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May 22, 2013 in Center for Financial Inclusion, Financial Inclusion, Microfinance, Microfinance CEO Working Group, Social Performance | Tags: Financial Inclusion, Microfinance, Microfinance CEO Working Group, Social Performance, Social Performance Task Force, Universal Standards of Social Performance Management | Leave a comment
> Posted by Meghan Greene, Manager, Microfinance CEO Working Group
Last June, at the annual Social Performance Task Force meeting in Jordan, the members of the Microfinance CEO Working Group and their lead social performance directors announced their plan to conduct the first large-scale analysis of the Universal Standards for Social Performance Management (USSPM) in practice, a process we called “beta testing.” You may recall our blog post about the plan last summer.
After a year of work, we’re ready to share our results, as detailed in the new working paper, “Insights from ‘Beta Testing’ the Universal Standards for Social Performance Management.”
As many of you know, the Universal Standards for Social Performance Management are a set of 99 “Essential Practices,” organized into six sections:
- Section 1: Define and Monitor Social Goals
- Section 2: Ensure Board, Management, and Employee Commitment to Social Goals
- Section 3: Treat Clients Responsibly (Essentially tracking the Smart Campaign)
- Section 4: Design Products, Services, Delivery Models, and Channels that Meet Clients’ Needs and Preferences
- Section 5: Treat Employees Responsibly
- Section 6: Balance Financial and Social Performance
The Universal Standards are considered applicable to all double bottom line microfinance institutions, and meeting the Standards signifies that an institution has strong social performance management practices. Clearly, implementing all 99 Essential Practices requires careful thought, planning, and execution, but we wanted to learn more about the process of translating the Standards into action. We partnered with more than 20 MFIs to work to answer a number of questions, including: Read the rest of this entry »
May 16, 2013 in Center for Financial Inclusion, Client Focus, Financial Inclusion, Microfinance, Social Performance | Tags: Financial Inclusion, India, M-CRIL, Micro-Credit Ratings International Limited, Microfinance, Sanjay Sinha | 2 comments
> Posted by Center Staff
“The old ideas have become akin to the sixteenth century assertion that the world was flat; yet it did gradually became established that the earth was round after all. Microfinance needs to be rounded too.” – Sanjay Sinha
Sanjay Sinha, founder of Micro-Credit Ratings International Limited (M-CRIL), recently released a candid wake-up call for the industry to move beyond the now outdated microfinance principles initially propagated in the 1990s and employ a more diverse and client-friendly approach. In his note, A Challenge to Flat-Earth Thinking in Microfinance, Sinha cites four tenets he finds especially problematic, contextualizing their adoption and negative implications, and positing how the industry can better move forward in meeting the needs of the poor. Sinha’s note follows:
The intensive promotion of microfinance worldwide as a palliative if not a panacea for poverty started in the mid‐1990s with initiatives like the establishment of CGAP, the Microcredit Summit Campaign, and various national-level apex agencies often sponsored by multilateral or bilateral development agencies like the World Bank and the regional development banks. Led by CGAP, as the main international technical agency for the support of microfinance, a strong message on the principles of good microfinance practice was propagated worldwide. These principles included (but were not limited to) the following:
- MFIs must adopt the principle of “zero tolerance of delinquency” in order to minimize default.
- There must be a continuous effort to limit operating costs in order to deliver microfinance at the lowest possible price to low income clients.
- Microfinance services must be offered by specialist MFIs in order to ensure that there are no conflicts of interest that confuse MFI managements, staff or borrowers.
- MFIs should focus on growth in order to maximize outreach to the vast numbers of financially excluded families across the globe.
This note argues that while these principles may have been appropriate at the time when they were formulated (in the mid‐1990s) their time passed a few years ago and the entrenchment of these principles as microfinance orthodoxy is now damaging the development objective – financial inclusion to serve the needs of poor and low income people, and facilitating income enhancement – for which the microfinance movement was propagated. Therefore, the time has come for a concerted effort to swing the pendulum back to equilibrium.
March 29, 2013 in Center for Financial Inclusion, Client Protection, Financial Inclusion, Investing in Inclusive Finance, Microfinance, Smart Campaign, Social Performance | Tags: Blue Orchard, Certification, CGAP, Client Protection, Client Protection Principles, Incofin, Investing in Microfinance, Microfinance, Oikocredit, PIIF, Smart Assessments, Social Performance, Social Performance Task Force, The Smart Campaign, Universal Standards of Social Performance Management | Leave a comment
> Posted by Antonique Koning and Kate McKee, Microfinance Specialist and Senior Adviser, CGAP
The following post was originally published on the CGAP Blog.
Microfinance investors are now openly discussing responsible investment, including balancing returns and how to reduce risks of market saturation and over-indebtedness, more than ever before. Investors agree it’s time for action. At the mid-year Social Investor Roundtable, convening of the Sangam Group (CEOs of the ten largest MIVs) and annual Development Finance Institutions (DFI) consultation on responsible finance last month they agreed on a “to-do” list of six concrete actions:
1. Join the discussion on balanced returns: Many participating investors had signed the Principles for Investors in Inclusive Finance (PIIF). Most agree that the balanced returns principle is the most difficult to pin down. The topic came up frequently: How much is too much, when it comes to prices and profits in the sector? Several MIV CEOs asserted that their commercial business model was the most effective way to drive responsible financial inclusion at scale. Eyebrows around the room shot up when one fund manager stated the target return of his fund: 20 percent. Other fund managers disagreed with the philosophy that such returns are consistent with responsible practice and desirable client outcomes. “We’re fooling ourselves” to suggest that there are few trade-offs between the financial and social bottom lines, they said. By policy some funds agree to take a lower return in the short run if it translates into better rural outreach or services like deposits that clients need and want. Sangam MIVs formed a working group on balanced returns and will feed their perspectives into related discussions led by the PIIF and Social Performance Task Force (SPTF). If you’re an investor, you should join one of these processes and help the search for a pragmatic but meaningful understanding on balanced returns.
2. Use the new Lender Guidelines on avoiding over-indebtedness. Market saturation was another hot topic: What can and should investors do about risks of market saturation and over-indebtedness? Investors in the AvOID Working Group have developed a Lender Code of Practice, which outlines steps investors should take in market analysis, due diligence, monitoring, and governance engagement. The Code has now been finalized and integrated in the PIIFs. Your investment organization can benefit by integrating the guidelines into your processes.
3. Support country-level research on market saturation and over-indebtedness: In addition to guidance that individual investors can use to rein in over-indebtedness, investors are also working together on analyzing such risks at the country or market level. DFIs and MIVs have supported this work in countries such as Azerbaijan, Bosnia-Herzegovina, Kosovo, the Kyrgysz Republic. Most recently, Blue Orchard, Incofin, and Oikocredit stepped up to jointly fund an innovative methodology in Cambodia that combined country-level proxies for market penetration, indicators of MFI lending practices, and surveys and qualitative research on borrower indebtedness and related factors. Findings were presented at the Social Investor Roundtable and will be formally released later this month. Sangam members committed funding to replicate the study elsewhere. Other investors can join and support expansion of this important work in additional markets.
> Posted by Bobbi Gray, Research and Evaluation Specialist, Freedom from Hunger
Listening to the poor without preconceptions has generated remarkable insights about their desires, challenges, and capabilities, with significant implications for designing programs that more effectively meet their needs. What about listening to those who talk to clients every day – the front line staff of microfinance institutions?
To complement direct client surveys, Freedom from Hunger undertook a study called Voices from the Frontlines: A Research Project Focused on Listening to Microfinance Credit Officers in order to listen to the frontline workers of financial service providers who use the village-banking model to provide financial and non-financial services to groups of poor women. Freedom from Hunger worked with five microfinance institutions to conduct this research: CRECER in Bolivia; Confianza, PRISMA, and Finca in Peru; and Alsol in Mexico. Almost 200 interviews and focus-group discussions were conducted with credit officers, clients, and supervisors. We wanted to answer five questions:
- What motivates credit officers?
- What is the state of the relationship between the credit officer and the client?
- What can we learn from credit officers about the people they serve?
- How can we better support credit officers?
- How faithfully are programs, policies, and procedures carried out by credit officers?
We found credit officers of these five institutions to be primarily socially motivated; they work for these organizations “to help people.” Their relationships with clients are crucial for client as well as organizational success. For example, the relationship creates both mutual satisfaction of clients and credit officers; on the other hand, the relationship can create huge risks of dissatisfaction and drop-out when the relationship is weak or falters for any reason. Therefore, these relationships can make or break client recruitment and retention. Product attributes and relationships with credit officers are intertwined. For example, a strong relationship between the client and the credit officer can overshadow poorly designed or less competitive products and services; however, poorly designed products and services also strain the relationship between the client and the credit officer. Products and services that respond to the clients’ needs better are an aid to building a stronger relationship between the client and the credit officer. The client’s relationship with the credit officer therefore deserves more attention than it normally receives when evaluating client satisfaction and outcomes.
January 8, 2013 in Center for Financial Inclusion, Client Focus, Client Protection, Financial Inclusion, Microfinance, Resources, Smart Campaign, Social Performance | Tags: Banana Skins, CGAP, Client Focus, Client Perspective, Client Protection Principles, Financial Literacy, Ghana, Jessica Schicks, Microfinance, Microfinance Gateway, Microinsurance Network, Overindebtedness, Risk, Smart Campaign | Leave a comment
> Posted by Jeffrey Riecke, Communications Assistant, CFI
There are endless ways to measure the successes of a given year. Number of clients reached. Total new stakeholder endorsement. Amount of capital invested… Though when assessing almost anything, it’s important to think holistically and not be biased by the numbers. That said, I think I can speak for most of the Center in saying that we are excited to share that several CFI-affiliated publications were among the Microfinance Gateway’s Most Popular Publications of 2012. No small feat considering 546 new resources were added to the Gateway this past year. Here’s a brief listing of the CFI pubs that made this top cut:
Over-Indebtedness in Microfinance: An Empirical Analysis of Related Factors on the Borrower Level
This paper by Jessica Schicks analyses the over-indebtedness of microborrowers in Ghana, examining its relationship with poverty, adverse shocks, loan returns, and financial literacy. In defining over-indebtedness, the paper adopts a client perspective, taking into account clients’ repayment struggles and the sacrifices they make to fulfill payment obligations. Some of the paper’s findings are the following: Read the rest of this entry »
December 3, 2012 in Center for Financial Inclusion, Client Focus, Client Protection, Events, Financial Inclusion, Financial Inclusion for Persons with Disabilities, Microfinance, Social Performance | Tags: Financial Inclusion for Persons with Disabilities, Handicap International, PWDs, United Nations | Leave a comment
> Posted by Jeffrey Riecke, Communications Assistant, CFI
Today, people all around the world are celebrating International Day of Persons with Disabilities. And, whether the focus is financial or any other type of inclusion for persons with disabilities (PWDs), we here at CFI would be remiss if we didn’t join in the festivities.
The International Day has been observed since 1992, and encompasses activities around the globe. The United Nations, which functions as the principal promoter, features an online list of events being held by governments, UN agencies, organizations, and communities in Australia, Africa, Europe, Asia, and the Americas. The impressively global – and inclusive – Day brings awareness to disability issues, acknowledges the integral role of persons with disabilities in society, and further promotes full inclusion for PWDs. The theme of this year’s International Day of Persons with Disabilities is “Removing barriers to create an inclusive and accessible society for all.”
November 6, 2012 in Center for Financial Inclusion, Client Focus, Client Protection, Events, Financial Inclusion, Microfinance, Microfinance CEO Working Group, Social Performance | Tags: AFMIN, Alex Counts, CGAP, Client Protection, Grameen Foundation, Microfinance, Microfinance CEO Working Group, Social Performance, Social Performance Task Force, Uganda, Universal Standards of Social Performance Management, VisionFund International | Leave a comment
> Posted by Mary Jo Kochendorfer, Manager, Social Performance Management Center, Grameen Foundation
This post by Mary Jo Kochendorfer was originally published on the Progress out of Poverty blog. Progress out of Poverty is an initiative of the Grameen Foundation that assists microfinance institutions and other organizations measure and track the poverty levels of groups and individuals, and in turn better manage their programs.
This past summer, the microfinance industry recently celebrated a milestone when the Social Performance Task Force (SPTF) released the Universal Standards of Social Performance Management (USSPM) after a worldwide consensus-building effort. After much work and collaboration, the microfinance industry, by way of the SPTF, came together and put forth standards which outline the best practices for monitoring and managing social performance. The SPTF defines social performance as “the effective translation of an institution’s social mission into practice in line with accepted social values.” Following the SPTF annual meeting back in June, regional microfinance networks have also prioritized social performance in their agendas.
Last month, the Africa Microfinance Network (AFMIN) hosted its annual conference in Kampala, Uganda to discuss “the State-of-the-Practice of Social Performance Management in Africa.” While there, I participated in a panel on Poverty Measurement Tools along with colleagues from Caurie-Microfinance, VisionFund International and CGAP.
>Posted by Danielle Donza
Several years ago the Council of Microfinance Equity Funds (CMEF) created a small booklet containing governance guidelines for microfinance institutions. The booklet quickly became a minor classic: it was translated into multiple languages and dozens of MFIs used it as a guide to operations for their own boards.
Then came the 2008 global financial crisis and a number of market-specific microfinance crises in several countries. These crises served to highlight the need for strong, mission-led governance by MFIs. Lessons from these events did not alter the core principles found in the original Guidelines, but they revealed a need for greater attention to areas such as risk management and social performance. In response to these lessons, CMEF is releasing a revised version of the guidelines, “The Practice of Corporate Governance in Microfinance Institutions.” Read the rest of this entry »
August 2, 2012 in Blogosphere, Center for Financial Inclusion, From the Field, Social Performance | Tags: Accion Ambassadors, El Comercio, Paraguay, Planet Rating, Social Performance, Social Performance Task Force | Leave a comment
>Posted by Sergio Guzman
Juan starts out with an interesting question–is measuring social performance similar to measuring love? How can it be quantified? Indeed, social performance can be an abstract concept and at times it seems a bit difficult to measure. However, there are Social Performance Standards have been specially designed in order to give us a better idea how MFIs are working not only towards the idea of improving clients life, but also making sure that their products are not making them any worse off.
Now, with some markets showing signs of saturation, managing social performance goals might be secondary for some bottom line focused institutions who might want to focus on their core business. Notwithstanding, this has proven to be a differentiating factor for many microfinance institutions like El Comercio who see this as a strategic objective. Or as we call it, Smart Microfinance.
Have you read?
>Posted by Meghan Greene
Last month, microfinance stakeholders from around the world gathered at the Dead Sea in Jordan to mark the launch of the Universal Standards for Social Performance Management, the culmination of 18 months of effort by hundreds of industry experts, led by the Social Performance Task Force.
The Universal Standards are management standards relevant to all microfinance institutions pursuing a double bottom line. The Standards cover six categories, with topics like “Define and Monitor Social Goals” and “Ensure Board, Management, and Employee Commitment to Social Performance.” They outline the essential practices organizations must have in order to achieve strong social performance management.
The Standards are based on the belief that “we can only manage what we measure,” so in order to achieve our social performance goals, we must actively measure and monitor our progress. The Standards are intended to help institutions elevate the profile of social performance to that of financial performance, so institutions can actively manage toward both goals.
Many hours and much thought have gone into the development of these Standards, with the SPTF soliciting feedback through several industry-wide comment periods. However, the Standards presently exist primarily on paper – they have not yet been road tested in MFIs themselves. Therefore, many questions remain: How do we assess our institution against the Standards? Are some standards more difficult to assess than others? Are they specific enough, or overly prescriptive? And most importantly: How do we use the information an assessment reveals to improve our practices? Read the rest of this entry »