Social Performance Management

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Social Performance Management

  1. 1. 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

  2. 2. Social
Performance
Management 
 Concept 

  3. 3. 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

  4. 4. Social
Performance
Measurement
 4

  5. 5. Social
Performance
Management 
 How
to
measure?

  6. 6. 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

  7. 7. 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

  8. 8. 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

  9. 9. 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

  10. 10. Social
Performance
Management 
 Benefits
and
Values 

  11. 11. 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

  12. 12. Social
Performance
Management 
 Trends
in
the
sector 

  13. 13. 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

  14. 14. 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

  15. 15. 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

  16. 16. 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

  17. 17. 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

  18. 18. 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

  19. 19. 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

  20. 20. Social
Performance
Management 
 MicroFinanza
Ra.ng
Brief
Profile

  21. 21. 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

  22. 22. 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

  23. 23. 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

  24. 24. 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

  25. 25. 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

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