More than 100 people in the microfinance sector from over 40 different organizations, from Mongolia, Cambodia, Indonesia and the Philippines, gathered at Kiva’s Asia-Pacific Conference in Manila. The weeklong event marked the first time that many of Kiva’s partners from all over Asia, as well as other microfinance organizations, were able to come together in one place. Though many issues were discussed, the conference was devoted largely to the topic of social performance.
Measuring social performance has become an increasingly important topic in the microfinance sector. With the recent high profile IPO of India’s SKS Microfinance and more commercial banks entering the sector, concerns have resurged as to how organizations can or will balance financial goals with social goals. Headlines on high interest rates and over-indebtedness question how and if microfinance institutions (MFIs) are looking out for the best interest of their clients. As with most Kiva lenders, we believe in microfinance as a poverty alleviation tool. A tool to help the communities it serves by lending money to entrepreneurs to grow their businesses, and improve their incomes. We hope our money is going to MFIs who are looking out for the borrowers, not profiting off their backs. But how can we be sure? How do we know an MFI is achieving its social goals? And as an MFI, how can you monitor your social performance?
The conference, sponsored by Kiva, the Microfinance Council of the Philippines and SPACE, focused on how MFIs can use different tools to ensure they are living up to their social mission. The two tools discussed were CERISE (Comité d’Echanges de Réflexion et d’Information sur les Systèmes d’Epargne-crédit) SPI (social performance indicators), and the Client Poverty Scorecard.
(1) CERISE SPI is a tool that “assesses the social performance of MFIs by evaluating their intents and actions.” Rather than evaluating the impact an MFI has on its borrowers, it measures whether the institution has the policies and processes in place to attain its social goals. The CERISE questionnaire focuses on four themes: Targeting & Outreach, Products & Services, Benefits to Clients and Social Responsibility. It asks specific questions including: Does the MFI serve clients in rural areas? Does the MFI allow local branches to adapt their products and services to clients’ needs? And does the MFI have a formal policy on how clients benefit from the profits generated by the MFI? Together these questions (and more) help create a scorecard on the MFI’s social performance. And the social performance snapshot that the tool generates can help an institution set new goals.
(2) The Client Poverty Scorecard is a version of the more commonly used PPI (Progress out of Poverty Index – Grameen) or PAT (Poverty Assessment Tool – USAID), which can be used to target services and measure poverty alleviation over time by an MFI. It allows MFIs to continually or annually rank a borrower’s poverty level based on key indicators. The scorecard focuses on five metrics: Housing, Health & Nutrition, Education, Utilities and Assets. These metrics can be further tailored to a specific group/region by inserting a standardized coefficient to allow for better reporting on individual poverty levels. A scorecard is best used to measure poverty improvement as it is simple, inexpensive, transparent, objective and accurate. Unlike CERISE SPI, this scorecard does not rate the policies of the MFI but provides a tool to directly measure its social impact on its borrowers.
As previously mentioned in other posts by Kiva Fellows, Kiva has requested all field partners to complete the CERISE SPI Assessment by the end of the year. Though the majority of Kiva’s field partners see value in social performance management (SPM) – and many have already taken strides to incorporate social performance into their daily operations – given that resources at some of these MFIs are spread thin, such requests can be burdensome. For a (very) quick cost-benefit analysis of SPM1 refer to the table below – it should help elucidate the significance of completing the survey.
With SPM, an MFI can ultimately hone in on what is important to their clients and better serve the needs of target clients more effectively to build customer satisfaction and loyalty. This can also lead to increased competition in the microfinance sector.
Through studies, the CERISE SPI team has found that good social performance can be linked to strong financial performance. On one hand, larger MFIs with strong financials and good resources are more likely to have the capacity to develop new and innovative products and implement policies that better serve their clients (e.g. tracking poverty levels). On the other hand, social performance can also drive financial performance – in areas where MFIs face increasing competition, MFIs that truly work to benefit their clients and score high in social performance are more likely to manage delinquency and retain clients, helping financial performance. Furthermore, these MFIs can highlight their strong social performance to prospective funders.
Nevertheless, although the benefits of social performance management seem to outweigh the costs, it will probably be easier to make a compelling case to MFIs across the industry once more data is collected to get a better understanding of the causal relationship between social and financial performance (if one even exists). Fortunately, Kiva’s push to have all Kiva Field Partners complete the CERISE SPI Assessment will contribute to a database that could reveal more about the relationship between the two.
In the meantime, Asia appears to be a regional leader in social performance measurement. Several of the MFIs at the conference have hired staff specifically to manage their social performance, and a few organizations have been implementing these tools in recent years.
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1 Joyas, L.M., “Social Performance Management: An Overview.” Presented at Looking into Your Organization’s Social Performance: The First KIVA Asia-Pacific Summit and Workshop on Social Performance Indicators and the Client Poverty Scorecard in Manila, Philippines on September 20, 2010.
Kiva Fellows Joanne Gan (Indonesia), Kaajal Laungani (Philippines) & John Rauschkolb III (Philippines) had a blast networking with MFI staff and learning the frog dance while in Manila, Philippines.