieve its social goals.

It is based on an in-depth analysis of an MFI social performance management system and social responsibility and an evaluation of its

results

External and independent Quantitative and qualitative

Objective Comparable

Stand-alone or coupled with financial rating

SocialRa.ngvsImpactStudy

7

Social rating does not measure impact; rather, it analyzes the objectives, systems and results of

the Rural Bank, before the impact that these may have on clients.

SOCIAL RATING and IMPACT STUDY are: complementary tools designed to respond to different needs.

SOCIAL RATING

An impact study measures the change in the living conditions of one population due to the

action of Rural Bank.

IMPACT STUDY

MicroFinanzaRa.ngSocialRa.ng

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DIMENSION SUB-DIMENSION

SOCIAL PERFORMANCE MANAGEMENT SYSTEM

Social Mission, Objectives and Strategy, Governance MIS and Social performance tracking and monitoring system Alignment of the operational systems to the mission (HR, Internal control, product design)

SOCIAL RESPONSIBILITY SR towards the clients (including consumer protection) SR towards the staff SR towards the community and the environment

OUTREACH Operational areas Target reached

QUALITY OF THE SERVICE Variety of the service Appropriateness to clients’ needs and client satisfaction Non-financial services

MicroFinanzaRa.ng’sApproach

9

COMPREHENSIVE SOCIAL RATING

Collection of clients level information: submission of a questionnaire

focus group discussion with clients Deeper Analysis:

Indicators about clients socio-economic profile

Feedback from clients about satisfaction/dissatisfaction

STANDARD SOCIAL RATING

Data available at institutional level

Proxies

Differences can be more or less relevant depending on the effectiveness and reliability of the SP monitoring system of the MFI


BenefitsandValues

BenefitsandValues

11

INTERNAL EXTERNAL

To give a clear picture of social performance to the staff of the MFI

To enter in a learning process

To improve social the performance management system:

mission statement;

Strategy;

Marketing;

Clients satisfaction

MFI’s own social performance vs. best practices.

Baseline for impact studies (comprehensive social rating)

To prove social performance to investors (and donors)

To promote transparency in the microfinance field thanks to an independent and standard tool recognized by donors and investors

To align to international standards for measuring social performance

To report on MIX social performance indicators

To explore new market niches


Trendsinthesector

Trends:Governance,StrategyandMission

13

SPMANAGEMENTSYSTEM

SOCIALRESPONSIBILITY

OUTREACH

QUALITYOFTHESERVICES

The intentions are well reflected in the mission

Key terms of the mission are not adequately defined (poor, rural, etc)

Good social / financial balance in governance, even if Improvable SPM knowledge and general weaknesses compared to the

good practices in governance In some cases, the strategy is mainly focused on financial performance,

Broad social goals are seldom translated into specific operational targets to guide decision making, reducing the effectiveness of the social strategy

The mission is overall well disseminated Even if less among new staff and distant branches, due to the lack of

formalized channels of dissemination / refreshment

Trends:MIS,HRandRiskManagement

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SPMANAGEMENTSYSTEM


OUTREACH


Good potential level of information for social performance tracking

The MIS is not adequate to track and monitor the progress towards the mission

The risk management system can be positively affected by an environment conducive and good reputation.

The audit function rarely includes specific and formalized checks on the reliability of social performance data. Client protection norms are not always formalized and lack adequate mechanisms to verify compliance

The mission is often considered during the staff selection and induction process

The staff performance assessment and salary incentives are not explicitly linked to social goals

Trends:CSRtowardsStaffandEnvironment

15

Financial Institutions are committed to Social responsibility and see it as an integral part of their orientation

Positive labour climate and internal growth opportunities

Partial participation of staff and bottom-up communication

High staff turn-over rate particularly in competitive markets

SPMANAGEMENTSYSTEM


OUTREACH


CSR towards the environment and the community can bring relevant benefits

No formal policies to prevent harmful activities for the community and the environment

Trends:CSRtowardsClients

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SPMANAGEMENTSYSTEM


OUTREACH


Risk of client over-indebtedness is a critical issue:

– MFI not always equipped with effective policies to mitigate it

– Necessity of effective Credit Bureaux – Improve analysis of repayment capacity – Policy for maximum level of indebtedness

10

0 10 20 30 40 50 60 70 80

Paraguay

Kenya

Bosnia and

Herzegoniva

Ecuador

Colom

bia

Philippines

El S

alvador

Mexico

Honduras

Niger

Azerbaijan

Nicaragua

Honduras

Palestine

Average*

Risk of client over-indebtedness

Clients with additional loans Score over-indebtedness Clients with previous loans from banks and regulated MFI

Trends:CSRtowardsClients

17

Transparency towards clients is an area of improvement

Even if generally acceptable for regulated Financial Institutions

Limited client financial awareness. Not clearly correlated to client education

SPMANAGEMENTSYSTEM


OUTREACH


55 54

82 81

0

20

40

60

80

100

120

Hon

dura

s E

cuad

or

Mex

ico

Ecu

ador

E

cuad

or

Nic

arag

ua

Hon

dura

s P

eru

Per

u P

eru

Mex

ico

Nic

arag

ua

Bol

ivia

E

cuad

or

Col

ombi

a E

l Sal

vado

r LA

C

Aze

rbai

jan

Bos

nia

and

Her

zego

niva

P

hilip

pine

s P

ales

tine

Nig

er

Aver

age*

Client financial awareness, transparency and education

Score transparency

Clients with at least primary school completed

Financial awareness of clients on Interest rate

Trends:Outreach

18

SPMANAGEMENTSYSTEM


OUTREACH


The poverty incidence among clients is lower than the national poverty incidence . Microfinance does not seem to suite the needs of the poorest segment of the pyramid, rather the economically active poor or wealthier.

Financial inclusion is character ized by a rather high variation. P h i l i p p i n e s i s o n average in line with LAC.

55 63

79

62 54

64

90

40

24

64

0

20

40

60

80

100

LAC

EC

A

Afri

ca

Pal

estin

e

Phi

lippi

nes

Financial exclusion, recent clients

Clients without previous access to formal credit

Clients without access to saving services

Trends:ProductQuality

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SPMANAGEMENTSYSTEM


OUTREACH


The average client drop-out rate is quite high in all the regions.

Client drop out is difficult to measure, as a standard formula may not capture the relevant information (e.g. resting clients)

Data do not show a clear correlation between the client drop out rate and the quality of services perceived by clients.


MicroFinanzaRa.ngBriefProfile

Whoweare

Privateandindependentra.ngagencyspecializedinmicrofinanceandruralfinance

Ra.ngagencyregisteredintheIADBRa.ngandAssessmentFundandintheADAMicrofinanceRa.ngandAssessmentIni.a.ve

HeadquartersareinMilan(Italy)with6officesin4con,nents

Ecuador:coveringLa.nAmerica

Nicaragua:coveringCentralAmerica

Mexico:forMexicanMFIs

Kenya:coveringAfrica KyrgyzRepublic:coveringNIS andCentralAsia

Philippines:coveringAsia

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Marketcoverage

Morethan480evalua,onsin60countries

LARGESTMARKETSHAREin2007accordingtothelastADA‐KPMG“Ra.ngMarketOutlookReport2008”

MicroFinanzaRa.nghaspioneeredthesocialra.ngformicrofinanceins.tu.ons,developinganinnova.vemethodologywhichincludethedirectcollec.onofclient‐leveldata(55SRconductedsofar).

22

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TheSocialra,ngprocess

I. Preliminary analysis

Preliminary analysis of basic documents sent by the MFI (financial statements, company profile, other documents, questionnaires sent by Microfinanza Rating).

II. Rating visit

On-site visit of 5-8 days / 10 days for SRC (depending on the size and characteristics of the institution) of two Microfinanza Rating analysts. Activities: interviews and meetings with managers, employees and directors, info collection, visit to the branches, meetings with other relevant actors.

III. Draft report Preparation of a first draft of the report to be submitted to the MFI for feedback.

IV. Final report Preparation of the final rating report after discussion and deliberation by the Rating Committee Unit.

ADARa,ngIni,a,ve:

Providesgrantfundingupto70%oftheSocialra.ngCOST!

SOCIALRa.ng:Co‐fund70%ofafirstra.ngwithamaximumof€11,000forasocialra.ngincludingaclientsurveyand€8,000forasocialra.ngwithoutaclientsurvey.

FINANCIALRa.ng:70%ofafirstperformancera.ngwithanimposedceilingof€8,000and50%ofasecondfinancialra.ngwithanimposedceilingof€6,000

Formoreinfo:h=p://www.ra.ngini.a.ve.org24

Contacts

Thankyou!!!

OurMANILAoffice:Unit34Ca=leyaGardens,111C.PalancaSt.,

LegazpiVillage,1229Maka.CityPhone:+6328173767

Mobile:+63(0)9183500821Email:[email protected]

www.microfinanzarating.com [email protected] 25

Date post:	28-Nov-2014
Category:	Business
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Social Performance Management

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