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Cover Story : Social Performance: increasing accountability and transparency ` an approach as financial reporting and management – in terms of defining objectives, aligning systems, developing an appropriate MIS with attention to detail and accuracy, for regular monitoring and concise reporting.

Frances is closely involved with current initiatives around social performance in microfinance, including: social performance management – training and research (as a member of the Imp-Act consortium); pioneering the development of a social rating meth-

These steps are reflected in the social rating tool now recognised as a tool to complement financial rating; and in the social reporting indicators introduced by the MiX this year.

odology to complement financial rating, with the M-CRIL team;

Indian MFIs have gradually emerged as global leaders in terms of growth and financial efficiency. Will they also be the future leaders for social performance? —————————————————————————-

of social reporting indicators (on the MiX Market; and leading the

About the Author:

dex (PPI) with the Grameen Foundation (US).

coordinating global pilots for social reporting (Ford Foundation, Social Performance Task Force) and contributing to development EDA team in working with social investors and their MFI partners in India and Afghanistan to develop practical systems of SPM and social reporting, and introducing the Progress out of Poverty In-

Frances Sinha is co-founder director of

EDA Rural Systems, and director of EDA’s associate company M-


CRIL. With 25 years of experience in development based in India,

We Can’t Afford to be Social…! Katherine Knotts Director Communications, Imp-Act Consortium

I received a call from the BBC the other day, asking me about the effects of the global economic crisis on microfinance. One also sees that the lecture circuit is starting to bloom with panel discussions on how to save microfinance from a “sub-sub-sub-prime crisis”. Elsewhere, I am hearing the refrain of “well, we’d love to focus on social performance management, but our MFI is just trying to stay afloat right now!” While I’m not dismissing the very real and pressing financial issues of the day, I wonder whether we can, in this context, re-visit the issue of how a social performance focus affects the financial bottom line. Seems like the knee-jerk reaction is to assume that it’s a win-lose situation: “being social” is unsustainable. But does the evidence bear up? A brief glance at some examples:


In a competitive Asian market, one MFI is sensitive to cost management. However, their strong poverty focus takes them deep into remote rural areas. Does this introduce inefficiency? The data reveals that in poorer regions, branch operating costs per client are not necessarily higher (often due to larger loan sizes), and branches tend to grow faster given lower competition.


Another Asian MFI has gathered informal feedback that those branches that do not consistently implement “social development” training tend to have a higher portfolio at risk that those branches that did.


A South African MFI has two microfinance programmes, one poverty-focused, another non-targeted. While the poverty-focused programme implies higher costs (for impact monitoring), it benefits from higher retention rates and a lower PAR than the non-targeted programme.

Given these examples, it seems the trade-off issue is a bit more nuanced that we thought. In that case, the key questions for me are:

   

How can we increase efficiency without sacrificing on quality of services? Where does cross-subsidisation fit in to MFI outreach strategies? Does data about actual social performance results distinguish MFIs in the race for ever-more-scarce funds? How can MFIs turn trade-offs into synergies? What are the quick wins, and what takes more time?

**************** Editor’s Note: reprinted with permission of the author

Microfinance Focus [ April 2009 ] 22

Microfinance Focus April issue 2009  

A Global Magazine on Microfinance and Sustainable Development