Developing a global approach to social performance measure

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In this presentation, we describe the Moody's Analytics Social Performance Assessment, and how it can be used by microfinance institutions (MFIs) to benchmark and improve individual practices, to analyze data on groups of MFIs at regional and global levels, and for further research on microfinance effectiveness.

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Developing a global approach to social performance measure

  1. 1. Developing a Global Approach to Social Performance Measure Jody Rasch Presented at various international conferences SEPTEMBER 2013
  2. 2. 2Social Performance Assessments Table of Contents Level 1: Use of the SPA by Individual MFIs 4 Level 2: For Local, Regional and Global Analysis of Microfinance Practices 11 Level 3: Global Research on the Effectiveness of Microfinance 19 About Moody’s Corporation 21 Contact Information 22
  3. 3. 3Social Performance Assessments Using the Moody’s Analytics Social Performance Assessment (SPA) The Moody’s Analytics SPA can be used for three different audiences: Uses of the SPA: For an MFI’s analysis of its practices For understanding regional and global practices For global research on microfinance effectiveness
  4. 4. 4Social Performance Assessments Level 1: Use of the SPA by Individual MFIs
  5. 5. 5Social Performance Assessments Key Features of the SPA for Individual MFIs Granular analysis of MFI performance and changes over time Benchmarking performance against different peer groups
  6. 6. 6Social Performance Assessments Example of Analytics Provided to an MFI Guide by factor Score and grade by factors and sub-factors so MFI can track its progress over time Graph of the relative contribution of each factor and sub-factor to the overall SPA grade
  7. 7. 7Social Performance Assessments Example of Analytics Provided to an MFI (cont’d) Relative Contribution » Relative contribution charts show how each factor contributes both positively and negatively to an MFI’s final SPA score. It allows an MFI to focus on the areas that will have the most impact on its overall SPA grade. » The relative contribution analysis is presented at both factor and sub-factor levels to make the tool more useful for social performance management, reporting and self evaluation. Main Factors Sub-Factors (Strategy and Leadership) Sub-Factors (Governance) Of the Main Factors, Strategy and Leadership contributes most negatively to the overall score Within Strategy and Leadership, Governance contributes most negatively to the overall score Within Governance, Board Composition contributes most negatively to the overall score
  8. 8. 8Social Performance Assessments The SPA Maps to Other Social Performance Initiatives Universal Standard Ref. code Universal Standards for Social Performance Management Moody's Analytics Mapping Reference Degree of Match to Moody’s Indicator Does MFI Meet the Standard Y=1 N=0 SECTION 2: Ensure Board, Management, and Employee Commitment to Social Goals 2a Members of the Board of Directors are committed to the institution’s social mission 2a.1 The institution provides Board members with an orientation on the social mission and goals, and the Board’s responsibilities related to the social performance management of the institution, and confirms that each member agrees S&L-1K4 Moderate 1 2a.2 The institution requires Board members to adhere to the institution’s code of ethics (see Essential Practice 2b.5) HR-D8 Moderate 1 2a.3 One or more of the Board members has expertise in some aspect of social performance (e.g., experience as a microfinance practitioner, product design experience, market research experience, human resources experience) S&L - 2A3, 2A4, 2A6, 2A10 Perfect 1 2a.4 Board members have a mechanism for direct contact with clients (e.g., field visits, Board meetings with client representatives) S&L-2BCD4 Perfect 0 2b Members of the Board of Directors hold the institution accountable to its social mission and social goals 2b.1 The Board reviews social performance data, including: mission compliance, performance results, human resource policy, social performance related risks (e.g., reputational risk, client exit), client protection practices, growth, and profit allocation S&L-2I1-2I4 Moderate 1 2b.2 Based on its review of the above information, the Board provides direction for, and oversight of the institution’s strategy (detailed in 1a), taking into account both social and financial goals (e.g., how growth targets will affect profitability and service quality for target clients S&L-2I2-2I3 Moderate 1 2b.3 The Board incorporates social performance management criteria (e.g., achievement of outreach targets, client retention) into its performance evaluation of the CEO/Director HR-P1 & S&L- 1D2 Perfect 0 2b.4 The Board prevents institutional mission drift during changes in ownership structure and/or legal form (e.g., transformation) S&L-2I4 Moderate N/A 2b.5 Client protection practice that applies: A written code of business ethics spells out organizational values and the standards of professional conduct expected of all employees. The code of ethics has been reviewed and approved by the Board. (Client Protection Principle 5) HR-D1-D8 Perfect 1 2b.6 The Board is formally organized (e.g., a social performance sub-committee, a “social performance champion,” mainstreaming SPM into the audit process) to review the social performance data detailed in Essential Practice 2b.1 S&L-2I4 & HR- P4 Moderate 0 2b.7 The Board is evaluated on its effectiveness (internal or external review) and these evaluations include social performance criteria (e.g., how often social performance is discussed at meetings, profit allocation decisions that reflect social goals) S&L-2G3 Moderate 0 The SPA can be mapped to other initiatives (SPTF’s Universal Standards or the SMART Campaign). Lists can be created specifying which standards an MFI meets.
  9. 9. 9Social Performance Assessments Delivery of the SPA  Document request Moody’s Analytics sends data and document request to MFI  Desk research Data/documents review, identify information gaps  Telephone interviews Telephone /Skype interviews with senior, middle and branch managers  Scheduling and logistics Schedule on-site visit and logistics  Interviews with senior, middle and branch management Review of operational processes, management information systems, and implementation  Interviews with branch employees and loan/extension officers  Customer surveys Surveying of customers on awareness of loan terms and transparency verification, validation of customer feedback and MFI procedures On-site visit Off-site data collection and scheduling  Analysis, report writing Analysis of primary and secondary information, verification of information with MFI, drafting of final report  Completion of SPA scorecard  Draft report sent to assessment committee Analysis and report writing Review and report finalisation  SPA grade review Report and assessment rationale reviewed by assessment committee  Draft sent to MFI for comments  Incorporating comments MFI’s comments, if relevant, are incorporated  Report finalization Report is finalized by assessment committee and sent to MFI Assessment committee  Teams from Moody’s Analytics and local affiliates take part in an assessment committee to determine SPA grades Term of the SPA  Once completed the SPA grade is monitored over the course of the year. After one year the SPA must be renewed or the SPA grade is withdrawn and is no longer valid Initiation Completion6 – 8 weeks
  10. 10. 10Social Performance Assessments Level 2: For Local, Regional and Global Analysis of Microfinance Practices
  11. 11. 11Social Performance Assessments Using the Moody’s Analytics Social Performance Assessment MFI MFI MFI MFI Consolidated Moody’s Analytics SPA Analysis SPA SPA SPA SPA Reduce MFIs’ reporting burden Attract funding from investors Tool to communicate with public Roadmap for improving social performance Track/share/monitor MFA members’ social performance Help prevent inappropriate regulation Benefits to Individual MFIs in Using the SPA The SPA is a state-of-the-art analytical tool MFIs can use to manage social risks and communicate with stakeholders Benefits to Global Adoption of the SPA The global adoption of the SPA would enable Moody’s Analytics to create a research database that would provide the market with needed information Communicate with stakeholders Tool to answer key questions facing the industry Increase the effectiveness of technical support Move industry to more empirical methods of analysis By combining individual reports the Moody’s SPA can be used to analyze microfinance practices in countries, regions or globally
  12. 12. 12Social Performance Assessments Using the Moody’s Analytics Social Performance Assessment (cont’d) The SPA combines comprehensive market research with clear, user-friendly analytics to serve as a tool for MFIs to: Communicate with InvestorsConduct Self EvaluationsCommunicate with Regulators » Reduce MFIs’ Reporting Burden Moody’s Analytics can provide custom social performance reports to investors to meet their reporting demands » Track/Share SP Data Show incremental improvement in social performance over time as well as specific social performance factors and indicator metrics » Attract Funding Transparent, user-friendly and easily shareable social performance metrics help attract social investment funding » Roadmap for Improving Performance Identify MFA members’ areas of relative strengths and limitations to be used as a template for improving social performance management within the region » Benchmarking SPA grades, granular scorecard-implied scores, and SPA sub-factor tables allow MFAs and members to easily compare their performance against peers » Track Important Links for Research Track links between indicators, social outcomes, SPA grades and financial performance » Minimize Risks of Inappropriate Regulation Use of consolidated data from an MFA’s members reported by a globally recognized, independent third-party can demonstrate current social performance practices and trends to regulators » Present the Social Performance of the Industry Moody’s Analytics can consolidate MFI data by region and country (where available) to highlight the social performance achievements of MFAs and members
  13. 13. 13Social Performance Assessments Countries/Groups Can be Compared to the World/Region Source: 2009 MIX social data mapped to MA’s SPA scorecard SPA Factors Group World Region Social Mission 71 79 78 Strategy and Leadership 30 38 33 Customer Relationship 51 52 54 Measurement of Social Outcome or Impact 49 55 53 Human Resources 57 64 63 Environmental Performance 23 42 33 Mean SPA Score 48 55 53 » The Moody’s Analytics SPA can be used to gather data on a market and compare that market’s performance against different peer groups. » This is one example of how the SPA can help an MFA consolidate its social performance data and communicate it to regulators, investors and the public » Customized consolidated analysis can be done on any and all SPA factors or sub-factors to highlight MFAs’ social performance strengths » Customized analysis can help MFAs focus on the social performance issues that its members need the most assistance with
  14. 14. 14Social Performance Assessments Countries/Groups Can be Compared to the World/Region Reporting can be done on any of the 144 different factors in the SPA
  15. 15. 15Social Performance Assessments Countries/Groups Can be Compared to the World/Region (cont’d) Reporting can be done on any of the 144 different indicators in the SPA
  16. 16. 16Social Performance Assessments Using the SPA to Increase Effectiveness of Technical Assistance MEAN SCORES SPA Sub-Factors Country World Region Focus of social mission 84 76 81 Customer protection 81 73 83 Debt collection practices 80 71 82 Management quality 52 54 56 Governance 44 38 43 Depth of outreach 48 31 44 Region: Country: World Region: Country: World Country: Region: World The SPA allows technical assistance providers to assess existing practices and determine where assistance is most needed
  17. 17. 17Social Performance Assessments Using the SPA to Increase Effectiveness of Technical Assistance (cont’d By using the scorecard approach, TA providers can monitor the impact the assistance is having on MFIs’ social performance practices versus local and global benchmarks A granular scorecard identifies incremental changes in social performance practices over time and can serve to gauge the effectiveness of the technical assistance program Sub-Factor SP5 SP4 SP3 SP2 SP1 Management quality 51 Governance 36 Outreach and access 30 Administrativesetup 60 Region: Country: World By using the scorecard approach a technical assistance provider can target MFIs that may be performing below the mean for certain practices and monitor their progress
  18. 18. 18Social Performance Assessments Level 3: Global Research on the Effectiveness of Microfinance
  19. 19. 19Social Performance Assessments Global Reach  The SPA will be delivered by a global team of analysts that combines the oversight of Moody’s Analytics, the local delivery by Moody’s affiliate relationships, and the analytical abilities of Moody’s Analytic’s subsidiary, Copal Partners  Together these three entities deliver vertically-integrated, state-of-the-art analytics combined with local country knowledge to ensure the highest quality analysis of social performance Moody’s Analytics Methodology and Oversight Copal Partners Administration and Analytics Eastern Europe Central Asia (MFC) Local Delivery by affiliates and partners Latin America (Equilibrium) MENA (DFS Group) Global Development by Moody’s Analytics and Copal Partners Sub- Saharan Africa (AFMIN) India/Asia (ICRON)
  20. 20. 20Social Performance Assessments About Moody’s Corporation  Leading global provider of credit rating opinions, insight and tools for credit risk measurement and management  Founded in 1900  Approximately 6,100 employees worldwide  Presence in 28 countries  Revenue in 2011: $2.3 billion  Publicly listed (NYSE: MCO)  Largest shareholder: Berkshire Hathaway Inc. » Independent provider of credit rating opinions and related information for over 100 years » Ratings and analysis covering more than: − 110 countries − 11,000 corporate issuers − 22,000 public finance issuers − 94,000 structured finance obligations » MIS’s published research and investor briefings draw thousands of attendees each year Moody’s Investor Services (MIS) » Research, data and software for financial risk analysis and related professional services » Main areas of expertise: credit research and risk measurement, economic and consumer credit analytics, enterprise risk management, professional services, and structured analytics and valuation » Client base includes leading asset managers, banks, corporates and insurers » Outsourced research and analytical services arm – Copal Partners Moody’s Analytics
  21. 21. 21Social Performance Assessments Contact Information Alan Bonilla Assistant Vice President Tel: (415) 874-6286 Email: alan.bonilla@moodys.com Jody Rasch Senior Vice President Tel: (212) 553-3797 Email: jody.rasch@moodys.com Michael Rauenhorst Vice President Tel: (212) 553-2866 Email: michael.rauenhorst@moodys.com www.moodysanalytics.com/microfinance United States
  22. 22. 22Social Performance Assessments Contact Information – Affiliates and Partners www.moodysanalytics.com/microfinance Latin America India/Asia Middle East North Africa Sub-Saharan Africa Nagla Bahr Director DFSGroup Tel :(+20-2) 37499883 Email: nbahr@finbi.com Eastern Europe/Central Asia Davy Serge AZAKPAME Chief Executive Officer AFRICA MICROFINANCE NETWORK Tel: +229 21-307441 Fax: +229 21-307496 Email: davy.serge@afminetwork.org Lilya Peskova Microfinance Centre Tel: +48 622 34 65 ext. 212 Email: Liliya@mfc.org.pl Ms. Rajalakshmi Srinivasan ICRA Online Ltd Tel: +91-44 30061703 Mobile: + 91 9840565126 Email: rajalakshmi.srinivasan@icraonline.comCarmen Alvarado Equilibrium Clasificadora de Riesgo S.A. An Affiliate of Moody's Investors Service, Inc. Tel: (511) 616-0400 221-3676 221-3688 221-2759 Email: calvarado@equilibrium.com.pe
  23. 23. 23Social Performance Assessments © 2012 Moody’s Analytics, Inc. and/or its licensors and affiliates (collectively, “MOODY’S”). All rights reserved. ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY COPYRIGHT LAW AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY’S PRIOR WRITTEN CONSENT. All information contained herein is obtained by MOODY’S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided “AS IS” without warranty of any kind. Under no circumstances shall MOODY’S have any liability to any person or entity for (a) any loss or damage in whole or in part caused by, resulting from, or relating to, any error (negligent or otherwise) or other circumstance or contingency within or outside the control of MOODY’S or any of its directors, officers, employees or agents in connection with the procurement, collection, compilation, analysis, interpretation, communication, publication or delivery of any such information, or (b) any direct, indirect, special, consequential, compensatory or incidental damages whatsoever (including without limitation, lost profits), even if MOODY’S is advised in advance of the possibility of such damages, resulting from the use of or inability to use, any such information. The credit ratings, financial reporting analysis, projections, and other observations, if any, constituting part of the information contained herein are, and must be construed solely as, statements of opinion and not statements of fact or recommendations to purchase, sell or hold any securities. NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY’S IN ANY FORM OR MANNER WHATSOEVER. Each rating or other opinion must be weighed solely as one factor in any investment decision made by or on behalf of any user of the information contained herein, and each such user must accordingly make its own study and evaluation of each security and of each issuer and guarantor of, and each provider of credit support for, each security that it may consider purchasing, holding, or selling.

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