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Pursuing Financial and Social Goals:

Pursuing Financial and Social Goals:. Initial findings on trade-offs and synergies. Adrian Gonzalez, MIX – SPTF Meetings, Bern, June 30 th 2009. Expected trade-offs and synergies. Regression Analysis for each FP

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Pursuing Financial and Social Goals:

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  1. Pursuing Financial and Social Goals: Initial findings on trade-offs and synergies. Adrian Gonzalez, MIX – SPTF Meetings, Bern, June 30th 2009

  2. Expected trade-offs and synergies • Regression Analysis for each FP • Controls: age, loan size as % of GNIPC, MFI size, deposit mobilization, lending methodology, % urban borrowers.

  3. Summary of Actual Results

  4. Takeaways: • Several expected trade-offs and synergies between SP and FP can be confirmed: • Efficiency trade-offs for targeting the poorest, SP training and social responsibility (SR) to staff • Productivity synergies for SP training and SR to staff • Productivity and efficiency synergies for client retention • Investments in human capital (SP training and SR) go hand-in-hand with higher staff productivity and better portfolio quality, but lower efficiency • SP training and HR policies have stronger synergies and weaker tradeoffs with FP • Serving the poor/very poor comes at a cost in terms of efficiency, but not of risk or productivity • even after considering differences in loan sizes

  5. Implications • For MFIs • Improving client retention improves financial performance • Process discipline and staff support pay off • For funders • You cannot ignore MFI investments in staff training, incentives and human resource policies, whether you are socially or financially driven • For critics of high interest rates/high costs • Exclusive targeting of very poor/poor borrowers increases the average cost of loans to the borrowers • For SPTF / Researchers • Need to control for SP-factors known to influence FP, in order to better understand differences in FP • Need to refine questions that have ambiguous attribution • (e.g. SP training versus general training effects)

  6. Productivity:Borrowers per Staff Human resource policies: clear salary scale based upon market salaries, medical insurance for all staff, pension contribution, practices and procedures which ensure safety of the staff, equal pay for men and women with equivalent skill levels, staff participation in decisions that affect them, anti discrimination policies, and anti harassment policy

  7. Portfolio quality:Portfolio at Risk over 30 Days as % of Loan Portfolio Policies safeguarding data: written policy and procedures regarding treatment of client personal data in place, internal audit reviews security of locations and electronic systems where client data is stored, the IT system is secure and password protected, staff explains to clients how their data will be used, client consents is require prior to sharing data outside the institution, client say review and correct their information, clients are instructed on how to safeguard access codes and PIN numbers.

  8. Efficiency:Operating Expense % Loan Portfolio 1/ Similar effect for “loan officer incentives related with SP”.

  9. Efficiency:Cost per Borrower % GNIPC

  10. Additional Resources: • “Microfinance Synergies and Trade-offs” (2010), MIX data Brief No. 6, forthcoming. • http://www.themix.org/publications/search/results/taxonomy%3A17 • agonzalez@themix.org for preliminary draft. • http://www.spblog.org/ • For updated on research and preliminary results • “MIX Research Agenda: Linkages between Social Performance and Financial Performance” • http://www.spblog.org/2010/03/mix-research-agenda-linkages-between-social-performance-and-financial-performance.html

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