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Social & environmental performance for microfinance. Triodos Facet. Consultancy firm promoting sustainable banking and SME development in developing countries & emerging economies Part of the Triodos Group, innovator of sustainable banking Headquarters: Zeist, The Netherlands - PowerPoint PPT Presentation
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Social & environmental performance for microfinance
Triodos Facet• Consultancy firm promoting sustainable banking and SME
development in developing countries & emerging economies• Part of the Triodos Group, innovator of sustainable banking • Headquarters: Zeist, The Netherlands• Representative offices in Africa, Latin America, Eastern Europe, Asia• 30 professional staff consultants
overview
1. What is social performance management?2. Social Performance Management: why should we care?3. Tools to manage social performance4. Managing environmental, health & safety performance
When is a microfinance institution successful?
The triple bottom lineFinancial
performance
Social performance
Environmental performance
Do financial services improve the living living conditions of this client?
The triple bottom line
Can an MFI play an active role in overfishing and support the long-term continuity of their clients’ business?
The triple bottom line
Can you help entrepreneurs with improving safety in the business?
The triple bottom line
Transparency
fair pricingOverindebtedness Poverty lending
Staff satisfaction
Client satisfactionWomen empowerment
Client focused microfinance
Financial inclusionIntegritySuggestion box
Portfolio quality
Ethical collection practices
Codes of conduct
Low interest ratesMultiple loansData privacy
Social performance?
Safe working conditions
Small business
The entrepreneur & the household
The poor?
The MFI
Health, safety & environmental impacts
Social performance management
Why are we doing microfinance in the first place? What do we as MFIs want to achieve?
• Access to financial services?• Poverty alleviation?• Economic growth catalyst?• Social change catalyst?
Social performance management
Social Performance Management is about:
1. Setting your objectives (what do you want to achieve?)2. Measuring your results3. Adapting your products and processes to improve
performance
Social performance management
Social performance management
1. Setting your objectives
“What is the mission of your MFI?”
Social performance management
1. Setting your objectives
Do you have a policy on:– Avoidance of over-indebtedness– Transparent pricing– Appropriate collections practices– Equal treatment of staff / staff development– Environmental management– ....
Social performance management
2. Measuring results
Social performance management
Acleda bank (Cambodia)
annual client survey:“how has your income situation developed?”• income situation reduced:
• 2005: 1.1-2.3%, 2006: 0.5%, 2007: 3.4%• further investigation for more specific info as to the underlying
causes in 2008
Social performance management
The experience of SHEPHERD(india)
Lessons learned with social performance measurement
• Translate social vision in clear social goals• Start with few indicators, expand as you go• A lot of data is already measured throughout the process• Do not report only for investors use information
internally.
Social performance management
Social performance management
“What data does your MFI measure & report?”
Social performance management
What can you measure & report? (some suggestions)
• profile of clients (do you actually serve your target group?)• gender, location, economic position, etc.)
• client satisfaction & turnover• change in poverty status / business growth• improvement in leadership skills• staff profile, satisfaction & turnover
a) Publish what you preach!
SPM: why should we care?
IFC’s mission is to promote sustainable private sector development in developing countries, helping to reduce poverty and improve
people’s lives. IFC believes that sound economic growth, grounded in sustainable private investment, is crucial to poverty reduction.
Through its Environmental and Social Review Procedure, IFC reviews the business of its FI clients to identify activities where the FI could be exposed to social and environmental risk as a result of
its investments.
b) Investors and donors are interested in non-financial impact of MFIs
SPM: why should we care?
c) Social performance drives financial performance
SPM: why should we care?
Social dimension Financial performanceClient satisfaction Efficiency increased
Preventing multiple loans Lower PAR
Staff satisfaction Increased efficiency
Transparent interest rates Satisfaction & lower PAR
Implemented SP policy Lower finance costs
SPM: why should we care?
“What benefits would social performance management bring your MFI?”
Tools for SPM
I want to… toolKnow the social performance of my MFI (diagnostic)
SP scorecards
Externally verify my social performance
MF social ratings
Know if my clients improve their living standards
PPI or other poverty benchmarks
report on my social performance Reporting guidelines
1. Social scorecards: SPI & QAT
SPI reviews:
• Policy• Systems• Performance
(standard indicators
Tools for SPM
1. Social scorecards: SPI & QAT
QAT reviews:
• Objectives set• Strategy for meeting objectives• Monitoring systems• Information quality• Information analysis & use
Tools for SPM
2. Social ratings
A rating is an externally assessment of the social performance of an MFI• Social results• Systems implemented
Major rating agencies:Planet rating, microfinanzas, MicroRate, mCril
Tools for SPM
Tools for SPM
3. Poverty scorecards
A poverty scorecards assesses:• Poverty status of clients (very poor, poor, not so poor, non-poor)• Improvements in poverty level
Tools for SPM
PPI:estimates the likelihood that an individual falls below the national poverty line
Tools for SPM
Tools for SPM
4. Social performance reporting
a) GRI guidelines
Tools for SPM
Environmental management
Would your MFI support this type of business activity?
Should you be concerned with your clients health & safety?
And what about the waste water?
Environmental management
Can MFIs reduce harmful pesticide use by their clients?
Environmental management
What role can MFIs play in supporting renewable (e.g. solar) energy?
Environmental management
What environmental, health & safety issues are relevant for your clients?
What does your MFI do to manage the environmental, health & safety impact of its clients?
What costs & benefits does it bring?
Environmental management
Environmental managementYou may think…. But let’s also consider this
First earn some money, then we will consider environmental, health & safety issues
Improving clients’ lives can also include a clear environment and safe working conditions
MFI clients don’t pollute, big oil companies do
One micro-entrepreneur may have limited impact, but what about 50000?
Strict rules will drive my clients to the competitors
Helping clients improve may be an added value
MFIs can’t afford this An MFI may be eligible for lower interest rates from investors
Managing EHS risks
Exclusionlist
Factsheets
Loanapplication
sheet
Loancontract
Contractclauses
Monitoringspecs
Reports to investors
Loanappraisal
sheet
Reportingformats
Application
Appraisal
Contracting & Disbursement
Recovery &monitoring
Reporting
MISinfo
Environmental management
Environmental management
• MFIs offer special loans to convert vehicle from petroleum to compressed natural gas.
• Natural gas produces fewer harmful gasses and reduces the CO2 emission with 15%. Also, the fuel efficiency of the cars rises.
• costs: US$ 800.Since petrol prices rose significantly, payback times were short and taxi drivers increased their earnings.
Environmental management
Wrap upWhat Triple bottom line is not What TBL is
Short term profit Long term value creation
Only for NGOs Relevant for all MFIs that consider themselves professional
Considering poverty as “money only”
Include decent work and direct environment
Shifting responsibilities to others Taking responsibility for clients wellbeing
Imposing western standards Help MFIs to improve their business and that of their clients
Finished product or blueprint Work in progress and adaptable to the context
