Measuring Impact of Microfinance Institutions. Presented to: 5 th AFRACA Microfinance Forum

1. Measuring Impact of Microfinance Institutions. Presented to: 5th AFRACA Microfinance Forum 2nd to 4th July 08, Cotonou, Benin by David T. Baguma, ED AMFIU

2. PRESENTATION OUTLINE • Introduction • What is SP and SPM? • Objectives of Measuring Impact • Why Measure SP/Impact? • Key Stakeholder expectations • Benefits of Measuring Impact • AMFIU’s SPM approach • Way forward • Conclusion

3. 1. Introduction – Where it began • Donor funded Projects, NGOs • Institutionalisation and Commercialisation • Transformation, Private Capital • Bottom Lines • Social Relevancy to Clients • Sustainability and Profit Seeking • Community Social Responsibility (CSR

4. A Pro-Poor Financial System for Uganda IG Assets for the very poor, Marginalised Vulnerable Groups Grants Skill training, Business Culture, Remittances Microfinance Entrepreneurial Poor Savings, Insurance Short-term loans, Money Transfers, skill training SME-Finance Small & medium scale enterprises Overdrafts, term loans, Leasing, Risk Capital Rural Finance Farmers and related rural enterprises Savings, Insurance (e. g. Price Buffering), Crop & Term loan, Warehouse Receipts, Contract Farming Introduction [cont’d]: Approach to Pro-Poor

5. 2.What it SP and SPM?

6. 3. Objectives for Social Performance measurement • Appropriate targeting • Development of need responsive Financial products and services • Effectively transform the livelihoods of poorer communities • Improve social responsibilities to communities served

7. Support the achievement of MFI’s Social Mission Understand and systematically assess the client’s needs and develop appropriate products and services Improve effectiveness and efficiency of operations Have documented evidence of managing process towards achieving impact 4. Why Manage Social Performance

8. 5. Key Stakeholder expectation • Government • Increased Outreach for the poor, esp. rural areas • Reduced Prices for Microfinance Services • Members of Parliament • Soundness of Institutions • Control Interest Rates to Curb Exploitation • Check Unethical Conduct • Presence in their constituencies • Develop consensus with all players on policy dialogue • Networking within the Micro Finance industry

9. 5. Key Stakeholder expectation [cont’d] • Donors • Outreach to the Poor • Mainstreaming Microfinance • Self Sustaining • Strong, Viable Institutions • Clients • Reduction of prices of microfinance products • Diversified ranges of products • Serve More clients – outreach • Develop consensus with all players on policy dialogue • Networking within the Micro Finance industry

10. 5. Key Stakeholder expectation [cont’d] • Transformed Institutions • Intermediation of Savings • Corporate Image • Strong Legal Status, sue and recover • Diversification of Services • Be part of the Mainstream Financial Sector • Develop consensus with all players on policy dialogue • Networking within the Micro Finance industry

11. 6. Approaches to Social impact measurement • Social Audit (Internal processes, Inputs) – Assumes impact/Outcome but does not give specifics • Higher Level Approaches (Special Surveys scoring on Impact/Outcome Indicators) – Difficulty of Attribution, Complexity, High Costs • Active Agencies (CGAP, SEEP, IMP-ACT, USAID, AMFIU) • Develop consensus with all players on policy dialogue • Networking within the Micro Finance industry

12. 7. Benefits of Social impact measurement • More appropriate products and services • Better service systems for clients • Higher client retention • Program growth • Lower Operational Costs (if done internally) • Demonstrate social performance to stakeholders • Develop consensus with all players on policy dialogue • Networking within the Micro Finance industry

13. 8. AMFIU’s SPM Tool • Social Audit Tool for Internal Processes • 20 Indicators from Key Areas: mission and social objectives, social responsibility to clients, social responsibility to staff, social responsibility to the community • 4 point score system reflecting compliance, level of effort, and achievements as perceived by the social auditor; • Gaps identifies form the basis for the score given. • Social Performance Score Card • Adaptation of USAID MFI SPM TOOL (Rating scale of from AAA to a D for scalability.

14. 8. AMFIU’s SPM Tool [cont’d] • Social Performance on Output Indicators • 10 Indicators in measurable key result areas (staffing, client satisfaction, industry benchmarking, social products and services access, business skills development initiatives undertaken and impact on practices/knowledge; • Social Audit Review and Action Planning • Action Planning to Address Weaknesses

15. 8. AMFIU’s SPM Tool [cont’d] • Making Use of Social Audit Findings (Strategic Level) • Consensus and Commitment at Board and Management • Developing a Strategic Framework; • Internal Processes and commit resources • Making Use of Social Audit Findings (Operational Level) • Social Performance Management Protocol; • Designation of a Team; • Org. Structure and Reporting; • Allocation of Budgets; • M&E

16. 9. Way Forward • Start /Roll Out (Sensitization, Feedback); • Core Team of Social Auditors; • Self Assessments (training of institutions to undertake own social audits) • Funding Issues (Who pays for the social audits?)

17. 10. Conclusion • We never started MF to be swallowed up by other approaches • MF is work for people with big hearts • There is nothing more gratifying to see socio/ economic transformation of poor people – therefore we need to keep track of this transformation and demonstrate it to those bent in criticizing the honorable work of MF services.

18. Thank You very much for your attention I am looking forward to answering any questions. My contacts: David T. Baguma, dbaguma@amfiu.org.ug Tel. (256-41) 259176 Fax (256-41) 254420