Make or Break: A Conversation between regulators and the ... · mistreatment from institutions. We...

SPTFAnnualMeetingPlenaryNotes,Day2

MexicoCity–June8,2017MakeorBreak:AConversationbetweenregulatorsandtheregulatedModerator:ClaudiaRevillaOstos,ProDesarollo(Mexico)Speakers:• RudyAraujoMedinacelli,ASBA(Mexico)• JorgeTorres,Condusef(Mexico)• JimMadrizLópez,ComisionNacionaldeMicrofinanzas(Nicaragua)• JoseAuadLema,CRECER(Bolivia)

• Claudiasaidlobbyingissomethingyouworkoninthenetworks.It’simportantto

makethemostofthepanelandlearnfromeachother.Regulationshouldnotbeanobstacletothedevelopmentofmicrofinance.

• Jimsaidasregulators,weareopentolearningfromthepracticesofothercollaborators.CONAMIworkstopromotemicrofinanceandisanautonomousentityinthegovernmentofNicaragua.Therolestemsfromthe2008non-paymentmovement.It’sinterestingthatweworktopromoteandregulate.o Weworkwithtwotypesoflegalentities.Today,wehave36regulated

institutions.o Forsome,itismandatorythattheyberegulated.Forothers,itisvoluntary.o Toberegulated,therearetwoconditions:(1)Socialcapitalhastobe

$200,000and(2)Microcredithastobeatleasthalfofitsoperations.Ifyoucomplywithboth,youcanbearegulatedinstitution.Thelawalsorequiresthemtocomplywithconsumerprotection,transparencyandmoneylaunderingprevention.

o ClientscancometoCONAMIiftheyfeeltheydonothaveadequaterecourseviaclientcomplaintmechanisms.

o WhenwestartedworkingwithregulationwehadtothinklikeanMFI.IntheOutcomesWorkingGroupmeetingtheotherday,someonesaid:“Tounderstandsomething,youhavetobeintheotherperson’sshoes.Andnotjustbeintheotherperson’sshoes,butwalkintheotherperson’sshoes.”

o ClientsarethemostimportantelementinanMFI.• Josesaidthatafewyearsago,CRECERanditsinvestorswereconcernedabout

whethertheinstitutionwascomplyingwithmission.Weworkedwithseveralinternationalinitiatives–CERISE,SPTF,SmartCampaign,andPPI–andhavenowbeenintegratingthesetools.o RegulationgaveaqualitativeleapinBolivia.Itemphasizedtheimportanceof

protectingclients.It’sabroaderconceptthanjustsayingregulationwouldprotectthesavingsofthepublic.

o ThesixdimensionsoftheUSSPMareintegratedintodifferentpartsoftheregulation.Corporategovernanceisnowincludedinregulation;beforeitwasnotmandatory.

o Submittingastrategicplanthatincludessocialgoalsisnowmandatory.Before,itwasjustfinancialissues.

o Thelawappliestoeveryone,notjustthosewhoworkformicrofinance.• RudysaidASBAbeenanorganizationfor17years.Itgatherssupervisorsofall

countriesintheAmericas,exceptforCanada.ASBAisnotasupervisoryentity.Ittrains,providesaplatformfordialogue,andfacilitatescooperationamongthemembers.o Conceptofsocialprotectionisaquestionallcorporationshave.They

sometimesprojectasocialprotectionimagewithoutactuallytrulyadvancingasocialmission.

o Twoissueswithsector:§ Thereneedstobegreatertransparency.§ Thereneedstobebettermarketbehavior.Thisrelatestothework

Condusefdoesintermsoffinancialeducation.Themorefinancialeducationclientshave,themoretheyareabletochooseamongproducts.

o Thiscomesfromthetop-down.Inthenewworldweareapproachingwithnewtechnologies,theclienthastobeatthecenter.Theindustryisnotunderstandingthattheclientisthemainasset.Thosethatdonottakecareoftheclientwillnotbeinthemarketlater.

o Theindustryneedstothinkfromthebeginninghowclient-centereditssystemsandregulatoryframeworksare.Financialeducationandclientprotectionareessential.

• Jorgesaidregulationisanopportunitytogrowthemicrofinancesector.o Condusefisadvancedinclientprotection.Wepromotetransparency

measurestoprovideasmuchinformationtotheclientsaspossibletohelpthemmakethebestchoiceforthemselves.ForCondsef,themostimportantthingistodefendtherightofclients.

o Condusefalsoprovidesfinancialeducationtohelpempowerclients.o Mexicorecentlyhadreformindifferentareas,includingfinancialreform.This

givesCondusefmorewaystoregulateandstandardizethefinancialservices.o Reformscreatedacollectionregistry.Thereweremanyclientcomplaintsfor

mistreatmentfrominstitutions.Wearetryingtopromoteuseofcredit,butnotatthecostofhumandignity.

o CondusefcanrequireMFIstoeliminateabusivepractices.Savingsunionshavethemostabuses.Manytimesithasbeenduetolackofknowledgeandnotbecauseofillwill.

o Reformsalsocreatedafinancialinstitutionbureau.Itrequiresawebsitewithinformationonthebehaviorofdifferentfinancialinstitutions:complaintstheinstitutionsreceive,iftheinstitutionshaveabusiveclauses,howlongittakestoresolvecomplaints,andwhatpercentageofcomplaintsareresolvedinthe

favorofclients.Italsoincludesinformationonwhichinstitutionsprovidefinancialeducation.

o Condusefwantstobecomeanarbitratorbetweenthefinancialinstitutionandtheclient.

o Thereformshavebeenhelpfulinimprovingclientprotection.Thesectorhasmanymoreopportunitiesthanchallengesinregulation.

• QuestiontoJim:Shouldregulationbeconductedbottomuportopdown?o Jimsaidbottomup.In2008,Nicaraguahadanon-paymentmovement,the

governmentwasveryconcernedaboutpromotingthemicrofinancesystem.Theydecidedtoregulateinstitutionsbutalsotopromotethem.Withthenon-paymentmovement,manyMFIsmovedawayfromruralarea;nowwiththeSPMmovement,theMFIsaremovingbacktowardreachingthispopulation

o EntireregulationwasstructuredaroundtheUSSPM.o Westillhaveinstitutionsoutsideregulation.Nomatterhowmuchweexplain

tothemaboutregulation,theydonotwanttocomeinvoluntarily.Wearenowreformingmicrofinanceregulationtoremovethevoluntaryaspectsotheycanallcomein.

o Therearesanctionsiftheydonotfollowclientprotection,anditispublishedontheCONAMIwebsite.

• QuestiontoJose:Shouldregulationbebottomuportopdown?o Josesaidtheregulatorhasafundamentalroleinlisteningtoinstitutionsin

creatingtheregulation.Butalso,itshouldhelpinstitutionsleavetheircomfortzones.Forexample,interestrates.Now,50%oftheportfoliomustberegulated.Theprofitabilityofthebanksfell,butmostfinancialinstitutionshaveanROEaround15-18%.

o Now,wehavemorecreditgearedattheproductivesector.Westillhavestrongfinancialinstitutions.Institutionshavebeendriventomaketechnologicalchangestobecomemoreefficient,reviewcoststructures.It’stakenusoutofthecomfortzone.Institutionsarenowfindinganewbalancepoint.Therearenocasualties,butsomearewounded.ThestrongestwillsurviveintheBolivianmarket.

o Institutionsthathaveregulatedrateshavegoneupandpartedfromsmallercredit.Therehavebeenothertypesofinstitutionswhereinthesameperiodoftimehaveincreasedclientbase.It’sbecausewearesmallerfinancialinstitutions,sotheyhaven’tputusinthesamebucket.Theysaidhere’syourlicense,youhavefiveyearstoadjustyourproductivecredit.Thisiswhat’smakingitpossibleforinstitutionslikeourstorefocusonprovidingservicesatthebaseofthepyramid.Justastherearepositiveeffectswhenwearetakenoutfromourcomfortzone,therearealsorisksthestatehastoconsider.

• Rudysaidtherearesomefundamentalelementsofregulation:o Thefirstelementisthecapacitytoregulateandtomonitor.Regulatorsneed

tounderstandtherisksineachsegment,andaltertheirregulationaccordingtosuchrisks.Thisiswheremanyfailbecausetheydonotknowthemarketstructure.Technicalindependenceandsupervisorfreedomisalsoimportant.

o Youneedtounderstandthemarket.Wetalkaboutproportionalityandregulatoryexpectation:youdon’tcomplywithwhatIthinkyoushouldhave.Wehaveaseriesofthesetypesofconcepts,whicharehardtotrulyadapttoregulation.

o Supervisorsshouldbeconcernedaboutaddressingsystemicrisk.Withouttheseissues,wecouldhaveblackmarketsorunregulatedbanking,whichhurtsclients.WedresswellandgotoCancunandsay,“We’reprotectingtheclient.”Noyou’renot.

o Youhavetoallowforreasonablereturn.Youcannotdrownittoomuch.Distortionscanstemfrompoliticsoralackofknowledge.Somethingiswrong.Somewhereinthechaintheyareeatingupallofthebenefits.Inthesecases,weneedtoexpectthatafinancialinstitutionshouldbeefficient,havereasonablereturnsandhaveclearunderstandingoftheclientitisserving.

o I’mnotagainstinternationalstandards.ButwhatIdonotsupportistheinclusionofinternationalstandardsthathavenothingtodowithyourmarket’sstructure.

• Question:HowisCondusefworkingtoincreaseproportionality?Forexample,afinemaybedisproportionaltoamicrofinanceinstitution,comparedwithabigbank.o JorgesaidthattheroleofCondusefisfundamentalintheMexicosystem.We

defendtheclients.Additionally,Condusefhelpsbalancethefinancialsector.Aswepromotefinancialeducationandpersuadepeopleaboutthebenefitofusingcreditresponsibly,userswillbenefitbutalsofinancialinstitutions.Themicrofinancesectorcanbenefitsignificantlyfromregulation.

o Intheend,withthismanychallenges,itcontinuestorepresentagreaterbenefitforfinancialinstitutionsthemselves.

o WehaveasignificantchallengeregulatingMFIsbecauseyouwillneverfindthewordmicrofinanceinregulation.Intermsofregulatorychallenge,thisiskey.Wearealwaystryingtogivethesectorpreferentialtreatment.Wehavemanychallenges.Aswehavegreaterfinancialeducation,peoplewillbeabletousefinancialproductsbetter.Financialinstitutionsarenotrespondingtothis,perhapsbecauseofregulation.

• Rudysaidthathethinksitisdangeroustohavealawforeachsector.Itisbesttohaveageneralregulatoryframeworkandseehowtoapplyittodifferentsectors.

• JimaddedthattherearetwosupervisoryentitiesinNicaragua:onesupervisingbankandanotherentitythatcreatesreforms.SheagreedwithRudy:Wehaveregulationthatisnotaperfectmatchtoeachinstitution.It’ssomethingthatinstitutionsacceptwhentheyadopttheregulation.Wethoughtwithinfiveyears,institutionswouldadoptabout60%oftheregulationsissued.Wenowhave75%acceptance.Thatmeansinstitutionstrusttheregulators.

• Question:Forhardtoreachregions,shouldweexpandthesameregulatoryframework,orshouldwethinkofdifferentregulatorysolutions?o JimsaidNicaragua’slawsaysregulatedinstitutionscanbecertifiedinSPM

andaccessapromotionfund.Youneedtoshowyouaregivinganopportunity

tolow-incomesectorsaswellaspromoteclientprotection.Thefundhelpsthemreachruralsectors.

o Josesaidprovidingfinancialeducationisnottheresponsibilityofthestate.Itistheresponsibilityofthestatetodemandtheprivatesectorprovidesit.Thisisontheshouldersofprivateentities.CRECERisforcedtoopenonebankperyearwherethereisnobank.Thisisbringingusoutofthecomfortzone.Intelligentsubsidiesneedtobegivenbytheprivateentities.

o Rudysaidoneofthegreatestproblemswehaveisthehyperurbanizationofourservices.Wehavefocusedonurbanareas.Howdowereachthefield?

o JorgesaidMexicohasachallengeaheadintermsofdifferentiatingregulations.Theprofitsarenotthesameinmicrofinanceatall.Someinstitutionsarebarelysurviving.Theyarenotanenterprise.Weneedtopromotehealthydevelopmentbecausetheyarefightinginunhealthyconditions.

o RudysaidhethinkstheratesaretoohighinMexico.ForeignbanksdonothavetojustifytheirbottomlinewiththepovertyratesinMexico.Butweneedtotalkmoreopenly.Ratesaretoohigh.Thereisalottodo.

• ClaudiaclosedthepanelbynotingtheimportanceofSPMinregulation.Regulatorsneedtounderstandregulation.Thereismuchworktodogoingforward.

ResponsiblePricing:AreWeGettingClose?Moderator:AndreaDomínguez,Oikocredit(Uruguay/Holland)Speakers:• BlancaAldasoro,FundaciónAlemanaServicios(Mexico)• MaríaSilviaAbalo,RADIM(Argentina)• AnnaKanze,GrassrootsCapital(USA)• ClaudiaRojas,TripleJump(Mexico)

• Blancasaidherorganizationisabouttopublishastudytobetterunderstandthe

pricingstructureandstarttodecreaseinterestratesatfasterspeed.o Thestudyexamineseachcomponentintheinterestratetobetterunderstand

theirtrends.o Thestudywillmakeproposalswiththeaimofbetterhelpingtheenduser.o Whenwelowertherate,weneedtocontinuereachingthepoorestandmake

surethetransactioncostsarenotincreased.o Studyco-fundedbyIFC,TripleJump,PRONAFIM

• ClaudiasaidTripleJump(TJ)hasseveralfundsfocusedonsocial:women,ruralareas,greenproducts.Otherfundsareformorematureinstitutionstohelpthembeabletogeneratemoreemployment.o Generallyspeaking,thesocialissueiskeyforTJ.Wegivefinancialandsocial

equalrelevance.Weaskmoreandmorequestionsaboutsocialastimegoes

by.Welookatwages.Wehaveatoolthatlooksatinterestrates.Partoftheduediligenceistoaskthemeverythingaboutsocial,aswellasinterestrate.

o WeusetheAPR.InMexico,italsoincludesmandatorysavings,feesandtaxes.Wecalculateallofthis.Wecomparetheinterestrateofpeersandlookatprofitability.Ifaredflagistriggered,wethenlookatotheraspects.

o Thisisnottosaythathighinterestrateswouldinstantlymakeuspullout.Butifitishigh,thenwelookatwhat’sgoingon:Isthemarketdifficult?Highinflation?Highoperatingcostsandwages?Alotofruralareas,makingitexpensivetodooutreach?Wealsolookatprofitsandtrytounderstandiftheyhaveworkedhardtolowertheinterestrateintime.Ifnot,whyisn’ttheprofitbeingpassedon?Perhapsithascapitalizationlevelstheyhavetocomplywith,maybethere’spoliticaluncertainty.Therearemanydifferentvariables.Weaskalotofquestions.

o Thistoolhasbeeninplaceforsevenyears.Weapplyitinallcountriesandinallourassessments.Weareasocialinvestor.Theendclientisthemostimportantthing.

• AnnasaidGrassrootsmanagessocialcapital.o Itprovidestrainingstosharegoodpractices.o Itmakeslonger-terminvestments.Weareactiveshareholders,andweare

alsoontheboardofdirectors.Weconsidermanyfactors,buttheinterestrateisapointwherewecanstartmanyconversations.Ourinvestmentshaveasocialandfinancialaspect.Weneedtobalancethat.It’snotthattheinstitutionhastochargeacertainrateorhaveacertainperformance.

• MariacomesfromRADIM,anArgentiniannetworkofmicrofinanceinstitutions.From2002-2016,therewasacrisisinArgentinaandmanypeoplefellbelowthepovertyline.Thereweresocialinvestorsthathelpedtostartthemicrofinancesector.Wehaveverysmallinstitutionsuptobanks,whichhaveverydifferentinterests.Creditsrangefrom$200to$3,000.Wehaveratesthatareveryhigh.

• QuestiontoBlanca:ExplainthedeterminingfactorsforinterestratesinMexico.Whathavebeenthemainobstaclesinreducingtheinterestrates?o Blancasaidwhenwedisaggregateinterestratefactors(funding,operation,

profitandprovisions),operationalcostsarethehighestandhumanresourcesisthehighestpartofthat.70%ofoperationalcostsarestaffcosts.Threethingsarehappeningwithstaffcosts:

§ Weneedtobeabletoanalyzestaffcostmorein-depth§ ProductivityofstaffinMexico.AveragestaffproductivityinLatin

Americais130clientsto1staffmember,whileinMexicoitis96clientsto1staffmember.Weareunderneaththeaverageoftheregion.

§ StaffturnoverinLatinAmericais22%.InMexico,itismorethan50%.In2008,itwas30%andithasbeenincreasingrapidlyinrecentyears.Thiscreatescostsfortrainingnewstaff,aswellashigherriskinthecreditportfolio.

o InMexico,wehavelowaveragecredit($432)comparedtotherestoftheregion.Thisistheresultofgroupmethodology,whichmakesup86%of

Mexicomicrofinance.Mexicohasbeencharacterizedbyhavingcoverageinhighlymarginalizedareas.Thisisnoblework.Now,wehavetohavebetterconditionsforthem.It’sthepoorestpeoplethatarepayingthehighestrates.

§ Weneedoperationalscalabilitytohelplowerinterestrates.§ Weneedtoincreaseclientbasewithoutharmingthecurrentclient

base.§ Weneedstrategiesforindividualcredit.Grouploansareverygoodbut

theyputacaponthecreditvaluethatcanbegranted.§ Also,competitionisimportant.Mexicohasahighlevelofconcentration

(implyingalowlevelofcompetition).Whencompetitionincreases,theinterestratelower.Marketincentiveswork.

§ Weneedtomakeinstitutionsmoreefficientandworktostrengthentheirmethodologies.Thereneedtobeincentivesandcompetition,andthentherewillbemotivationfordecreasinginterestrates.

• QuestiontoBlanca:Hasthisstudyexaminedthedifferencesinsalaryscalesbetweenemployeesandexecutives?Whywouldtherebesuchhighturnoverifsalariesaresohigh?o Blancasaidshecompletelyagrees.Wehavedisaggregatedinformationto

checkthesalarystructure,butthereisneedtocheckthedifferentlevelsofsalaries.

o Regardingturnover,somesaidloanofficersarepoorlypaid.Otherssaytheyarewellpaid,butthechallengesbeinginthefieldwithgroupmethodologyleadtohighturnover.

• QuestiontoClaudia:WhathasTripleJumpdonetolowerinterestrates?o ClaudiasaidTJhasbeeninMexicoformorethan10years.Wehavehad

influenceinvariousways:§ Wehavemadecapitalinvestmentsinthecountry.Wewantedto

influenceMFIsfirsthandtodiversifytheproducts,andwediditthroughcapital.

§ Wealsoinfluencethroughdebt.Wehad10institutionsinthepast,butnowonlyhave2.Ithasbeendifficulttojustifyhighinterestratestoourinvestors.

§ Wehavedevelopedatoolthatlooksatdifferentaspects,includinginterestrates.WeusetheStoplighttoolwedeveloped.

§ TJalsohasaspecificguideinMexico.Wehavealimitof100%.Anythingabove100%isautomaticallyano-go.Then,wealsolookatgovernanceissues.

§ InMexico,it’sverycommontohaveinstitutionswhosefoundersareontheboardandarealsofinancialmanagers.Wewanttoknowifthereareexternalmembersontheboard,iftheyhaveauditedfinancialstatements,etc.

§ Wealsolookatgeographicproductconcentration,andwecelebrateinstitutionsthatwanttogointonewareas.

§ Welookathowinstitutionsaredoingcreditassessmenttopreventover-indebtedness.Wehavethesestandards,andwehavehadtodropinvestmentsbecauseofit.

§ TJusespartofitsrevenuetoprovidetechnicalassistancethroughconsultants.Wehavesupportedinstitutionstostrengthenthemselveswithmarketstudies,developindividualproducts.

§ Mexicoismorecomplexthanothercountries.Governanceandinterestratesaredifficulthere.Therewasonethattriedtoremovemandatorysavings,thinkingthatwouldresultinmoreclientsandabetterimpactbyreducingtheAPR.Intheend,theirriskportfolioincreased.

§ Itisveryexpensivetoworkwithindividualcredit,andthereisnomotivationtodoit.

§ OtherinternationalfundersarenotasstringentasTJ,andinstitutionswillgotheretogetfunding.

o QuestiontoClaudia:Howdoyouconvinceexecutivestoworkoncorporategovernance?

§ Claudiasaidweareobviouslynotgoingtobeabletochangetheshareholderstructure.Butmoreandmoreinstitutionsaretryingtoaudittheirfinancialstatements.Thosewhowanttomoveforwardandshowtheyarewillingtohavebettercorporategovernance,theyarewillingtoworkonthesethings.

o QuestiontoMaria:WhyhasArgentinanotbeenabletoreduceinterestrates?§ Mariasaidthemainissueisfundingcosts.Wearetalkingaboutrates

similartoMexicowithhigherinflation(almost40%in2016).Argentinabecameisolatedfrominternationalmarketsbecauseitwasnotabletopayitsdebts.

§ Wewerealsoisolatedfromlocalfunding.Argentinacouldnotdealwithinflation,whichaffectedsavings.Becausetherewerenosavings,localcreditwasscared.Becauseofthat,ArgentinianbankswerenotlendingtoMFIssoMFIswereleftwiththeirownequity;howevertheyhadverylittleseedcapital.Theissuehasbeenhowtosurvivewithalackoffunding.

§ MFIsstayedwiththeirexistingclientsbecauseitwaslessriskythangoingtoothers.Now,MFIsarestartingtoexpandtonewclients.

§ Currently,withaportfolioofUSD$100million,wereach100,000people.Analternativetofinancingformicroentrepreneurswasthefinancingby“sharks”offeringratesof1,500%.

§ Severalfactorsinfluencethehighvalueofrates:30%comesfromthefundingofpublicbanks(pricepaidbytheMFI);40%fromwagecosts.

§ Inflationwasalmost40%in2016andnowestimatedat25%.§ InternationalfundersarecomingbacktoArgentina.Theproblemis

thereare2-3institutionsthatareincontrolofthemarket.Now,wearereachinganagreementwithBelgianfundersthatiftheyfundlarger

ones,theyhavetofund1-2smallerones.Tolowercompetition,theremustbegreateraccesstocapital.

§ LaborcostsinArgentinaareveryexpensive.It’s40outofthe100pointsthatmakeupaninterestrate.It’sahighlyunionizedcountry.

§ InArgentina,theMFIswhoaremakingmoneyaremakingverylittle.Publicinstitutionshavesomebenefits,butprivateinstitutionsdonot.They’renotmakingmoney.Nobodyiscomingtoofferanythingnew,whichwouldlowerinterestrates.MFIsneedtobecarefultosurvive.

o QuestiontoAnna:Howdooperations’debtandcapitalaffecttheinterestrate?Thefundingcomponentisanimportantpartoftheinterestrate.

§ Annasaidresponsiblepricingissubjective,butwehavetoreachthepoorandprovidethemresponsiblefinance.Wedonotwanttomakethemgointomoredebt.

§ Itisdifficultwithoutexploringallaspects,suchasdebt,profitability,investors,shareholders,aswellastheservicestheinstitutionisproviding.

§ Groupmethodologyisexpensive,butthereareothercountriesthathavegroupmethodologieswithouthavingsuchhighinterestrates.

§ Weneedtolookatwhatclientsvalue.IstheinterestratehighbecausetheMFIoffersnon-financialservices?Ifso,doestheclientvaluethat?Ifnot,itmightnotbeworththeinterestrate.

• ClaudiasaidTripleJumpbelievesthemostimportantthingtounderstandisifaninstitutionistrulybenefittingtheclient.Wedonotwantinterestratecapsbecausethenyoumayexcludesomeclientsfromthemarket.

• Question:Haveyouanalyzedtherelationshipbetweenpricesandtheimprovementofqualityoflifeofthecustomers?o MariasaidthatalthoughArgentinadoesdonothaveaformalstudy,50%of

thepopulationdoesnothaveaccesstocredit.Itisdifficulttogrowwithoutaccesstocredit.Insuchpoorcommunitieswheretherearenoopportunities,whensuddenlytheyaregiventheopportunitytohaveaccesstoamachineforexample,thatisdevelopment.Withoutfunding,thereisnoimprovement.Therehasbeennomeasurementofimpact,butitwouldbegoodtoadvanceinmoreformalmeasures.

• QuestiontoBlancaandMaria:Whathasbeentheroleofgovernmentinpricing?o Blanca:InMexico,thegovernmenthasbeenapromoteroffinancial

inclusion.Thegovernmentwantstoextendfinancialservices,andtheregulationhasbeentryingtoprotecttheenduser.Additionally,ithasbeendevelopingprogramsfortechnicalassistance.Therehasn’tbeenagovernmentinterventiononpricing.

o Maria:Withasmallerentity,regulationbringsacost.Manydonotwanttohavesavingsbecausethereisacostassociatedwiththat.Publicbankinghasratesabout60-70%.Thisissetsothattheyarenotseennegativelybypublic.However,weputaninterestratelevelthatwentbelowinflationwhichisnotsustainablefortheinstitutions.Thegovernmentrecognizesthis

andisconductingaratestudy.Theimportantthingisfororganizationstobesustainable,toseektoreduceinterestrates,andtomaintainastrongfocusonthebalancebetweenfinancialandsocialperformance.

• Questiontogroup:Whathasbeenthemainprogressinrecentyears,andwhatarethechallengesgoingforward?o Blanca:In2000,theratewas120%.Nowit’s75%.Therehasalsobeen

progresswithprofessionalizationofMFIs.Thechallengeaheadistoreduceoperationalcostsandincreasescalabilitytoincreaseclientbase.Wealsoneedtoimplementproductsthatarebetteradaptedtotheneedsofclients.

o Claudia:Thebigchallengeaheadisthatregulationwillbeestablishedfromthebottomup.Thereneedstobefinancialeducation.Endusersdon’treallyhavethetoolstomakethosedecisions.

o Anna:It’simportanttocontinueanalyzingpricingdataandusethattoadjustproductsandservices.

o Maria:Weareonagoodpath.Giventhemacroeconomicsituation,therehasbeenadecreaseininflationrates.TheprobleminArgentinaisthevolume.

MeasuringandusingclientoutcomesdataModerator:AmeliaGreenberg,SPTF(USA)Speakers:• MónicaVelasco,IDEPRO(Bolivia)• VerónicaRoblesMoreno,FondoEsperanza(Chile)

• Ameliastartedwithdefinitionsaboutoutcomes:o Inputs,activitiesandoutputsaremeasuresofimplementation.They

referencewhatanFSPisdoing.Examples:§ Inputs:software,hardware§ Activities:processes§ Outputs:productsandservices(howmanyclientsdidyoutrain,etc.?

o Outcomesrefertochangesattheclientlevel.ChangeforclientsthatisplausiblyassociatedwiththeservicesoftheFSP.Doesnottalkabouthowmuchchangewascaused,butitlooksatchangethatisreasonabletoassumewasinfluencedbytheFSP.

o Impactistheamountofchangethatcanbedirectlyattributedtoanattributedtoanintervention.Impactwouldtellyouwhatpercentageofthechangewasattributedtoanintervention.

• Ameliasaiditiscomplextomeasureimpact.It’scomplicatedandsometimesimpossibletocollectdataonallthevariablesthatmakeupimpact.However,outcomescanbestudied,andeveryFSPshouldbecollectingoutcomesdata.

• ResourcesfromSPTF’sOutcomesWorkingGroup:https://sptf.info/working-groups/outcomes

o Webinars(recordings,PPTsavailableonline)tofacilitatepeerlearningonmanagingoutcomes.

o Harmonizedlistofindicatorsforbusiness,poverty,healthandinsurance.Thegroupisalsoworkingonotherareas.

o HavebegunpilottestingtheindicatorsinPeruandIndiao Publications:

§ MakingtheCasetoFSPsforOutcomesManagement§ GuidelinesforFSPsonOutcomesManagement.It’sabouthavinga

theoryofchange,collectingthedata,verifythequalityofdata.Whatisittellingyouandhowdoesthatchangehowyouoperate?

§ Guidelinesforinvestorsonoutcomesmanagement§ KOMIDA(Indonesia)CaseStudy

• QuestiontoVerónica:Whenandwhydidyourinstitutionstarttomeasureoutcomes?o Verónica:Weneedtoknowifwe’remeetingourmission.Weneedtobea

results-basedinstitutionsowecanhaveanimpactonpublicpolicy.Howcanwehaveanimpactwithoutdata?

o Itwasalongroadtogetstarted.Westartedin2006withastudy.Twoyearslater,wecarriedoutanotherstudythatwasnotisolated.In2012,weworkedonourownSPMsysteminanautonomousway.Forthefirsttime,wecarriedoutmeasurement.Inaddition,aspartoftheBBVAgroup,wearepartofanannualmeasurement.Thelongtimelinewasnotbecauseitwasdifficult.It’sbecausewehadtoconvincepeoplewhyweshoulddothis.

• Ameliahighlightedthatyoucannotknowifyouareaccountabletostakeholderswithoutmeasuringit.

• FondoEsperanzahaschosenfourareastofocuson:businessdevelopment,familywell-being,empowermentandsocialcapitalo Verónicasaidtheychosetheseareasforvariousreasons.Weknowthatthe

familyrelationshipiscrucialtoemployment.Weneedtoknowwhat’sgoingonthat.Weworkwith80%women,andweknowthatempowermentisfundamentaltocomeoutofpoverty.Finally,weknowsocialcapitalisasimportantasfinancialcapital.§ IndicatorsforBusinessdevelopment:businessskills,businessgrowth,

businesssurplus§ Indicatorsforfamilywell-being:per-capitaincome,socialsecurity§ Indicatorsforempowerment.Thesearequestionsdealingwithself-

perceptionwhereweaskabouttheirself-esteem,control,decision-makingpower,andleadership.

§ Indicatorsforsocialcapital:HowmuchdoItrustmyneighbors?Whataretheinstitutionalnetworks?

o Wehaveascorecard.Onethingistomeasuresocialoutcomestodisseminateinformationtoinstitutions.Onamonthlybasis,wecollectthisinformationandgenerateareport.Wealsodoacomparisonofwhenthey

cameintotheinstitutionandthenayearandahalflater.Wemeasureatthefirstandthefifthloancycle.Reportsgotoofficesandbranchesofeachteam.Theyalsogotoboardofdirectors.

o Wealsohaveaqualityareathataccompaniestheprocessoffillingoutthecardthatprovidesfeedbacktoofficerstoseehowthey’redoing.Wealsohaveareviewafterthefactsoweknowifinformationisbeingproperlycollected.AsaMFI,wereviewdataonaquarterlybasiswithBoardofDirectorsandcomparehowwe’reworkingcomparedtootherinstitutions.

• QuestiontoMónica:Whatdidyoulearnfromyourevaluation,andhowdidyoudevelopyourproductinresponsetothat?o Mónica:In2003and2004,wehadanevaluation,andwedidsomeinternal

reflectionontheresults.Itgaveusmicrocreditandbusinessdevelopmentdatathatwerenotinagreementwithourexpectations.Therewasimpact,butitwasnotsustainable.Therewerenosustainablechangesinbusinesses.

o Wedesignedaproductwestillhavetodaythatwassuccessfulinbringingchangetoclients’businesses.Weprovidetechnicalassistancetoproductivesectors.Thereareproductivesectorsthataresignificanttotheeconomicsuccessoftheregion;that’showweselectedthesectorsfortheproduct.Thishasgivenusroomforsomereflection.

o Thishasbeenabigeffort:thedesignofcommerciallinkageservicesforproductivechange.

o Tosupportthisdecisionandthisstronginvestment,wedecidedtoincludearesultsevaluationsystemthatwestartmeasuringtheinitialmomentaclientappliesforcredit.Allofthosethatgiveoutloansdothistypeofassessment.Thisfinancialassessmentforusisthebaseline.Wemeasureagainafterthefirstyear,orwhenthefirstcredithasbeenpaid,tocompare.Thisinformationisanalyzedbytechnicalstaffatheadquarters.

o Theindicatorsweuse:income,profits,equity,andemployment.o Theseindicatorscomedirectlyfromthefinancialassessmentand

repaymentcapacityoftheclient.o Manyofushaveawealthofdatabutwearenotmakinguseofit.o Informationcomesineveryday,butweanalyzeiteverysixmonths.

• Mónica:Outcomesmanagementisaninvestment.Itallowsustoevaluatehowweareperformingagainstourmission.Thisshifthasvalidatedthemission.Ithasalsosparkedareviewoftheproductsweareproviding.o It’saninvestmenttotheextentthatitallowsustoanalyzewhichsegments

itmakessensetokeepprovidingservices.Wehavestrengthenedourparticipationinothersectors.

o Fromanoperationalpointofview,itisalsoaninvestment. o Ithasbeenastrugglewithintheinstitutiontomaketheinvestment.o Itgivesyouanideaofwheretomakesignificantchanges.Itcanbeproven

thatthroughoutcomesevaluation,wearedecreasingthedelinquencyrates.

• Verónicaaddedthatwegivealettertoclientswiththeiroutcomes.Theyareabletoseetheresults.o Dependingontheresults,positiveornegative,werecommendtheymake

certaincommitments.o Wehaverealizedtherearecertainvariablesthathaven’tchangedasmuch

aswewantedthemto.Weneedtoimproveoureducation.o Wealsobringthisdatatohelpinformpublicpolicydiscussions.

• Mónica:Themostspecificexampleofoutcomesmanagementisaboutthecommercialstrategyandwhicheconomicsectorsweshouldfocuson.Throughouroutcomesevaluation,werealizedwewerenothavingthedesiredoutcomes.Ifwewerenotgettingresults,thecreditriskwassohighthatitwasn’tworthwhile.Westoppedprovidingservicestotwosectorsafterevaluation.Wealsoconductedanalysisofthelifecycleofourproducts,andwerealizedtherewereTAservicesthathadamorepositiveimpactthanothers.