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Promoting Information Exchange in the Microfinance Industry

Common Indicators for Social Performance Measurement – November 11, 2006. Promoting Information Exchange in the Microfinance Industry. M icrofinance I nformation e X change, Inc. DRAFT - Updated December 1, 2006. What? For Whom?. WHAT

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Promoting Information Exchange in the Microfinance Industry

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  1. Common Indicators for Social Performance Measurement – November 11, 2006 Promoting Information Exchange in the Microfinance Industry MicrofinanceInformationeXchange, Inc. DRAFT - Updated December 1, 2006

  2. What? For Whom? WHAT Goal: select CORE set of indicators that can be standardized and reported on a wide scale NOT: define ALL the indicators that are useful to measure social performance • Core Indicators (CI) to be integrated to existing initiatives, not to replace them FOR WHOM? For MFIs, donors, investors and the public at large

  3. Why? WHY? Increase funding, improve social performance, mitigate reputation risk for microfinance • Increase awareness on microfinance: integrated into public information platform MIX Market • Improve performance benchmarks on MFIs: integrated into MBB

  4. Basic Facts for Core Indicators • Short list that does not impose a burden too heavy on MFIs: • 10 – 20 to start • Buy-in: • from MFIs: are useful to MFIs themselves (i.e., can be used to improve social performance) > Survey to get MFI feedback • From users of data > included in all data collection initiatives, ratings, etc. Who is ready to endorse?

  5. *Selection Criteria for CI* • Indicators that MFIs can easily report on (ideally, drawing from data already captured by their MIS systems, or can easily be added) • Indicators that MFIs can self-report • Indicators that are objective: can be verified by third parties • Indicators that are globally comparable KEEP IN MIND • Do MFIs report on any of the indicators? • Do the networks/funders that require these indicators have high compliance?

  6. Types of Indicators • Outcome: • MDG type indicators that measure household, enterprise, or individual outcomes • Proxy indicators: • MIS generated indicators, e.g., client retention, FSS, effective interest rates, number of products • Process indictors: • e.g., whether MFI conducts market research, whether MFI discloses effective interest rate, length of group meetings, types of collateral taken, etc. • Corporate social responsibility indicators: • e.g., MFI contributions to community, compliance with environmental standards, pay ratio male to female, percentage of females in management, staff turnover, etc. • THIN approach

  7. Types of Indicators 1. What do we want MFIs to report? 2. What can MFIs report?

  8. Choice of Framework • Option 1: Select initiative that shares same criteria for Core Indicators (i.e., USAID Social Performance Assessment Tool) Or • Option 2: Start with raters’ framework and select indicators that match the criteria for Core Indicators

  9. Pre-select indicators that match criteria Select from 69 indicators, across categories: • CONTEXT: • Organizational Profile • Financial Services and Access • PROCESS: • Social Performance Management • Social Responsibility • RESULTS: Social Goal: Outreach • Social Goal: Appropriate Services • Social Goal: Change – Effects of Impact

  10. Results: 25 core indicators: many already captured: 11 need to be added • Total client households • Percent of rural and urban clients • Effective interest rate on different loan products (EIR) • Whether the MFI has both a written, formal internal CSR policy and a written, formal code of conduct governing actions between employees and between employees and clients • Average time between approval and disbursal of loan • Women and men on board of directors, in management, field staff, and support staff • Percentage of employees that have left during the two most recently completed fiscal years • Percent of clients with the MFI for the past 2 years • Findings of any recent (within past 2 years) impact studies of MFI (along with design details, methodology for, size of sample, method for poverty assessment) • Contribution toward achieving MDGs: change in assets or income • Contribution toward achieving MDGs: percent of school-aged children (girls and boys separately) of clients who attend primary school (compared to children of non-clients)

  11. Seemed to match but were not selected • Percentage of administrative units (equivalent to states) in country with active clients • Percentage of loan clients with non-traditional collateral (e.g., group guarantee, third-person guarantee, movable property, etc.) • Whether the MFI provides clients formal access to management. • Whether the MFI provides health insurance for full-time employees (in addition to national health coverage system). • Client retention rate • Percentage of portfolio growth attributable to existing clients over most recently completed fiscal year • Number and percent of accounts in different loan cycles (or percent of clients by loan cycle or years with MFI) • Operational areas ranked—with distribution of clients across areas • Number of financial services-supported enterprises by number of hired (non-household) employees (0, 1–2, 3–5,6–9, 10–30, < 30)

  12. Process • Step 1: Confirm pre-selection of indicators (today) • Step 2: “TIPS”: • Terms: standardize • Indicators: standardize • Performance Standards: set • Step 3: Populate database/Promote

  13. Process Step 1: Pre-select Indicators • November 11th: • pre-endorsement of indicators and process from Taskforce members • November 22th: • based on today’s feedback from Taskforce, finalize short list (10 to 20 to start) and prepare questionnaire for feedback from MFIs and data users • November 22nd – December 22nd: • from MFIs: will send survey to MFIs, through regional networks, SEEP SPWG, affiliate networks • from users of data: survey to investors and donors

  14. Process Step 2: “TIPS” • January – June 2007: • Final list (including standard definitions) based on feedback and new testing • Formal endorsement from Taskforce members, SEEP SPWG, CGAP, CMEF, regional networks and other industry orgs. • Discussion/selection on Peer Group variables for benchmarking

  15. Process Step 3: Populate Database/ Promote • July + 2007: • Start collecting consistently Common Indicators, through every evaluation/assessment/audit, etc.

  16. In Parallel… Not directly linked to SP Core Indicators, but necessary to market them well and improve on them: • Test Indicators • Analyze indicators/ help contextualize results • Improve/expand indictors • Do more ratings • Etc. This complements the SP Core Indicators project (THIN and FAT both have a place in this process – THIN for moving faster on SP Core Indicators and FAT to improve on them)

  17. *What will be MY role*… …in promoting the Core Indicators • QUESTIONS: • Would you report? • Would you promote? (i.e., would you encourage MFIs to report, even if you are supporting a specific initiative) • Would you review? • Would you help maintain fresh? • Would you help update standards?

  18. Update as of December 1, 2006(DRAFT, work in progress) Step 1: • After reviewing the short list of 25 indicators vs. long list, an updated list of 30 indicators are suggested • Of the 30 indicators, some apply to financial performance as well, and some do not need to be updated on a regular basis (i.e., yes/no questions)

  19. Update on Timeline(as of December 1, 2006)

  20. Update as of December 1, 2006(DRAFT, work in progress) Next Steps for Sub-Committee: • Suggest definitions, as well as guidelines for measuring and interpreting the 30 indicators • Classify indicators in ‘Simple’ and ‘Complicated’ • Brainstorm 2-step approach: 1/ start with simple indicators; 2/ add complicated latter-on • Deadline for comments on indicators extended to year-end to accommodate sub-committee members • Sub-committee to ‘meet’ virtually end of December 2006/beginning of January 2007 to: • Review final list of suggested core indicators • Decide if 2-tiered approach needed (simple/complicated) • Adapt process and timeline as needed

  21. Update of Sub-Committee members(40 as of December 1, 2006) • Reynaldo Marconi - FINRURAL • Patrick Mc Allister/SEEP Consumer Protection Working Group • Mila Mercado - MF Council of the Philippines • Kasia Pawlak, MFC of CEE and NIS • Hansruedi Pfeiffer/ SDC • Rekha Reddy/ Accion-Council of MF Equity Funds • Frank Rubio - Oikocredit • Geert Jan Schuite/ FACET • Tony Sheldon – Bering Associates • Anton Simanowitz/ ImpAct • Frances Sinha/ EDA-MCril • Evelyn Stark - USAID • Katie Torrington/FINCA • Sebastian Von Stauffenberg/ MicroRate • Koenraad Verhagen - Argidius • Peter Wall/ MIX • Reynold Walter - REDCAMIF • Gary Woller – SEEP SPWG • Hanny Maes – HIVOS • Wolday Amha, AEMFI • Frank Bakx Dutch MF Platform • Isabelle Barres/MIX • Marc Berger/ SIDI: • Nigel Biggar/ Grameen Foundation • Allan Bussard/ Integra • Patrick Crompton/ASAP • Bart de Bruyne/TRIAS and European SP working group • Frank DeGiovanni/ Ford Foundation • Henri Dommel/ IFAD • Laura Foose/ ACT • Micol Guarneri/ Microfinanza Rating • Syed Hashemi – CGAP • Anne Hastings - Fonkoze • Masami Hayashi/ MFN • Lauren Hendricks/SEEP Savings-Led Working Group • Emmanuelle Javoy/ Planet Rating • Cecile Lapenu/ Cerise • Teodorina Lessidrenska/GRI • John Ikeda - WOCCU

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