European Microfinance Week 2015

PRESENTATIONS

Jürgen HAMMER opened this session by explaining the reasons why SPTF was created and recalled the Universal Standards of Social Performance Management, a proposal to structure all the issues of social performance management (SPM) into 6 global dimensions and 19 standards.

Cécile LAPENU mentioned that the SPI4 is a social audit tool designed for MFIs to assess their practices and is completely aligned with the Universal Standards of SPM (USSPM). She explained how the SPI4 can be used as a self-assessment tool for MFIs. She mentioned that for first time SPI4 users, CERISE provides feedback on data consistency and ways to improve overall data quality. SPI4 facilitates reporting on the MIX SP indicators, which are included in the tool. SPI4 offers a variety of reporting formats including separate reports summarising the MFI’s level of implementation on the Universal Standards, the Smart Certification standards, and the MIX Social performance indicators.

Lapenu explained that the Universal Standards draw on good practices from leading industry initiatives, such as the Smart Campaign, MF Transparency, CERISE, Imp-Act Consortium, ILO, and practices that the financial services providers (FSPs) have already been successfully implementing in the field. She stressed that all of these practices are contained in one manual. The six dimensions in the Universal Standards are: defining and monitoring social goals; ensuring board, management and employee commitment to social goals; designing products, services, delivery models and channels that meet clients’ needs and preferences; treating clients responsibly; treating employees responsibly; balancing financial and social performance. She remarked that SPI4 standardises reporting across stakeholder groups and thereby reduces the burden on FSPs. The main reasons why FSPs should use the SPI4 is because it will help them manage their social performance, spend less time on reporting requirements and more time on improving practices. She added that the SPI4 was launched in 2014 and is available for free. The only commitment for an FSP using SPI4 is that it should report the results to CERISE. She then talked about the ALINUS working group (ALigning Investors due diligence to the Universal Standards), a group of investors and fund managers committed to using the Universal Standards / SPI4 in their investments. Currently there are 12 MIVs who have developed a joint selection in SPI4 and test it in their due diligence process.

Micol GUARNERI guided the audience through the use of SPI 4 with ACAD and the subsequent SPM work that was conducted within the framework of TA Project financed by the EIB to support the transformation of ACAD NGO into ACAD Finance. Assisted by the TA expert team, ACAD updated its business strategy and built a full set of new policies, procedures and manuals to meet regulatory requirements. The SPM component of the project aimed at assisting ACAD to improve its SPM practices, mainly by integrating SPM aspects into the new business plan and operational manuals; integrating SPM into ACAD training curricula; identifying social indicators and integrating them into the reporting to the board of directors and coaching senior management on the tools created and SPM implementation.

Guarneri pointed out the advantages of using SPI4. SPI4 was used to facilitate the design of the TA component and of a complete SPM action plan for ACAD. It is a tool ACAD can institutionalise, an operational tool that can facilitate internal monitoring of the SPM action plan by ACAD. The set of documentation and resources associated with the SPI tool will support ACAD in actually improving practices. SPI4’ was also used because it allows global reporting to a growing number of investors and is aligned with other industry initiatives. She then presented the main USSPM findings and explained how they focused on working towards the main weaknesses by creating action plans and implementing improvements. She noted that the board of directors was regularly being informed on the progresses of the USSPM implementation action plan. She closed her presentation by stating that the main reason for success was that SPM became a part of ACAD’s normal business operation as ACAD has now integrated SPM into operations of all levels. She added that the board of directors’ buy-in also played a crucial role.

Samir BARGHOUTHI, CEO of ACAD explained how they decided to use SPM when they underwent transformation from an NGO to an MFI. He explained that many of the employees within the organisation were afraid that ACAD was going to lose focus on its social mission by transforming into an MFI. He explained how integrating SPM in ACAD was a challenging procedure as working in the Palestinian Territories meant they needed to work with different legal and regulatory frameworks per region. He stressed that the commitment from shareholders, top management and board of directors was of crucial importance during the entire procedure. He added that an internal auditor was delegated by the board to have authority to audit the implementation of the social performance. He then went through the social action plan and the various USSPM areas to give examples of the various actions that have been implemented and the work still in progress. 

DISCUSSION

Hammer explained how ALINUS can be used by investors and that it is a very flexible tool that can be adapted to specific organisational needs. A question from an EIB representative related to the workload needed to use the ALINUS tool in due-diligence. Hammer explained that a continuously growing number of organisations have done an SPI4 assessment. The CERISE tool allows them to download this information directly into an ALINUS tool. He explained how by using the ALINUS tool, investors can focus their work on data analysis and improvement plans, looking into the different areas of USSPM, instead of spending time collecting data on due diligence. He also stressed that social rating agencies will be using SPI4 in their validation procedures, and in the rating process provide a “validation” of data quality.

Another question from the audience was about the reaction of organisations in the field when investors ask them to do an SPI4 assessment. SPI4/ALINUS includes approximately 80 indicators which can take time to answer. Hammer explained that a large number of the indicators included in the SPI4 are already part of a normal due diligence procedure. Moreover, he added that about 60 percent of the indicators in the SPI4 come from the Smart Campaign indicators. Organisations that have already done a Smart Campaign - self-assessment or certification - can automatically upload these indicators into SPI4.

A question from ALIDE Benin was about the importance of reaching out to regulators. Hammer explained that there is a regulators’ stakeholder group present in SPTF. For many issues, for example transparent pricing, it is increasingly being approached and getting involved in the process. Lapenu added that regulators are already working with client protection indicators of the Smart Campaign. She emphasized that CERISE is thinking about creating a similar tool to ALINUS for the regulators. However, she noted that CERISE and SPTF needs to work with regulators to understand which indicators would be of interest to them to track on a regular basis. Hammer added that now that the industry has SPI4 as a standard tool, regulators can keep track of SPM much easier.