Social Performance Management

MicroFinanza Ra,ng:  Social Performance Management  Marco Boa  MicroFinanza  2010 RBAP‐MABS Na.onal Roundtable Conference  Hya= Hotel and Casino, Manila  June 2‐3, 2010 

Social Performance Management   Concept  

Social Performance Management  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 Mission What is explicitly Social defined and measured Performance is what is managed Financial Performance Performance Management 3 

Social Performance Measurement  4 

Social Performance Management   How to measure? 

Social Ra.ng  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 6 

Social Ra.ng vs Impact Study  Social rating does not measure impact; rather, it SOCIAL analyzes the objectives, systems and results of RATING the Rural Bank, before the impact that these may have on clients. IMPACT An impact study measures the change in the living conditions of one population due to the STUDY action of Rural Bank. SOCIAL RATING and IMPACT STUDY are:  complementary tools  designed to respond to different needs. 7 

MicroFinanza Ra.ng Social Ra.ng  DIMENSION SUB-DIMENSION  ocial Mission, Objectives and Strategy, Governance S  IS and Social performance tracking and monitoring M SOCIAL PERFORMANCE system MANAGEMENT SYSTEM  lignment of the operational systems to the mission (HR, A Internal control, product design)  R towards the clients (including consumer protection) S SOCIAL RESPONSIBILITY  R towards the staff S  R towards the community and the environment S  perational areas O OUTREACH  arget reached T  ariety of the service V QUALITY OF THE SERVICE  ppropriateness to clients’ needs and client satisfaction A  on-financial services N 8 

MicroFinanza Ra.ng’s Approach  STANDARD SOCIAL RATING COMPREHENSIVE SOCIAL RATING  Data available at institutional Collection of clients level information: level  submission of a questionnaire  focus group discussion with clients Deeper Analysis:  Proxies  Indicators about clients socio- economic profile  Feedback from clients about satisfaction/dissatisfaction Differences can be more or less relevant depending on the effectiveness and reliability of the SP monitoring system of the MFI 9 

Social Performance Management   Beneﬁts and Values  

Beneﬁts and Values  INTERNAL EXTERNAL  o give a clear picture of social T  o prove social performance to T performance to the staff of the MFI investors (and donors)  o enter in a learning process T  To promote transparency in the  o improve social the performance T microfinance field thanks to an management system: independent and standard tool recognized by donors and investors  ission statement; m  o align to international standards for T  trategy; S measuring social performance  arketing; M  o report on MIX social performance T  lients satisfaction C indicators  FI’s own social performance vs. M  To explore new market niches best practices.  aseline for impact studies B (comprehensive social rating) 11 

Social Performance Management   Trends in the sector  

Trends:  Governance, Strategy and Mission  The intentions are well reflected in the SP MANAGEMENT SYSTEM  mission SOCIAL RESPONSIBILITY  Key terms of the mission are not adequately OUTREACH  defined (poor, rural, etc) QUALITY OF THE SERVICES  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 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 13 

Trends:  MIS, HR and Risk Management  SP MANAGEMENT SYSTEM  Good potential level of information for SOCIAL RESPONSIBILITY  social performance tracking OUTREACH  The MIS is not adequate to track and QUALITY OF THE SERVICES  monitor the progress towards the mission 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 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 14 

Trends:  CSR towards Staﬀ and Environment  Financial Institutions are committed to Social SP MANAGEMENT SYSTEM  responsibility and see it as an integral part of SOCIAL RESPONSIBILITY  their orientation OUTREACH  QUALITY OF THE SERVICES  Positive labour climate and internal growth opportunities Partial participation of staff and bottom-up communication High staff turn-over rate particularly in competitive markets CSR towards the environment and the community can bring relevant benefits No formal policies to prevent harmful activities for the community and the environment 15 

Trends:  CSR towards Clients  Risk of client over-indebtedness is a critical SP MANAGEMENT SYSTEM  issue: SOCIAL RESPONSIBILITY  – MFI not always equipped with effective OUTREACH  policies to mitigate it QUALITY OF THE SERVICES  – Necessity of effective Credit Bureaux – Improve analysis of repayment capacity – Policy for maximum level of indebtedness Risk of client over-indebtedness 80 70 60 50 40 30 20 10 10 0 Paraguay Kenya Ecuador Philippines Mexico Honduras Honduras Palestine Colombia Niger El Salvador Nicaragua Herzegoniva Average* Azerbaijan Bosnia and Clients with additional loans Score over-indebtedness Clients with previous loans from banks and regulated MFI 16 

Trends:  CSR towards Clients  Transparency towards clients is an area of SP MANAGEMENT SYSTEM  improvement SOCIAL RESPONSIBILITY  Even if generally acceptable for regulated OUTREACH  Financial Institutions QUALITY OF THE SERVICES  Limited client financial awareness. Not clearly correlated to client education Client financial awareness, transparency and education 120 100 82 81 80 Score transparency 60 55 54 Clients with at least primary 40 school completed 20 Financial awareness of clients on 0 Interest rate Honduras Ecuador Mexico Ecuador Ecuador Nicaragua Honduras Peru Peru Peru Mexico Nicaragua Bolivia Ecuador Colombia El Salvador LAC Average* Azerbaijan Herzegoniva Philippines Palestine Niger Bosnia and 17 

Trends:  Outreach  The poverty incidence among clients is lower SP MANAGEMENT SYSTEM  than the national poverty incidence. SOCIAL RESPONSIBILITY  Microfinance does not seem to suite the needs OUTREACH  of the poorest segment of the pyramid, rather QUALITY OF THE SERVICES  the economically active poor or wealthier. Financial inclusion is Financial exclusion, recent clients characterized by a 100 rather high variation. 90 79 Philippines is on 80 Clients without 64 63 64 average in line with 55 62 previous access to 60 54 formal credit LAC. 40 40 24 Clients without 20 access to saving services 0 LAC Africa Palestine Philippines ECA 18 

Trends:  Product Quality  The average client drop-out rate is quite high in all SP MANAGEMENT SYSTEM  the regions. SOCIAL RESPONSIBILITY  OUTREACH  Client drop out is difficult to measure, as a standard QUALITY OF THE SERVICES  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. 19 

Social Performance Management   MicroFinanza Ra.ng Brief Proﬁle 

Who we are   Private and independent ra.ng agency specialized in microfinance and rural  finance   Ra.ng agency registered in the IADB Ra.ng and Assessment Fund and in the  ADA Microfinance Ra.ng and Assessment Ini.a.ve   Headquarters are in Milan (Italy) with 6 offices in 4 con,nents    Ecuador: covering La.n America   Nicaragua: covering Central America   Mexico: for Mexican MFIs   Kenya: covering Africa   Kyrgyz Republic: covering NIS     and Central Asia   Philippines: covering Asia  21 

Market coverage   More than 480 evalua,ons in 60 countries   LARGEST MARKET SHARE in 2007 according to the last ADA‐KPMG “Ra.ng  Market Outlook Report 2008”   MicroFinanza Ra.ng has pioneered the social ra.ng for microﬁnance  ins.tu.ons, developing an innova.ve methodology which include the  direct collec.on of client‐level data (55 SR conducted so far).  22 

The Social ra,ng process  Preliminary analysis of basic documents sent by the MFI Preliminary I. (financial statements, company profile, other documents, analysis questionnaires sent by Microfinanza Rating). On-site visit of 5-8 days / 10 days for SRC (depending on the size and characteristics of the institution) of two Microfinanza II. Rating visit Rating analysts. Activities: interviews and meetings with managers, employees and directors, info collection, visit to the branches, meetings with other relevant actors. Preparation of a first draft of the report to be submitted to the MFI III. Draft report for feedback. Preparation of the final rating report after discussion and IV. Final report deliberation by the Rating Committee Unit. 23 

ADA Ra,ng Ini,a,ve:  Provides grant funding up to 70% of the      Social ra.ng COST!   SOCIAL Ra.ng: Co‐fund 70% of a first ra.ng with a maximum    of € 11,000 for a social ra.ng including a client survey and         € 8,000 for a social ra.ng without a client survey.   FINANCIAL Ra.ng: 70% of a first performance ra.ng with an    imposed ceiling of € 8,000 and 50% of a second financial ra.ng  with an imposed ceiling of € 6,000  For more info: h=p://www.ra.ngini.a.ve.org  24 

Contacts  Thank you!!!   Our MANILA oﬃce:    Unit 34 Ca=leya Gardens, 111 C. Palanca St.,     Legazpi Village, 1229 Maka. City     Phone: +63 2 8173767   Mobile: +63 (0)9183500821  Email: marco.boa@microﬁnanzara.ng.com  25  www.microfinanzarating.com info@microfinanzarating.com

Social Performance Management

by MABSIV on Jun 08, 2010

Accessibility

Categories

Tags

Upload Details

Usage Rights

2 Embeds 57

Statistics

Social Performance Management — Presentation Transcript

http://www.rbapmabs.org	56
http://www.slideshare.net	1