European Microfinance Week 2017

PRESENTATIONS

Jürgen HAMMER, from the Social Performance Task Force (SPTF) / Grameen Credit Agricole Foundation, started this session by referring to a discussion held at the BMZ Ministry for Economic Cooperation and Development in Berlin about impact management and its connection to the Sustainable Development Goals (SDGs). He explained that financial inclusion was used as an example of a sector bringing concrete answers and methodologies on impact evaluation and social performance. Hammer added that the sector has now switched from developing methodologies to actually implementing them. He continued by introducing the panellists, who represented all main stakeholders in the sector: investors, networks, IT providers, and microfinance institutions (MFIs).

Cécile LAPENU, from CERISE, talked about the Universal Standards for Social Performance Management (USSPM), SPI4 and ALINUS. The Universal Standards are a comprehensive manual of best practices in social performance management (SPM) released in 2012. The resource creates a common structure and language for SPM, being globally accepted and used by leading organisations in the field. It can also be used by a whole range of stakeholders: regulators, investors, MFIs, rating agencies and auditors. Lapenu high­lighted the Universal Standards's importance for investor due diligence and monitoring of investees.

She also introduced SPI4, a tool to streamline reporting but also used in management processes. It is the only assessment tool completely aligned with the Universal Standards, and customizable with optional modules on poverty, gender, and the environment. The tool allows institutions to identify gaps and improve on them as it is linked to each Essential Practice within the Universal Standards. SPI4 also allows for benchmarking through comparison of other users locally or worldwide.

Lapenu finalised by shedding light on ALINUS, a sub-set of indicators in SPI4 for investor due diligence and monitoring. With ALINUS, investors can assess how well an FSP is achieving its double or triple bottom line. She emphasised that ALINUS concentrates on what counts, convinces and guides partners to improve. It compiles results, compares through benchmarks, and communicates using a common language. Lapenu stressed that it is important to not only have standards, but also to find ways to correctly apply them.

Hammer provided an example of how an investor can use these tools in their due diligence. He provided the example of Grameen Credit Agricole Foundation which decided to use ALINUS to benchmark their portfolio against those of other investors in 2016. This comparison allowed them to identify their strengths and weaknesses more thoroughly. The Foundation discovered that, although their global portfolio was outperforming that of other investors, Tier 1 partners were at or below the benchmark. These findings were presented at the board and discussed with the management of the Foundation. This resulted in the introduction of new eligibility criteria based on social performance through the implementation of covenants and performance targets.

Kinga DABROWSKA, from the Micro­finance Centre (MFC), presented lessons learned from the Social Performance Fund program, a global program aiming at a broader adoption of social performance standards. The Fund which has been operating since 2011, is managed by the Microfinance Centre in cooperation with CERISE, and has supported a large number of MFIs, associations and investors. Dabrowska stressed the importance of networks in microfinance, as they are very well positioned for raising awareness and facilitating knowledge sharing. She then presented key findings from the Social Performance Country Report, a document that includes 11 social performance reports from 11 different countries in Eastern Europe, Central Asia, and Latin America. Dabrowska highlighted that client protection practices are increasingly implemented, as more and more institutions have social missions. There is also increased interest in green microfinance as well as in financial education. However, one of the key challenges is helping MFIs translate their existing social goals into more practical language. Dabrowska continued by naming other challenges which were identified per stakeholder level. For example, networks need to diversify their funding, as generally they are dependent on only a couple of funders. Investors should aim to turn their verbal commitment into practice and cooperate more with local networks. Regulators need to start recognising socially-oriented MFIs and to provide more incentives instead of just controlling and regulating the sector.

Alexis LEBEL, of OpenCBS, explained how technology can help MFIs collect, analyse and share outcomes on social performance. OpenCBS is a free Core Banking Software (CBS) for MFIs created in 2006, and currently serves 180 customers. It offers affordable channels for collecting SPM information, for example through a tablet application. The software is adaptive, enabling MFIs to choose which outcomes they want to measure, and can be based on the harmonised social outcomes created by SPTF. MFIs can then report the information through open Application Program Interface (APIs), which connects different systems together, offering a reliable and free transfer of SPM data, and an easy way to consolidate information and extract reports.

Adhy SURYADI started his presentation by introducing BMT itQan, a cooperative in Indonesia offering Islamic credit and savings. BMT itQan was introduced to SPM in 2016 by the International Labour Organisation (ILO) and it incorporated SPM in their work to pursue a double bottom line in a more systematic way. BMT itQan staff received training on SPM and Making Microfinance Work (MMW), and conducted a preliminary self-assessment using SPI4. The MFI has included social performance in their business plan for 2017 and is gradually implementing the 6 dimensions of the Universal Standards. With the help of ILO, BMT itQan developed a pilot project to deliver marketing and financial planning training and counselling to clients. The results of the pilot are currently being measured by a randomised control trial (RCT). Following certification as a MMW trainer, BMT itQan promoted SPM by training other financial institutions. Suryadi emphasised that this initiative clearly led to targeted institutions revisiting their business processes.

DISCUSSION

A member of the audience asked the panellists how investors can motivate staff working in the field to achieve social outcomes. Hammer replied by stating that investors have not yet tackled this question, and invited the investor community to come up with an answer. Yousra Hamed, from the ILO, gave an example of how talking with the local staff in an Egyptian MFI and looking at the situation from their perspective led to the creation of an incentive package for loan officers linked to their work on social performance. Lapenu added that some investors negotiate interest rates based on outstanding SPM results.

Hammer then asked the panel what the next steps are in the SPM implementation process. Lebel mentioned that he hopes to see more of his clients understanding that technology can ease the process of collecting and analysing SPM data. Dabrowska mentioned that we should try to create more incentives for the MFI, but also on the investor side, to keep on tracking and analysing social performance. Lapenu emphasized that the next frontier is outcome measurement management. She stated that we need to make sure that SPM has value for everyone in the MFI, from the loan officer to the CEO. All panellists agreed that it is important for both the MFIs and investors to understand there is a good business case for social performance. There is no trade-off between social performance and profit sustainability.