Social Performance for Credit Unions

Day 1

Isabelle Kidney

Bless Darkey

CuTRAC, Kasoa, Ghana

Session 1

Advisor Introduction • Name

• Occupation/job

• Background

• Brief information regarding role in this project

Participant Introductions

• Name

• Role

• Experience – other positions

• Length of time, etc.

Learning Objective and Sessions, 27th Nov

Objective: To help cultivate a pro-poor orientation of the CU movement by familiarising participants with the concept of Social Performance Management, Assessment, existing initiatives as well as poverty dynamics of the different regions (and The Gambia)

Session 1: Introductions and Regional Poverty Characteristics Session 2: Reporting to the Group on Regional Poverty Characteristics Session 3: What is Social Performance, why is it important and who is doing what in this field? Session 4: Group work exploring cost benefit of SPM

Timetable: Day 1

•8:30 – 10:15 Session 1: Getting to know the group: introductions, expectations, and start of Presentation by Regional Managers

•10:15 – 10:30 Break

•10:30 – 12:00 Session 2: Presentations by Regional Managers

•12:00 – 01:00 Lunch

•01:00 - 02:30 Social Performance Management

•02:45 – 04:15 Exercise on Social Performance

Day 1 Day 2 Day 3

Social Performance Management Social Performance

Assessment

Poverty Assessment Tools

Session 1

Introductions and Orientation

Session 1

Orientation and Social

Performance Mgt.

Session 1

Poverty Assessment Tools

Session 2

Regional Characteristics of Poverty

Session 2

Social Performance Appraisal

Session 2

Poverty Assessment Tools:

Application

Session 3

Social Performance Management:

Overview

Session 3

Social Performance Appraisal

Ends

Session 4

Social Performance Management:

Exploration

Session 4

Social Performance Appraisal:

Application

A note on the delivery

• Technical Language

• Misunderstanding

• Note any word or term I use, which you think needs a definition or clarification

• ASK !

Mark Twain – “the only dumb (silly) question is the one you don’t ask”

Quote

The most important thing you bring to the table is your brain -Edward Filene, Credit Union Pioneer USA

Expectations

What do you expect to get from these two and a half days?

• Social Performance Management

• Knowledge Management

• Expansion into Under-mm served mm areas

• Capacity Building

National apex body

developed & strengthened

Credit Unions &

member-ship

Poor and Extremely

poor

Regional Hub &

Steering Group

West African Credit Unions Against Poverty Programme

Exercise

Each Regional Manager to Develop Flipchart Presentation on their own Regions – Highlight:

- Geographical characteristics

- Political factors

- Demographic characteristics (population size, whether high level of female headed households, migration etc.)

- Education levels

- Health and nutrition issues

- Issues around access to services (schools, infrastructure, clinics, extensions etc.)

- Economic characteristics

- Wealth and Welfare indicators (typical rich, middle, poor characteristics)

Session Two: Presentations

Flipchart Presentation on Regions highlighting: - Geographical characteristics & infrastructure - Political factors - Demographic characteristics (population size, whether high level of female

headed households, migration etc.) - Education levels - Health and nutrition issues - Issues around access to services (schools, infrastructure, clinics, extensions

etc.) - Economic characteristics - Wealth and Welfare indicators (typical rich, middle, poor characteristics)

The Definition of Social Performance

The effective translation of an institution’s mission into practice

Vision: your idea of a better world

Mission: your idea of how to bring this about

Starting Point for Social Performance Management

What is the mission of your credit unions?

Missions

• Banks ▫ Maximize profits / shareholder value

• Credit Unions ▫ Build democratic institutions with

strong common bond

• Microfinance Institutions ▫ Alleviate Poverty

▫ Help clients build livelihoods, improve wellbeing

What do we mean by ‘Social’?

What qualifies as ‘social’?

• Who you are reaching based on poverty or vulnerability criteria

• Expanding access to financial service for economic development

• Reaching women / providing opportunities for families

• Promoting equity

• Promoting progress towards Millennium Development Goals

• Fostering participation and empowerment

Common Social Missions:

• Serving increasing

numbers of poorer and

more excluded people

sustainably

• Improving the quality &

appropriateness of

financial services

through assessment of

members’ needs

• Increasing members’

social capital, assets,

income, and access to

services

• Reducing members’

vulnerability

• Improving members

responsibility of the

institution toward clients,

employees, and

communities

What is Social Performance?

The effective translation of an

institution’s social mission into practice

▫ No Social Mission

▫ No Social Performance

▫ No Social Performance Management

Who is working for who?

The effective translation of an institution’s mission

into practice relates to:

• Reaching target market • Delivering high quality and appropriate financial services • Responding to the needs of members, their families and

communities

• Ensuring responsibility towards: • Its members

• Its employees, volunteers, the community it serves and the environment

Results

• Reaching target members

• Meeting target members’ needs

• Change in target members’ lives

23

Social Performance Pathway

Operations Strategy

Information use

Poor households have very active

financial lives and different needs.

Photos credit: Fonkoze, Haiti

Trends in Microfinance

• Double bottom line: changing context

• Growth and competition

• Commercialisation & legal status

• Skepticism

Social Performance Cannot Be Taken for Granted

Big Problems?

What Went Wrong ?

Commercial Mission Drift:

Fast growth (15-30% + p.a)

High competition

Market saturation

Coercive collection practices

Over-indebtedness …

Financial Mission Drift:

High return on investment

expected

Minimize costs, maximize profits

Fast profitability

Few products

IPOs (stock market launch) …

Open Floor Discussion

• What are the dangers in the Ghanian / Gambian context??

Core Problem

• If you can’t measure it, you can’t manage it

• No Action Talk Only – NATO

• Social Performance Measurement

Backlash ▫ Donors

▫ Investors

▫ TA Advisors

• Client protection

• Development

standards, good

practices,

certification

• 7 principles

• 1 750 endorsers

from 120 countries

Responses of the Sector …

• Microfinance

Transparency

• Campaigns for fair

and transparent

pricing

• 28 countries

• More than 1000

different loan

products

• Seal of Excellence

for poverty

outreach and

Transformation in

Microfinance

• To recognize those

institutions doing

the most to help

families lift

themselves out of

poverty

• Platform for dialogue,

learning and

collaboration

• Facilitating

engagement and

advocacy

• Setting industry

standards for social

performance

management

• Promoting good

practices

• Gathering quality

evidence and research

SP vs. SPM

• Social performance

▫ Whether or not you achieve your social goals

• Social performance management

▫ How you achieve your social goals.

The Definition of “SPM”

The processes an institution uses to translate its

mission into practice.

These include:

▫ Setting social targets

▫ Measuring the progress toward these targets

▫ Using the results for strategic decision-making-

namely, to improve products, services, and

delivery channels

Achieve Your Mission Through Performance

Management

Mission

Performance Management

Social

Performance

Financial

Performance

Managing for Social Results

Define desired

performance

Measure progress

toward desired

performance

Use performance

results to improve

products, services,

& systems

30% new

members are

female

New

membership

recorded by

CU staff and

reported to

board

CuTRAC

training led to

more

inclusion of

women

AMK Company Profile

• Largest number of borrowers in Cambodia : > 300,000

• Outreach to > 10,000 villages: > 70% of the villages in Cambodia

• Absolute Commitment to Mission: 50% of new clients in 2011 were

below the Cambodia Rural Food Poverty Line

• Leader in Social Performance Management and Responsible Finance

• Finance at Your Doorstep Methodology: Loan disbursement and

collection at community level

• Average Loan Size lowest of nationwide MFIs in Cambodia: USD 172;

94% of loans are for less than USD 300

• Lowest interest rates in the group lending market

Key Stats

• Population: 14.1 million

• GNI per capita, Atlas method: USD 750

• Poverty Level: 30%

Mature SPM Example – AMK Cambodia

AMK Client Profile

• 50% are below Poverty Line

• 87% of clients are female

• 63% of clients are literate, and 81% attended some school

• Average household has 5.2 persons including 3 income earners

• Clients are predominantly rural, but 63% of clients’ main source of cash

inflow is non-farm activity; 35% is farm activity

• Food is one of the top three expenditures for 96% of clients

• 83% of clients own land, but 76% of clients have no toilet facilities

• 33% of clients’ economic situation stayed the same in the previous 12

months; 55% improved, and 13% worsened

AMK SPM Framework

Social Performance Progress and Challenges

• Strengths:

▫ Synergies between social and financial performance

▫ Practical way to answer critics

▫ Tools, approaches and support are good

• Challenges

▫ Confusion of tools

▫ Verification process / credibility

▫ Developing process, practices and internal accountability

▫ What about impact?

Cost benefit of SPM

Trade offs:

- Individual targeting of poverty

- Non financial services

- Client protection (early stage)

Synergies:

- Geog. targeting & participation

improve productivity

- Quality of services & reasonable

interest rates improve portfolio

quality

- Service adaptation improve

efficiency

Links between social &

financial performance

(Cerise)

Other studies on the SP/FP correlations

(Cerise)

• A rating agency: Microfinanzas Rating ▫ Financial cost of poverty outreach, but

▫ Positive Correlation between staff prod/pov outreach, OSS & SR staff, OSS & breadth of outreach – 36 MFIs, verified data

• A platform for reporting: Mix Market ▫ Cost per borrower increases with targeting very poor/poor

▫ But SR staff linked with better productivity and SPM training linked to better PAR – 204 MFIs, self reported

Overall, same trends in data analysis

SP/FP

• Costs of individual/direct targeting of the poor

• But other means to reach poor people: geographic, methodologies, clients’ participation

• SP & FP are compatible when different dimensions of SP are taken into account

Different levels of support for the MFI

• Purely self assessment: The MFI fills in the questionnaire alone

• Accompanied self-assessment:The MFI fills in the questionnaire with support from an external reviewer

▫ The external reviewer knows the SPI tool and can answer to the questions of the MFI

▫ Final doc= full questionnaire / excel data-graphs

• Self-assessment with external audit ▫ The auditor verifies the quality of the information ▫ At least one day for external audit ▫ Final doc= full questionnaire/ Excel data-graphs/2p

summary

• Purely external assessment: done by the external auditor

Group Work

In small groups, answer the following questions: 1. In your opinion, why do social performance? 2. How can social performance of credit unions be improved? 3. What are the resource implications of introducing social performance?

Wealth Ranking Exercise

• There are 10 households in this small but typical village.

• Make up fictitious names and divide them into Well Off, Middle Ranking and Poor.

• Allocate how many you think will be in each category

• Describe each category

• Report back on Flipchart Paper

Recap Questions

1. List 3 common social missions of financial service providers

2. What does NATO stand for?

3. Why was the microfinance sector’s reputation damaged?

4. What is meant by the term ‘double bottom line’?