Freedom from Hunger's Methodology for Calculating the Social Return on Investment of Credit with Edu

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Freedom from Hungers Methodology for
Calculating The Social Return on Investment
Of Credit with Education
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PURPOSE OF THE SROI TOOL
TRACK THE SOCIAL AND FINANCIAL BOTTOM
LINES RAISE FUNDS FROM PRIVATE
INVESTORS STIMULATE DEBATE ABOUT MEASURING THE
SOCIAL BOTTOM LINE
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OVERVIEW OF THE SROI TOOL
The SROI is a cost/benefit tool designed to bring
together the value of the social impacts created
by Credit with Education and add them to the net
financial return of the MFI. These benefits are
offset by the grant subsidies invested in the MFI
and the technical assistance expenses incurred in
working with the MFI.
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THE SROI VARIABLES
A valuation of lives saved due to the
information offered through the health
education A valuation of money saved by members
due to lower cost of financial services offered
to them by a Credit with Education program. A
valuation of the net income earned by an
organization offering Credit with Education
services. A valuation of the subsidy invested to
create and or expand the Credit with Education
services.
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FREEDOM FROM HUNGERS VALUE PROPOSITION
REDUCTION OF SEVERE TO MODERATE MALNUTRITION IN
CHILDREN LESS THAN 5 YEARS OLD
HOW CONVERT THE IMPACTS INTO METRICS?
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RESEARCH FROM FREEDOM FROM HUNGERS GHANA
LONGITUDINAL STUDY SHOWS CREDIT WITH EDUCATION
DOES REDUCE THE PREVALENCE OF MALNUTRITION lt 5
YRS OLD REDUCTION IN PREVALENCE RATE FOR WEIGHT
FOR AGE FOR CHILDREN lt 5 YRS OLD IS 4 20 OF
MEMBERS HAVE CHILDREN lt 5 YRS OLD
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OTHER NUTRITION RESEARCH SHOWS
NUTRITION IMPROVEMENTS DEMONSTRATED BY A PROJECT
CAN BE USED TO ESTIMATE A CHANGE IN MORTALITY
RATES AND LEAD TO AN ESTIMATE OF LIVES
SAVED Therefore A 4 REDUCTION IN THE
PREVALENCE OF MALNUTRITION TRANSLATES INTO 2
LIVES SAVED FOR EVERY 200 MEMBERS WITH CHILDREN lt
5 YRS OLD WHO STAY WITH THE PROGRAM FOR MORE
THAN ONE YEAR
Pelletier, David, Estimating Changes in Child
Mortality from Changes in Child Malnutrition,
presented August 22, 2001, USAID.
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VALUE OF LIVES SAVED
ACCORDING TO THE WORLD BANKS MANUAL ECONMIC
ANALYSIS OF NUTRITION PROJECTS A LIFE SAVED
GNP PER CAPITA X LIFE EXPECTANCY
MEASURES BY COUNTRY EXAMPLE ONE CHILD SAVED IN
BENIN - 1 X 380 (GNP per capita) x 50 years
(life expectancy) 19,000
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SROI VARIABLES
A valuation of lives saved due to the information
offered through the health education. A
valuation of money saved by members due to lower
cost of financial services offered to them by a
Credit with Education program. A valuation of
the net income earned by an organization offering
Credit with Education services. A valuation of
the subsidy invested to create and or expand the
Credit with Education services.
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VALUE OF MONEY SAVED FROM FINANCIAL SERVICES (NET
ECONOMIC GAIN TO USER)
DIFFERENCE IN COSTS BETWEEN A CREDIT WITH
EDUCATION LOAN AND A LOAN FROM AN INFORMAL
MONEYLENDER USES EFFECTIVE INTEREST RATES
INFLUENCED BY NOMINAL INTEREST RATE, FEES AND
TERMS OF LOAN CONTRACT (LENGTH FREQUENCY OF
PAYMENTS) EXAMPLE FINANCIAL AND TRANSACTION
COSTS TO BORROW ARE 25 FOR CREDIT WITH
EDUCATION AND 30 FOR SAME AMOUNT FROM A
MONEYLENDER SO NET GAIN IS 5 based on Dr. Mark
Schreiners work
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SROI VARIABLES
A valuation of lives saved due to the information
offered through the health education. A
valuation of money saved by members due to lower
cost of financial services offered to them by a
Credit with Education program. A valuation of
the net income earned by an organization offering
Credit with Education services. A valuation of
the subsidy invested to create and or expand the
Credit with Education services.
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NET INCOME TO MFI

• INCOME THAT REMAINS AFTER
• ADMINISTRATIVE EXPENSES
• LOAN LOSSES
• COST OF FUNDS
• THE GREATER THE NET INCOME TO THE INSTITUTION,
  THE HIGHER THE BENEFIT

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SROI VARIABLES
A valuation of lives saved due to the information
offered through the health education. A
valuation of money saved by members due to lower
cost of financial services offered to them by a
Credit with Education program. A valuation of
the net income earned by an organization offering
Credit with Education services. A valuation of
the subsidy invested to create and or expand the
Credit with Education services.
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SUBSIDIES INVESTMENT COSTS

• MONEY GRANTED TO THE MFI TO COVER
• INITIAL OPERATING EXPENSES
• MONEY SPENT ROR TECHNICAL ASSISTANCE
• EXPENSES OF FREEDOM FROM HUNGER AND
• OTHERS IN SUPPORTING THE MFI

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SUMMARY OF THE SROI VARIABLES
VALUE OF LIVES SAVED (No. of lives saved x GNP
per capita x Life Expectancy) NET GAIN TO USER
(Costs of Borrowing from moneylender - costs of
borrowing from Credit with Education) FINANCIAL
INCOME TO MFI Income - (Administrative Costs
Loan Loss Reserve Costs of Funds INVESTMENT
COSTS (Grants Subsidies)

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WHAT IS THE SROI FORMULA?
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THE SROI FORMULA
VALUE OF LIVES SAVED


NET GAIN TO USER

NET FINANCIAL INCOME TO MFI

INVESTMENT COSTS
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MOVING FORWARD
DEFINE THE EXPECTED SOCIAL OUTCOMES IMPACT
RESEARCH TO DOCUMENT BENEFITS CONVERTING IMPACTS
TO METRICS FOR MONITORING AS PROXIES MORE OPEN
DIALOGUE ABOUT HUMAN AND SOCIAL BENEFITS