Operationalising Social Performance in Microfinance Presentation to IMPACT Workshop

1
Operationalising social performance in
microfinance Presentation to Imp-Act
workshop SEEP AGM, October 21st 2003 Anton
Simanowitz
2
1.1 Introduction
Action Research Programme 20012004

• Imp-Act is a three-year action research programme
• 29 partners in 20 countries very diverse range
  of MFIs
• Implemented by a team from three British
  universities
• the Institute of Development Studies (IDS), the
  University of Bath, and the University of
  Sheffield
• Focus on improving practice for poverty impact,
  not just increasing outreach of financial
  services to the poor

3
1.2 Introduction
Imp-Act aims to improve the quality of
microfinance services and their impact on
poverty Three main objectives

• To develop credible and useful social performance
  (impact) systems based on the priorities of MFIs
  and their stakeholders
• To broaden the scope of impact assessment to
  include wider poverty impacts
• To influence thinking and practice relating to
  the role of microfinance in poverty reduction

4
1.3 Introduction
A concern with social performance

• Social objectives
• Most MFIs have social objectives and aim to
  design their programmes to meet these objectives
• who is reached (gender, poverty level, caste)
• how clients benefit relating to MDGs or other
  social objectives eg. social equity or
  empowerment
• how non-clients or wider community benefit

5
1.4 Introduction
Social objectives contribution to the MDGs

• 1. Income
• income growth (productive use of credit/savings)
• income stabilisation (regular and reliable
  income)
• 2. Reducing risk and vulnerability
• increased assets and savings
• consumption smoothing
• stronger social networks and support
• increased skills

6
1.5 Introduction
Social objectives contribution to the MDGs
3. Enabling access to services eg. health,
education, water 4. Social and economic
empowerment of women 5. Wider social Eg.
changing perceptions of women and poor at
community/society level 6. Wider economic Eg.
impact on poverty through labour markets
7
2.1 Why social performance?
Increasing interest in social performance is
motivated primarily by three concerns.

• 1. Knowing your market
• social motivation to reach specific groups (eg.
  poor)
• increasingly competitive environment
• adapting services to specific needs of different
  groups of potential clients makes commercial
  and social sense
• 2. Improving service
• MFOs can cost-effectively collect information
  from their clients to improve both social and
  financial performance.
• Information on if an MFI achieving its social
  goals
• - important internal validation of work
• - allow for improvements in their interventions

8
2.2 Why social performance?
Increasing interest in social performance is
motivated primarily by three concerns.
3. Reporting to external stakeholders Donors and
other external stakeholders are increasingly
concerned to monitoring the effectiveness of
their funding towards their social objectives
9
2.3 Why social performance?
Achieving a double bottom-line

• social as well as financial performance
  achieve and demonstrate
• need to collect information to monitor whether
  objectives are being met.

10
3.1 Operationalising social performance
Operationalising social performance Imp-Act
partners are

• examining their own context, objectives and
  social performance goals
• designing social performance assessment or
  monitoring system
• institutionalising this system for use as part of
  the core operational methodology
• developing effective feedback mechanisms to
  ensure that information generated is used
• using information produced for operational
  performance monitoring, management decisions and
  strategic management
• making operational changes in the light of
  lessons learnt from the monitoring system and the
  information it produces
• presenting social performance data to external
  stakeholders.

11
3.2 Operationalising social performance

• Developing social performance monitoring
• Must be simple, cost-effective and useful
  otherwise financial pressures will take precedent
• Integrated into on-going systems, rather than
  one-off assessments

12
3.3 Operationalising social performance
A framework for a social performance system

• 1. What are your social performance goals?
• MFIs need to clearly define their social goals
• - delivery of financial services to specified
  markets (outreach)
• - expected benefits/ impacts on clients/wider
  community
• 2. Monitoring status of clients
• On entry
• Changes over-time monitoring of simple
  indicators
• Drop-outs
• Eg. sex, age, marital status, employment, no.
  children, education level, business type,
  business value, poverty level, location

13
3.4 Operationalising social performance

• Examples of use of monitoring data
• Poverty level of new clients changes over time?
• Patterns of behaviour/need related to poverty
  level business type, loan sizes, savings
  capacity, arrears, drop-out etc etc
• Changes in poverty level of clients patterns
  compared to business type, gender, age, marital
  status, geography, loan officer, loan/savings
  amounts etc etc

14
3.5 Operationalising social performance

Source Imp-Act partner
15
3.6 Operationalising social performance

• 3. Assessing impact
• Monitor small number of impact related indicators
  (include in MIS)
• Regular management reports
• Understanding based on MFI knowledge/experience
• Changes in status or monitoring indicators is not
  impact
• eg. may be general income increase in whole
  country
• Follow-up research to understand underlying
  reasons for changes and drop-outs

16
3.7 Operationalising social performance

Source Imp-Act partner
17
3.8 Operationalising social performance

• Imp-Act partner examples
• PRADAN (India). Internal Learning System
• Participatory client diary system track and
  analyse changes in own lives
• Summarised and analysed at group level
• Summarised into MIS
• Client monitoring system but also impact
  analysis

18
3.9 Operationalising social performance

• 4. Social performance management
• Using information to improve practice
• Ensuring organisational learning systems
  involving staff and clients at all levels
• Continuous process of generating and using
  information
• Organisational culture is key

19
3.10 Operationalising social performance
The Feedback Loop
Communication
20
3.11 Operationalising social performance

• Imp-Act partner examples
• SEF (South Africa). Impact Monitoring System
• Monitor impact indicators from all clients on
  all loan cycles
• Capture in MIS
• Quarterly management reports (also submitted to
  Board)
• Useful in strategic decisions
• eg. balancing financial and social bottom lines
  (decisions taken using both financial and social
  information)
• Learning tool for field staff and clients
• Identifies most vulnerable clients to target
  support

21
3.12 Operationalising social performance

• 5. External credibility of social performance
  data
• Who?
• Board, government, donors, policy makers
• Why?
• Avoid mission drift resource allocation and
  strategic decisions
• How?
• External studies
• Auditing of MFI generated data (eg. CGAP Poverty
  Audit)

22
Improving the Impact ofMicrofinance on
PovertyAction Research Programmewww.Imp-Act.or
gwww.microfinancegateway.org/impactResource
CDs, IDS Bulletin, Newsletter, Feedback Loops
Practice Notes available at back of this room