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October 23, 2014 in Client Protection, Financial Inclusion, Policy, Smart Campaign | Tags: Client Protection, Financial Inclusion, Regulation, Social Performance, The Smart Campaign, Transparency | Leave a comment
> Posted by Sonja Kelly, Fellow, CFI
Sound financial inclusion regulation and policy does not an ethical financial system make. In financial inclusion, we often talk about the importance of consumer protection, industry transparency, and fair market conditions. In the absence of universal standards of what these principles look like in practice, we turn to regulators and policymakers. I contend that we cannot keep relying on regulation to make the financial system moral and just. Since much of my own research promotes financial inclusion policy and regulation, this is a fairly inflammatory statement for me to make. But when we look only to regulators to create a financially inclusive and fair marketplace, we miss the mark.
In my own life, I see an analogy to our family game night. I am a very competitive person. I confess that there are times (fairly frequent times) that I cheat. I can easily miscount the number of spaces my piece is moving in Monopoly, or I can set down three cards and make it look like one card in Uno. My husband sometimes catches me, or my efforts to cheat simply aren’t drastic enough, so very rarely do I change the outcome of the game. But no number of rules can keep me from trying. Nevertheless, I’m sure my husband would agree that rules and regulations are not sufficient. Game night would be far more ethical if, instead of relying on the game rules, we relied on our responsibility to one another (check back with me in a few months to ask how a recalibration of my own internal compass is going).
In his remarks to during the recent World Bank Annual Meetings, the Most Reverend Justin Welby (Archbishop of Canterbury) emphasized that ethics in finance is not about creating carrots and sticks, but about doing the right thing because it is the right thing to do. Welby’s charge to participants in the meeting, including Governor of the Bank of England Mark Carney and Managing Director of the International Monetary Fund Christine Lagarde, recognizes the necessity of the personal ethical compass—not solely a reliance on regulators.
On the Pathway to Responsible Microfinance: An Update on the Microfinance CEO Working Group’s Progress
August 19, 2014 in Center for Financial Inclusion | Tags: ACCION International, Certification, Client Protection, FINCA International, Freedom From Hunger, Grameen Foundation, MicroCinance Transparency, Microcredit Summit Campaign, Microfinance, Microfinance CEO Working Group, Opportunity International, Overindebtedness, Pricing Transparency, Pro Mujer, Responsible Microfinance, Smart Campaign, Social Performance, Social Performance Task Force, Universal Standards for Social Performance Management, Vision Fund, Women's World Banking | Leave a comment
> Posted by Anne Hastings and Tyler Owens, Microfinance CEO Working Group
The following post was originally published on the Microcredit Summit Campaign’s blog, 100millionideas.org.
Since its inception in the spring of 2011, the Microfinance CEO Working Group has worked diligently and collaboratively to define the concept of Responsible Microfinance around the globe and lead by example to try to fulfill this vision. It has focused on three key pillars on which Responsible Microfinance is built: client protection, pricing transparency, and social performance management. A responsible microfinance institution (MFI) is one that, at a minimum:
- Does all in its power to protect its clients from harm;
- Is transparent about fees and interest rates; and
- Implements best practices in social performance management including monitoring effectiveness in achieving desired client level outcomes.
An MFI can achieve this by complying with the industry-developed standards of the Smart Campaign, MicroFinance Transparency, and the Social Performance Task Force, known as the Universal Standards for Social Performance Management.
The Working Group is a collaborative effort of the CEOs of Accion International, FINCA International, Freedom from Hunger, Grameen Foundation, Opportunity International, Pro Mujer, VisionFund, and Women’s World Banking. At the Microcredit Summit in Manila in October 2013, the Working Group publicly encouraged its collective 224 affiliated MFIs around the globe to embrace Responsible Microfinance by sharing a list of commitments. Since making those commitments, the group has made significant headway toward strengthening each one of the pillars of Responsible Microfinance.
March 11, 2014 in Center for Financial Inclusion, Client Protection, Microfinance, Resources, Smart Campaign, Social Performance | Tags: Client Protection, M-CRIL, Microfinance, MicroFinance Transparency, MicroFinanza Rating, MicroRate, MIX, Planet Rating, Social Performance, Social Performance Task Force, The Smart Campaign | 26 comments
> Posted by Elisabeth Rhyne, Managing Director, CFI
Nearly every industry requires infrastructure to thrive, and this goes for the microfinance industry too. But the infrastructure that the global microfinance industry has constructed over the past two decades is looking a bit shaky today. Infrastructure investments are urgently needed to keep the industry sound and prepare it for the future.
One could argue what exactly constitutes the microfinance industry’s infrastructure, and there are a range of organizations to choose from, but for this conversation, let’s look at several key organizations dedicated to setting standards and providing information for microfinance globally: the Microfinance Information Exchange (MIX), the four specialized microfinance rating agencies, the Social Performance Task Force (SPTF), Smart Campaign, and Microfinance Transparency (MFT). These organizations, which perform vital functions for the industry, arose during two different phases of microfinance industry development.
The first generation of organizations – MIX and the rating agencies – were created to provide financial transparency and standards, primarily so that investors could identify well-performing institutions, and also so microfinance institutions could evaluate their own performance against common standards. It took a lot of work to create these organizations. MIX had to find ways to incentivize MFIs to report and to devise a system for data quality assurance. The founders of the rating agencies – Microrate, Planet Rating, Microfinanza Ratings, and M-CRIL – took substantial personal risk in devoting their careers to promoting financial transparency in microfinance. Together, these organizations have helped spread financial standards throughout the microfinance industry and contributed to improving the financial performance of MFIs, enabling the entry of private social investors who now contribute very importantly to the funding of microfinance. We sometimes now take financial transparency for granted, but if these organizations were to stop playing their role in upholding it, adherence to standards across the industry would undoubtedly drop, with consequences for investor interest, which up to now has remained strong.
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 »
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.
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 Julie Shea
Large scale commercialization of microfinance institutions (MFIs) has led to an increased focus on profitability and with that a growing fear of “mission drift.” In an industry facing increased demands for both social and financial performance, how can investors in microfinance funds ensure that both of these “bottom lines” are appropriately balanced? One way is to create incentive structures that measure and compensate fund managers and the managers of the microfinance institutions (MFIs) in which they invest in accordance with the stated mission of the fund.
Paul DiLeo of Grassroots Capital Management, in his recently published paper, Re-Positioning Microfinance with Impact Investors: Codes of Conduct and “Social First” MFIs, argues that investors should do a better job of articulating their fund’s priorities. Rather than promoting a single, standard model, DiLeo promotes a framework, developed by the Monitor Institute, that more clearly positions funds along a spectrum from “Social First” to “Financial First”. In adopting this framework, investors are encouraged to provide transparency and to attract likeminded investors that support the mission of the MFI. Read the rest of this entry »
> Posted by Steve Wright, Director, Social Performance Management Center, Grameen Foundation and Kate Griffin, Director, Solutions for the Poorest, Grameen Foundation
In the recent New York Times article, “How Companies Learn your Secrets”, Charles Duhigg discusses how companies can use demographics and data on personal consumption behavior to manipulate shopping habits and attract new customers. Target, for example, can predict if a customer is pregnant, what trimester she is in, and, with this information, target baby-related advertisements to her. For many consumers, this use of “big data” (very large and complex data sets and the analytics to mine them), seems like an unacceptable intrusion of privacy. For many of us working in microfinance and development, this concept produces a reflexive “Eewww,” probably because our goals are much less about directing consumption through marketing than they are about increasing the opportunity and capacity to consume.
Despite this initial reaction to the manipulation of customer data to drive profits, the use of big data can actually prove very effective for the fields of microfinance and financial inclusion. At Grameen Foundation, we strive to: 1) examine large datasets to find relevant patterns and leverage opportunities, and 2) build tools and systems that use data to enable the poor to improve their quality of life. Read the rest of this entry »