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How does Social Performance Management (SPM) initiative translate into social returns (benefits and costs of SPM) Irina Ignatieva, Microfinance Advisor, Concern Worldwide www.concern.net. About Concern Worldwide. Non-governmental, international, humanitarian organisation - PowerPoint PPT Presentation
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How does Social How does Social Performance Management Performance Management (SPM) initiative translate (SPM) initiative translate
into social returns into social returns (benefits and costs of (benefits and costs of
SPM)SPM)
Irina Ignatieva, Microfinance Advisor,
Concern Worldwide
www.concern.net
About Concern WorldwideAbout Concern Worldwide
• Non-governmental, international, humanitarian organisation
• Dedicated to reduction of suffering and ultimate elimination of extreme poverty in the world’s poorest countries
• In 2008 worked in 30 countries and reached 10 million people directly
• Long-term development work: health, education, livelihoods, HIV and AIDS programmes
• Responses to emergency situations
• Addressing the root causes of poverty through its advocacy and development education work
Objectives of the PresentationObjectives of the Presentation
Review a case study of AMK, in Cambodia
Discuss Concern Worldwide’s approach to Social Returns and SPM
Where Concern Worldwide is involved Where Concern Worldwide is involved in SPM in microfinancein SPM in microfinance
AMK, Cambodia– a subsidiary of Concern Worldwide in Cambodia; serving the rural poor;
200,000 clients across the country, 85% of clients are women
– Concern Worldwide’s focus at AMK governance level - SPM committee in AMK: overseeing social research and reporting; advisory role to the Board
Africa Microfinance Initiative
– a joint initiative of Concern Worldwide and Agora Microfinance Fund, since 2009
– access to finance for the poorest where the need for access to financial services is the greatest and the supply is the lowest
– green field microfinance operations in Sub-Saharan Africa; initially, Zambia and Malawi
– defining and measuring social returns in Africa Microfinance Initiative with focus on mission, market and social research, setting reporting standards, ensuring SPM is imbedded in the operations
Financial performance Social performance
Goal Financial self-sufficiency: sustainable delivery of viable services
Large number of the poor improve their livelihood options
Means Appropriate products and delivery mechanisms
Appropriate products and delivery and client protection mechanisms
Information source
MIS, accounting system, audit
Market and social research, MIS, HRM, audit
Indicators Operational and financial self-sufficiency, ROE, ROA
Depth of outreach, client satisfaction
Financial and Social Performance in case of Financial and Social Performance in case of AMK, a non-deposit taking MFIAMK, a non-deposit taking MFI
Costs of SPM in case of AMK Costs of SPM in case of AMK as percentage of operating costsas percentage of operating costs
2006 2007 2008
Direct field work (personnel, transport, data cleaning and entry)
1.3% 0.7% 0.9%
Software development 0.3% 0.0% 0.0%
Analysis and report writing 1.3% 0.7% 0.7%
Workshops, meetings, conferences (internal, social performance committee, external)
0.6% 0.4% 0.6%
Social performance committee (SPC) costs 0.8% 0.2% 0.2%
Total research and SPC costs 4.2% 2.0% 2.3%
Staff 3 of 188 4 of 349 5 of 519
Number of clients interviewed 450 of 67,006 375 of 120,111
1,271 of 151,604
AMK’s accomplishmentsAMK’s accomplishments
System for balancing financial and social objectives at management and Board (SPC) levels
Commitment to long-term strategies that incorporate SP + FP when assessing if AMK is achieving its mission
Client-level data and “intelligence” for informing decisions
Know-how/expertise within AMK self-reliance and culture of consultations/discussions
Working towards definition of social returnsWorking towards definition of social returns
Focus on savings – tracking progress from subsistence to growth • Moving from borrowers’ capital limited to the means of
subsistence• Through developing savings habit and providing loans for
productive activities• To savings as capital for investment in productive activities
The indicator should be• Comparable to return on equity (ROE)• Measurable and verifiable• Data available from MIS• Reported on a monthly, quarterly, annual basis
Defining social returns: Defining social returns: savings as a source of capital for the poorsavings as a source of capital for the poor
• Financial returns: capital growth indicator in MFI = ROE
• We suggest social returns: capital growth indicator in client households = the borrowers’ average deposit amount change, viewing savings as clients’ capital
Comparing average deposit amount change and ROE, 56 sustainable MFIs, 2006-2008Comparing average deposit amount change and ROE, 56 sustainable MFIs, 2006-2008
P erc entag e c hang e of averag e depos it amount in 56 s us tainable depos ti-taking MF Is
02468
101214161820
P ercentage change
Number of MF Isin each category
2006
2007
2008
R eturn on E quity in 56 s us tainable depos it-taking MF Is
0
2
4
6
8
10
12
14
16
18
20
R OE
Number of MF Isin each category
2006
2007
2008
Comparing social returns to financial returnsComparing social returns to financial returns
Observation:Observation: MFIs clients’ savings diminished: 2008 in 61% of MFIs;
2007 in 16 % of MFIs; 2006 in 18% of MFIs
while the capital of the MFIs increased
Conclusion:Conclusion: If social returns reflect average savings amount growth
in poor households, social returns in 34 MFIs (61%) were negative in 2008, while the MFIs’ financial returns were positive
Compounded savings change and return on equity in 31 deposit-taking MFIs in LAC
-80%
-50%
-20%
10%
40%
70%
100%
130%
160%
190%
220%
250%
280%
1 31
31 deposit-taking MFIs in LAC
Percentage changeROE 2006-2008
Savings change 2006-2008
Are social and financial returns (savings change and Are social and financial returns (savings change and ROE) correlated? – No. ROE) correlated? – No.
Should they be correlated? – Yes.Should they be correlated? – Yes.
What is the right balance between financial and social What is the right balance between financial and social returns?returns?
A sample of 7 African Deposit-Taking MFIs, 2006-2008A sample of 7 African Deposit-Taking MFIs, 2006-2008 Compounded savings change and return on equity in 7 deposit-taking MFIs in Africa
79%
16%16% 22%6%
30%
121%
356%
43%
-46%
9%
40%
121%
30%
-90%
-60%
-30%
0%
30%
60%
90%
120%
150%
180%
210%
240%
270%
300%
330%
360%
390%
1 2 3 4 5 6 7
7 deposit-taking MFIs
Percentage change
ROE 2006-2008
Savings change 2006-2008
Four scenariosFour scenarios = goal setting= goal setting
Social Returns can be
I. Positive and exceed financial returns
II. Positive and at the same level as financial returns
III. Positive and at a lower level than financial returns
IV. Negative
-20%
-10%
0%
10%
20%
30%
I II III IV
SocialReturns
FinancialReturns
Decisions to be made by the Decisions to be made by the stakeholdersstakeholders
• What is the expected level of financial returns for the social investors?
• Which returns should be maximised – financial or social?
• What is the desired balance between the social and financial returns?
Thank you !Thank you !
Irina Ignatieva