A Microfinance
Institution is a social enterprise and the reason for its
existance is to serve a social purpose. This purpose is
expressed in the mission of the MFI. The mission determines
the final effects and guides the MFI to differentiate itself
in an increasingly competitive financial market.
The ability to transform a mission into practice and to
manage an organisation towards specified ends, whether
financial or social, requires a system of measurement to
determine the progress towards them.
This creates an environment for Social Performance
(SP), defined as the effective translation of an
institution’s mission into practice (its actions,
corrective measures and results/outcomes).
Social Performance Management (SPM) is a practical
approach which can help the MFI to look at the entire
organization through a social lens and guides the MFI in
translating their “lofty” missions into
Specific, Measurable, Achievable, Realistic and Time-specific
(SMART) social performance objectives.
These objectives provide the MFI with tangible benchmarks,
towards and against, which progress can be measured and
performance improved.
Social Performance Management also involves the process of
collecting and using information effectively in order to
adapt and improve the organisation’s products and
institutional systems. To make sure that everyday operations
contribute to the longer term goal of realising the mission.
SPM engages a wide spectrum of stakeholders into the MFIs
operations including: clients, their families, staff, board
members, donors, governments and the society.
Agreed definition of Social
Performance
During the meeting of ITFSP
in October 2005, one of the subcomities came up with
a common definition of social performance:
Social performance is
not just about measuring the outcomes but also about
the actions and corrective measures that are taken to
bring about those outcomes. The social value of
microfinance relates to:
Improving the lives of poor and excluded
clients 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 clients 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 clients of microfinance, their families
and communities relating to social capital and
social links, assets, reduction in vulnerability,
income, access to services, and fulfilment of
basic needs.
Improving the
social responsibility of the MFI towards its
employees, its clients 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
clients, defined through specific characteristics of the
selected target group, outreach in numbers and/or % of
certain client 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
clients:
Specific product development efforts can be planned to better
respond to the clients’ needs based on the accumulated
knowledge the MFI has in their client's needs, their use of
products and changes in their wellbeing. This can also
include service delivery.
Test Your MFI –
Imp-Act's Six SPM
Questions
Commitment to
social mission:
1) What is your MFI mission and what are your social
goals? How do you seek to achieve them?
How do you know
you are achieving your mission?
2) Reaching target clients: Who uses and who is
excluded from using your services?
3) Meeting client needs:
How do your clients use your services? Are their
needs met? Why do some leave/become inactive?
4) Client change: How
does client status change? What changes are
unexpected?
On-going
improvement and learning:
5) How can you use this information to improve your
services and the way you operate?
6) How do you improve
your systems through which you answer these
questions?
3.
Outcome/Impact of the products on the clients:
Specification on how the offered services are supposed to
serve the needs of the clients (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 – Measuring Social
Performance
One of the foundations of SPM is collecting and using
information in the process of assessing or
measuring social performance. There is a rich array of
resources available that can help the MFI collect the
information needed in order to answer key social performance
questions. The methods and corresponding tools chosen will
largely depend on what the MFI wants to learn and what
capacity it has. It is crucial to start by clearly defining
SPM objectives and information needs; and then only to start
gradually building on what is already available in the MFI
or/and what can be added at low cost.
• Information already collected on financial
performance or other purposes can be useful for learning
about social performance. No additional collection efforts
are needed. The good practice is to make use of already
existing data whenever possible. Eg. Changes in average loan size or instalment as a proxy
for poverty or increase in savings as a proxy of client
trust.
• Additional information can be gathered by additional
data collection integrated into already existing systems: Eg. Integrating some social performance related questions
in the loan application form administered within the loan
approval process, using already scheduled group discussions,
meetings or client visits to collect additional social
performance data, etc.
• Information can be provided by additional collection
efforts. Eg. Drop out interviews, client focus group discussions,
staff feedback meetings, additional research for deepening
highlights given by regular indicators.
Social Performance
Management FAQ
What is Social Performance?
The effective translation of the MFI’s mission into
practice.
What is Social Performance Management?
It is a managerial approach that helps an institution look at
all organisational systems through a social lens in order to
ensure alignment with the mission. It is the
institutionalisation process of translating mission into
practice, which includes:
1. Setting clear social objectives,
2. Monitoring social performance and using this information
to improve practice.
What is ‘mission drift’?
Mission drift is when the focus on social issues is lost or
vague and as the institution struggles for financial
sustainability, the original development goals are
neglected.
What is SPM strategy?
Managing Social Performance Strategy is a process of
specifying the organisation’s social objectives,
developing policies and plans to achieve them and allocating
resources so as to implement the plans. It provides overall
direction to the whole organisation. The formulation of SPM
strategy is referred to as determining where you are now,
determining where you want to go, and then determining how to
get there.
What should be the strategic objectives resulting from
the mission ?
The strategic objectives should be SMART:
• Specific
• Measurable
• Achievable
• Realistic
• Time-bound
What is an SPM Information System?
SPM information system helps to answer questions about
reaching the target clients, meeting client needs and the
level of impact/change. It is based on collecting, analysing
and utilising the information. It uses all the data available
in the organisation, both social and financial, and requires
additional sources of information.
How to institutionalize Social Performance
Management?
SPM should be aligned with institutional systems, like human
resources, financial management, budgeting, strategic
planning and communication, being a permanent part of the
organization. It involves allocating sufficient resources
(financial, personnel, time, and computer system support),
adjusting operational procedures and adapting the MIS.
It should be supported by an organizational culture,
expressed by the support of senior management and the Board,
staff buy-in at all levels and identifying a system
‘champion’ – at least one dedicated
staff member for coordinating the SPM process.
Is SPM consistent with other organizational strategies
like the business and marketing strategy?
SPM aligns with all institutional systems, and should also be
a part of the business and marketing strategy.
What is the relationship between social objectives and
financial objectives?
Social Performance Management allows to bond social and
financial objectives so that the organisation remains
financially sustainable in reaching its social objectives.
There are successful cases of MFIs in the region as well as
globally showing that social and financial performance can go
hand in hand.
Is SP measurement an impact assessment?
Social Performance measurement has emerged out of impact
studies that were considered to be too expensive, time
intensive and complicated. Impact studies have tried to prove
impacts, very often for external purposes while providing MFI
management with little practical information.
Social Performance shifts from external impact assessments to
internal support for management in analyzing the complete
process how to achieve impact. The focus shifts from proving
impact to improving the impact. SPM provides simple, easy and
cost-effective social information that can be quickly acted
upon by the MFI management as well as it can be reported to
external stakeholders including donors and social investors.
Can my MFI afford SPM?
Initial investment is required both in terms of financial and
human resources to adapt existing systems, however the
initial costs get off-set in a long run and the system
maintenance costs are marginal. To ensure cost effectiveness
of the system development and institutionalisation process,
it is highly recommended to start small and build on the
systems and resources already existing in the
organization.
