Social & environmental performance for microfinance

1. Social & environmental performance for microfinance

2. 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

3. overview What is social performance management? Social Performance Management: why should we care? Tools to manage social performance Managing environmental, health & safety performance

4. When is a microfinance institution successful?

5. The triple bottom line

6. The triple bottom line Do financial services improve the living living conditions of this client?

7. The triple bottom line Can an MFI play an active role in overfishing and support the long-term continuity of their clients’ business?

8. The triple bottom line Can you help entrepreneurs with improving safety in the business?

9. Social performance? Portfolio quality Client focused microfinance Staff satisfaction Transparency Safe working conditions Ethical collection practices fair pricing Overindebtedness Poverty lending Low interest rates Data privacy Multiple loans Client satisfaction Women empowerment Suggestion box Integrity Financial inclusion Codes of conduct

10. The MFI The entrepreneur & the household Small business The poor? Health, safety & environmental impacts

11. 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?

12. Social performance management Social Performance Management is about: Setting your objectives (what do you want to achieve?) Measuring your results Adapting your products and processes to improve performance

13. Social performance management

14. Social performance management 1. Setting your objectives “What is the mission of your MFI?”

15. 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 • ....

16. Social performance management 2. Measuring results

17. 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

18. Social performance management The experience of SHEPHERD (india)

19. 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

20. Social performance management “What data does your MFI measure & report?”

21. 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

22. SPM: why should we care? a) Publish what you preach!

23. SPM: why should we care? b) Investors and donors are interested in non-financial impact of MFIs 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.

24. SPM: why should we care? Social performance drives financial performance

25. SPM: why should we care? “What benefits would social performance management bring your MFI?”

26. Tools for SPM

27. Tools for SPM Social scorecards: SPI & QAT • SPI reviews: • Policy • Systems • Performance (standard indicators

28. Tools for SPM Social scorecards: SPI & QAT • QAT reviews: • Objectives set • Strategy for meeting objectives • Monitoring systems • Information quality • Information analysis & use

29. 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

30. Tools for SPM

31. 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

32. Tools for SPM PPI: estimates the likelihood that an individual falls below the national poverty line

33. Tools for SPM

34. Tools for SPM 4. Social performance reporting a) GRI guidelines

35. Environmental management Would your MFI support this type of business activity?

36. Environmental management Should you be concerned with your clients health & safety? And what about the waste water?

37. Environmental management Can MFIs reduce harmful pesticide use by their clients?

38. Environmental management What role can MFIs play in supporting renewable (e.g. solar) energy?

39. 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?

40. Environmental management

41. Reports to investors Loanapplicationsheet Managing EHS risks Reporting Application Reportingformats Exclusionlist Factsheets Monitoringspecs Recovery &monitoring Appraisal Contractclauses MISinfo Loanappraisalsheet Contracting & Disbursement Loancontract

42. Environmental management

43. Environmental management

44. 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.

45. Wrap up

46. Thankyou! Alberic Pater a.pater@triodosfacet.nl www.triodosfacet.nl