Responsible Finance: Is there a need to certify accomplishments of social goals?

K Paul ThomasManaging Director

Aiming at holistic development of the poor1.Microcredit (Microfinance)2.Sustainable Health Care3.Livlihood Support Programs4.Dairy Development5.Community Development Programs

6. Water and Sanitation programs7. Educational programs for children and youth.8. Environment and Natural Resources Management

1. Kerala

2. Chhattisgarh

3. Maharashtra

4. Tamil Nadu

5. Madhya Pradesh

6. Jharkhand

7. Karnataka

8. Delhi

9. Gujarat

ESAF – Targeting the poor in 9 states

ESAF-Reaching more than 4,50,000 low income families.

1992- ESAF was registered as a charitable society.

2008- The microcredit activities of ESAF was

transferred to ESAF MICROFINANCE AND

INVESTMENTS Pvt. Ltd which has the status

of an MFI.

Business Highlights: Sept.2011

• Branches 148

• Total Members 420700

• Total Borrowers 291189

• Current portfolio (in millions) 1820.43 Rs.

Outreach to the Unreached

Initiatives taken .........

►SPM strategy workshops on setting social performance goals

►Training to all the branch staff on SPM strategy implementation

► PPI (Grameen tool ) collected from over 100 branches .

► A dedicated staff in Head Office to provide PPI support to the branches.

ESAF Received the PPI ‘CERTIFICATE OF COMPLETION’-BASIC AND ADVANCED’

Research and Development Department

Oversees Social Performance

Activities undertaken by R and D department:

►Market survey before product development.

► Study to understand the over- indebtedness of clients

► Productivity Analysis of selected branches

► Client satisfaction survey

► Drop- out studies (Random basis)

► Staff satisfaction Studies.

► Social Audit using CERISE tool

Activities.............

► Regular reporting of social data to external stakeholders

► Impact assessment of the EMFIL operations-Productivity study.

► Developing case studies, papers on EMFIL’s SPM and presenting it at different platforms.

► Policies in place to protect clients

SMART CAMAPIGN:

All the 6 client protection principles are translated into vernacular languages and displayed across the branches.

What is required to put SPM in place?ESAF’s experience

1.Commitment from the management to fix social targets

2.Trained professionals to design tools and monitor implementation

3. Trained staff to implement strategies

4.Incentives to staff for faithful implementation of SPM strategies.

Certification to achieve Social Goals: Advantages

Increased responsibility to maintain the standards of certification.

Increased credibility and recognition of SPM initiatives globally.

Increased commitment of the management and staff to set new social targets and to find ways to meet them.

Some concerns..........

•No specific recognition by the banks and donors on SPM initiatives.

•No additional benefits like reduced interest rate.

•No financial support to meet the additional cost of training and putting SPM systems in place.

• Striking a balance in terms of setting financial targets vis a vis social one is quite challenging.

In Conclusion..........

1.Certification should ensure certain advantages like reduced interest rate to the MFIs. Banks and investors should have a stake in the certification process.

2.Cost of certification should be minimal.

3.Upon the certification, the certifying agency may mentor the MFI for a period of time with regard to adherence to the standards.

Certification should be a tool to reaffirm a client’s faith on the MFI.

THANK YOU !