The microfinance world of today is a world of fast growth, changes in the market and in the legal framework and most importantly stiff competition. In this environment, achieving and staying in tune with the mission is a real challenge. The social aspect of the mission is the reason for the existence of MFIs, reaching the poor and financially excluded.
Social Performance is an effective translation of an MFI's social mission into practice in line with accepted social values.
The social value of microfinance relates to:
- Improving the lives of poor and excluded Consumers and their families
- Widening the range of opportunities for communities.
- To create this value the social objectives of an MFI may include:
- Serving an increasing number of poor and excluded people in a sustainable manner: expanding and deepening outreach to poorer people
- Improving the quality and appropriateness of financial services available to the target Consumers through a systematic assessment of their specific needs
- Delivering such services in a cost-effective way resulting in low fees and fair interest rates on loans and deposits.
- Creating benefits for the Consumers of microfinance, their families and communities relating to social capital and social links, assets, reduction in vulnerability, income, access to services, and fulfillment of basic needs.
- Improving the social responsibility of the MFI towards its employees, its Consumers and the community it serves.
- Monitoring and acting upon unintended negative side-effects of microfinance, such as over-indebtedness and multiple borrowing
Social Performance can be considered four dimensional in terms of setting objectives, measuring the results as well as action undertaken by the MFI in order to reach those objectives:
1.Outreach to the poor and excluded:
Clear definition of who and where an MFI is targeting it Consumers, defined through specific characteristics of the selected target group, outreach in numbers and/or % of certain Consumer types in the portfolio. In this dimention the adaptation appropriate institutional systems and products to extend outreach to the selected target group and to avoid their exclusion is needed e.g. targeting tools, incentive systems promoting outreach to selected groups, product features responding to particular group characteristics, etc.
2. Adapted products and services to the needs of target Consumers:
Specific product development efforts can be planned to better respond to the Consumers’ needs based on the accumulated knowledge the MFI has in their Consumer's needs, their use of products and changes in their wellbeing.
This can also include service delivery.
3.Outcome/Impact of the products on the Consumers:
Specification on how the offered services are supposed to serve the needs of the Consumers (and their families) and their well being: What’s the expected change? How will this change be generated?
4. Corporate Social Responsibility (CSR):
The relationship with other stakeholders: to what extent does an MFI take into account its role as a responsible actor
Social Performance Management - the process of translating mission into practice, including:
- setting objectives to achieve social goals,
- tracking Social Performance,
- and using information to improve practice.
Benefits for Microfinance Institutions:
- Lower exit rates and higher Consumer loyalty
- Higher staff motivation and lower turnover
- Innovation in products
- Identification of new market segments
- Good public image
