Patricia RICHTER opened the session by reminding the audience that social performance standards have been guiding the industry since 2012, and there are several capacity building resources available in this respect. She explained that the goal of the session was to showcase the advances of the industry in implementing social performance standards in the last years, seen from different experts’ perspectives, and then discuss which aspects seem to need further capacity building and to learn from capacity building experiences and mechanisms that the industry has been offering. Richter briefly introduced the panellists and gave them the floor.
Chiara PESCATORI presented the results from 87 social ratings on social performance and client protection carried out by MFR between 2015 and 2017. Pescatori revealed that countries in Central Asia, Asia, Middle East and North Africa, and Latin America are on average aligned with the universal standards for social performance. She noted that there are some shortcomings in Africa, where operational expenses are much higher than in other regions of the world. In contrast, this is also where portfolio quality is higher and innovation is thriving.
Pescatori elaborated that the ratings’ results further revealed that social performance management is usually the area where institutions struggle the most. Despite the developments in digital inclusive finance, there are many MFIs that still track and analyse data manually. She also detailed that within client protection, MFIs struggle mainly with transparency. This is partially due to the challenges brought by the introduction of digital finance and lack of strong regulatory frameworks. This is especially clear in Africa due to the innovation boom happening in the region. Pescatori further noted that the social ratings also showed that the size and robustness of MFIs matter; a solid base allows MFIs to implement social performance and client protection at a much higher level.
Cécile LAPENU and Mathilde BAUWIN addressed social performance management from the perspective of another tool: SPI4, which was released by CERISE in 2014. In 2018, ADA analysed the SPI4 database on social performance management, resulting from the SPI4 audits which have been completed and sent back by 368 MFIs from 73 countries.
Bauwin commented that the results showed that regarding the six dimensions of social performance management defined by the SPTF and included in the SPI4, MFIs do better on the balance between social and financial performance. She further noted that social performance management did not prevent MFIs from being profitable. It was also seen that MFIs sharing good practices in social performance management also have smaller portfolios at risk. At the same time, the main weakness in terms of social performance management was in the engagement with social goals. Along with the definition of the MFI’s mission and its social goals, that’s where the strongest need for capacity building activities lie.
In terms of performance per region, Bauwin revealed that African MFIs had generally the lowest scores in social performance management. In all regions however, cooperatives reached the lowest scores across the board and have a strong need for capacity building. Bauwin further noted that no difference was seen in for-profit and non-profit institutions in all regions.
Lapenu then concluded that we know how to assess and demonstrate social performance, but working with the universal standards is difficult. She explained that the industry has a lot of tools, but that dissemination remains a problem. As such, there is a strong need to focus on stakeholders that drive change, to achieve better communication amongst users of the universal standards and to draw from in-country expertise.
The session then turned to the capacity building experiences and mechanisms that the industry is offering for improving social performance management. Laura FOOSE affirmed that SPTF is also engaging with its members in improving social performance practices related to the Universal Standards. SPTF offers three regional SPM implementation facilities in Africa and the Middle East, in Central America and the Caribbean, and in Southeast Asia. Foose explained that each facility provides trainings and co-finances projects to help strengthen the capacity and SPM of financial service providers. On this note, she also mentioned that SPTF is trying to use as many local trainers as possible, and is currently updating its technical assistance database which currently consists of 87 professionals.
Yolirruth NÚÑEZ brought the perspective of a social investor to the discussion; she emphasised that capacity building is a process, thus we cannot expect results in the short-term. Núñez also mentioned that the investor’s intention when engaging in capacity building initiatives for social performance management is to bring more customer centricity to the industry. Núñez advocated that customers, and not only organisations, should be strengthened from this exercise. She then provided an insight into Oikocredit’s SPM capacity building journey, which started in 2007 with the tools available at the time. Núñez revealed that Oikocredit gradually realised that diagnoses were not sufficient to measure impact (using different tools such as SPI, CPP, Social Ratings, etc), and that action plans for improvement and monitoring were necessary, but also costly, so it is important to find a balance when designing capacity building activities. These capacity building activities are complemented by the Clients Outcome Programme, which supports organisations analyse changes on end clients’ lives using the databases of MFIs. This programme started in 2014 – in which Oikocredit has already worked with 40 MFIs. She commented that customer centricity should also be reflected in how we measure results in social performance; results should be measured at the client level, not only at the organisation level and its management. In this respect, Núñez advocated that we must look at the client level to understand the real needs of the organisation.
One of the subjects brought up by the audience was the fact that MFIs are overwhelmed with the amount of SPM indicators, and investors should simplify the process by using existing indicators. Foose clarified that this harmonisation among investors is already happening. She mentioned the example of SPI4 ALINUS, which is already used by 17 investors in their due diligence.
On the subject of the buy-in from management, Pescatori revealed that the lack of management commitment is the first reason for social performance management to fail, since the necessary changes are not implemented across the organisation. Núñez stressed that Oikocredit seeks commitment from the MFI board even before the loan is disbursed.
The audience also addressed the use of technology in SPM. Lapenu and Bauwin clarified that SPI4 is an online tool, and that the digitisation of SPM tools allows for tailor-made guidance and interaction with users. Richter and Foose also commented that there’s much more in the making, calling attention to the use of e-learning and other digital tools which will soon be used in capacity building activities.