Pathways to Better Outcomes for Clients Living in Poverty Executive Summary The Seal of Excellence is a global initiative to focus on outcomes in microfinance. There are millions of people living in poverty who can change their living conditions if they have access to the right services. The Seal recognizes those practitioners that are doing the most to reach people living in poverty and to create positive and enduring change in their lives. The Seal will collect and share effective practices of these practitioners and, in so doing, will promote a learning community, alongside the Social Performance Task Force and others, of microfinance practitioners, networks, donors, investors, policymakers, regulators, researchers, and others who want to see measurable progress for poor families. All stakeholders stand to benefit by being able to differentiate those that are acting in the service of poor clients and those who only claim to do so. The rapid growth of microfinance over the last few decades has provided financial services to over 200 million clients globally. In some cases, however, the drive for growth and profitability has come at a high price, leaving clients worse off and damaging the reputation of the entire sector. Events in India, Morocco, Bosnia, Nicaragua, and elsewhere have shown the dangers that come when growth and earnings are not balanced with strong client relationships and accountability for measurable results. Most published rankings of microfinance institutions focus exclusively on financial performance and scale, and the industry has been working towards ways to benchmark poverty outreach, supported by various initiatives, including the FordCGAP project on social indicators reporting, Grameen Foundation’s development of the Progress out of Poverty Index (PPI), and the adoption of these indicators by the specialist rating agencies as part of a social rating. To these efforts, the Seal attempts to define specific indicators, establish a road map toward effective support of clients living in poverty, and to highlight examples of good practice. The Seal builds upon and reinforces the work of the Smart Campaign for Client Protection and the Social Performance Task Force, both which are represented on the Steering Committee. No MFI will be recognized by the Seal that has not yet met the minimum requirements from Smart and SPTF. The Seal focuses a lens of poverty on these initiatives and, by collecting and sharing rigorous, objective, and concrete evidence of success, reinvigorates the role of financial services as a powerful tool and platform in the fight against poverty. Further, the Seal represents the first major initiative to focus on client outcomes and is complementary to and creates a simple focal point for the efforts of Smart Campaign, SPTF, MIX Market, and others working on accountability in the industry. The goal is to set a vision for the sector that prioritizes effective poverty outreach and quality data collection and analysis. Through its focus on successful models, the Seal of Excellence will define pathways to better outcomes. Led by diverse stakeholders from across the industry (including Freedom From Hunger, CGAP, Deutsche Bank, Global Impact Investors Network [GIIN], SPTF, Dell Foundation, Kiva, and Grameen Foundation), the Seal will build a community of practice of pro-poor microfinance organizations, promote best practices and tools, and provide guidance as institutions attempt to improve their practices and move up through the levels of the Seal.
Top • Leaders Level Second • Achievers Level First Level Aspiring to the Seal
• Emerging
• Stating Committement
Reaching these goals will be a long-term commitment. The Seal’s community of practice will develop models that assure sustainability and long lasting changes in clients’ lives. The Seal highlights the potential of microfinance—and ultimately other interventions as well—to contribute to positive change by providing a 1
Pathways to Better Outcomes for Clients Living in Poverty reliable framework to evaluate MFIs. The Seal will play a critical role in providing rigorous, concrete evidence of those institutions, donors, investors, and others that are truly and successfully serving clients living in poverty. Opportunities to Partner with the Seal The Seal of Excellence presents an opportunity to influence practice across the larger microfinance industry. High profile recognition will set the stage for learning, renew focus on the importance of measuring outcomes, promote the adoption of new practices, and facilitate the replication of scalable innovations across a large number of service providers. The Seal will also give funders and investors a reliable tool for ensuring that their funding strategy matches their stated poverty goals. We look forward to speaking with you further about how you can support this important initiative. Theory of Change—Measure, Learn, Change The table and diagram describe the steps within the theory of change of the Seal. Measurement and Learning will need to be effectively institutionalized before we can see true and lasting change. Objectives Seal Methodology and Launch Build pipeline of eligible / aspiring institutions Build learning community for improved products and services Adaptation of products and services to poor clients Proof of Concept Positive and enduring client change over time
Assumptions The Seal is credible, recognizable and inspiring. It is seen as independent, unbiased, practical, and yet still aspirational. Practitioners want to be connected with a pro-poor social mission. Practitioners and funders will unite to improve practices for the sake of better client service. Practitioners collect data over time. Funding cycle adjusts to favor institutions with Seal. Institutions increase their capabilities in poverty outreach and positive change, receive greater support from funders, and millions more clients see positive and lasting change.
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Timeline 1-3 years 1-3 years 2-4 years 2-5 years 3-5 years 2-6 years
Pathways to Better Outcomes for Clients Living in Poverty
3. Change. Better Client Outcomes
1. Measure.
2. Learn.
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Pathways to Better Outcomes for Clients Living in Poverty Appendix B: Seal Leadership
Established in December 2010, the Steering Committee of the Seal is composed of a diverse group of industry leaders. Members of the Steering Committee represent: CGAP Michael and Susan Dell Foundation Deutsche Bank EDA Rural Systems Ford Foundation Freedom From Hunger Global Impact Investing Network (GIIN) Grameen Foundation Kiva Microcredit Summit Campaign REDCAMIF, the Central American Microfinance Network Smart Campaign Social Performance Task Force. Practitioner advisors represent Fonkoze, Pro Mujer, and SEF South Africa. The MIX Market participates as Technical Advisor. In May 2012, the Steering Committee voted to create an Executive Committee for the Seal with two CoChairs and named Carmen Velasco, Co-Founder of Pro Mujer as one of its first Co-Chairs. The other Co-Chair and up to three members are currently being recruited. Representing the Microcredit Summit Campaign, the Seal’s Secretariat, Larry Reed also participates on the Executive Committee in an advisory and tie-breaking capacity. The Executive Committee acts as the decision-making body for the Seal while the Steering Committee provides strategic counsel. A Technical Committee, consisting of raters, researchers and others experienced with assessing the performance of MFIs, was established in the fall of 2011. The TC has developed a set of draft indicators, and is currently developing, testing and revising a methodology for assessing performance against the Seal. Frances Sinha of EDA Rural Systems leads the Technical Committee. Members of the Technical Committee represent CERISE, Microfinanza Rating, and Planet Rating. Carmen Velasco is the Co-Chair of the Executive Committee of the Seal of Excellence. Based in Lima, Peru, Velasco is the co-founder of Pro Mujer, has served as Pro Mujer Ambassador for Latin America and Spain, and as a key member of the organization’s Development and Communications team. From 1995 to 2007, Velasco served as Country Director for Pro Mujer in Bolivia and created and developed the integrated model to assure the fulfillment of Pro Mujer’s mission, which integrates training programs in business development, empowerment, and health, with microfinance and basic care health services. She has previously served on the boards of Procosi and FINRURAL, where she later served as President. She has served in the Microcredit Summit Campaign for several years and is part of the Executive Committee of the Social Performance Task Force. Velasco has a B.A. in Special Education Pedagogy from the Universidad de Chile and has completed postgraduate studies at the Boulder Microfinance Institute and Harvard University. Larry Reed is the Director of the Microcredit Summit Campaign. He has worked for more than 25 years in designing, supporting and leading activities and organizations that empower poor people to transform their lives and their communities. For most of that time Reed worked with Opportunity International, including 4
Pathways to Better Outcomes for Clients Living in Poverty five years as their Africa Regional Director and eight years as the first CEO of the Opportunity International Network. During his time with Opportunity, Reed helped to implement a strategy for developing full-service banks that served the very poor while mobilizing hundreds of millions of dollars in savings deposits and investments. Under his leadership, Opportunity developed the first microinsurance brokerage, which now serves hundreds of millions of people globally. Reed has taught at the Boulder Institute of Microfinance for 15 years, served as the chair of the SEEP Network, and consulted with industry-wide initiatives like the Smart Campaign for Client Protection and MicroFinance Transparency. He is a graduate of Wheaton College and the John F. Kennedy School of Government at Harvard University. Frances Sinha is the technical consultant to the Steering Committee and the Chair of the Technical Committee. Sinha is co-founder of EDA Rural Systems Pvt Ltd and its associate companies, M-CRIL and EDA Rural Artha Vikas. A graduate from Oxford University and the London School of Economics, UK, she has lived in India for over 25 years. Sinha has led EDA teams for research, evaluation and impact assessment and has also been an international consultant (for the Asian Development Bank, DFID) working throughout India and in several countries in Asia and Africa. Her experience has contributed to recent developments around social performance and double bottom line management and reporting, including the development of social rating with M-CRIL. With the M-CRIL team, Sinha has pioneered the development of a social rating methodology – to complement credit rating. John D. Bergeron is the Director of the Seal of Excellence. He worked most recently as Senior Director of Social Performance at Kiva, where he developed the social performance strategy, scorecard, and badges, completed 100+ MFI social audits, and led the growth of the Kiva Fellows Program. Bergeron brings over 16 years of program development leadership both in the corporate and not-for-profit sectors. Previously, he worked at Accion, the U.S. Peace Corps in rural Bulgaria, and held senior roles at various startups. He is actively involved with the Smart Campaign’s Client Voice Task Force, the Social Performance Task Force, and CERISE SPI. Bergeron is the co-founder of Bike Zambia, a cycling fundraiser to bring awareness to AIDS and poverty in southern Africa.
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