Social Performance Management introduced to RBAP-MABS National Roundtable Conference

Micol PistelliMicol Pistelli of MIX introduced the concept of social performance to the crowd of rural bankers at the 2010 RBAP-MABS National Roundtable Conference held on 2-3 June.  Social Performance Management (SPM) involves the definition of desired social improvement metrics and measurement of the results against desired performance.

Ms. Pistelli makes a case for the inclusion of social performance as a key measurement for rural banks along with their financial performance measurement.  SPM will bring greater social responsibility to the rural banking sector, provide access to more donors and investors, and improve the industry’s overall transparency.  By the end of 2009, 208 Microfinance Institution’s (MFIs) had reported on social performance indicators to MIX, including five from the Philippines.  She strongly encouraged MABS participating banks to report their social performance indicators to MIX (see the end of this article for reporting details).

Part of MIX’s research agenda is to study the correlation between social performance and financial performance.  We are looking forward to keeping updated on further developments in this area. For more information about Social Performance Management, visit MIX’s website at www.themix.org/standards/social-performance.

Marco BoaMarco Boa of MicroFinanza, a private and independent rating agency specializing in microfinance and rural finance, provided his perspective of Social Performance Management.  Mr. Boa discussed MicroFinanza’s approach to social rating.  Social rating analyzes the objectives, systems and results of the rural bank, before the impact is measured on the clients.  Areas of measurement include tracking and monitoring systems (the SPM system), social responsibility practices, outreach and quality of service.  Social rating provides an outline of strengths and weaknesses of the bank and where to focus the bank’s improvement efforts – this rating is not just a number.  On the other hand, an impact study measures the change in the living conditions of the clients due to the actions of the rural bank.  Mr. Boa stressed the importance of using both of these measurement tools.

Based on the evaluations that his organization performed, Mr. Boa shared some trends that he sees in the microfinance industry:

  • The intentions of the institutions are well reflected in the mission, but key terms of the mission are not always adequately defined (such as poor, rural, etc.)
  • Financial institutions are committed to social responsibility and see it as an integral part of their orientation; however, communicating this with the staff needs to be improved
  • Risk of client over-indebtedness is a critical issue now facing MFIs, including institutions in the Philippines

With the support of the Ford Foundation and in collaboration with another rating agency, Micro-Credit Ratings International Limited, MicroFinanza prepared a publication summarizing the approach and findings of a social rating study.  Click here to access this publication.

James SoukamneuthAs James Soukamneuth of Planet Ratings took us through his views on the history of microfinance, he discussed how the sector has shifted from traditional evaluations (with their focus on merely end results and impact) to assessing the entire process by which impact is created.  Dr. Soukamneuth defined effective social performance as the continual process of translating mission and values into practice.  Furthermore, a successful MFI will focus on decision-making that considers both social and financial outcomes.  A look at the road ahead for social performance in microfinance includes the integration of the assessment of social performance into the regular management systems, an increase in transparency, and the shift from social performance management as a cost center to an opportunity to develop sound and socially viable institutions.

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Ms. Pistelli closed this session by sharing some insights into the 2008 microfinance trends in the Philippines.  Approximately 75% of Philippines rural bank liabilities come from deposits and local fund sources and less than 10% come from international sources.  These two statistics illustrate the self-reliance of the Philippine rural banking sector primarily on deposit mobilization.  Philippine rural banks have significantly larger gross loan portfolios compared to non-government organizations (NGOs).  Their average profit margin is greater while their operating expense ratio is significantly lower than NGOs.

Please submit your social performance indicators to MIX today!  To download the reporting form, click here.  Email your completed form to Eo Masilungan at emasilungan@rbapmabs.org.

Are you measuring social performance in your organization?  What methods are you using to capture this information?  Share your stories and experiences by replying to this post.

Until next time, Mabuhay ang Microfinance!