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Cover Story : A Special Interaction on Social Performance Management With Koenraad Verhagen ` www.microfinancegateway.org/ files/49313_file_The_Pocantico_Declaration_Final0515b.pdf

8. What mechanisms would you recommend to gain compliance ?

Social Performance has been used in Microfinance much more as the deliberate promotion of positive impact by the delivery of high quality financial services to poor, or relatively poor people. It fits the overall concept of CRS, but is more specific, pro-active, goal- oriented in its contribution to the combat against poverty.

To ensure and promote compliance we ( Ford Foundation, Argidius and CGAP) have in 2005 set up the international Social Performance Task Force which has 350 members now: leading MFIs, networks, investors and donors. Since then Regional and national networks have taken up the promotion of SP concept, SP measurement and management. Tools and guidelines have been developed by international networks like CERISE (Paris-based), the ImpAct Consortium ( UK based), and US based networks like the Grameen Foundation. You cannot force compliance; you can promote acceptance.

6. What role does transparency play in your model ? When the Argidius Foundation was still a member of CGAP we have supported CGAP staff member Syed Hashemi in his lobbying to get ‘social transparency’ be included as one of the key principles of sustainable microfinance. That was in 2004. As to transparency it is convenient to distinguish different categories or stakeholders. Transparency to MFI clients about lending conditions is a minimum requirement. In MFIs , owned by its clients like co-operatives, transparency is statutory regulated. Being transparent towards clients is a moral obligation, creates loyalty, and make them choose the products that fit their situation best. Transparency of lending and savings conditions for clients is included in the framework for the assessment of Social Performance adopted by the international Task Force. SP Management implies the purposeful promotion of transparency to ensure MFI clients be well informed, and have them make responsible choices. To be truly transparent takes time and energy, and skills and tools for communication, in particular, when most of your clients are illiterate and poorly educated. At a national level social transparency about whom are you serving and at what conditions, will make you less vulnerable for intervention by politicians and regulators . At international level, it makes you more attractive for private and public social investors or donors. They also have, and wish, to act in socially responsible way. They have the right to know how well a MFI , or a network of MFIs, is performing socially. If private, most of them want to know that to be sure that financial return is supplemented by social return. If public, investors are accountable for the way they have used tax payers’ money.

9. Which of the may criteria sets would you use to measure SPM ? Argidius was the first foundation to invest by a small donation in the development of a tool to assess social performance. That was in 2003. It is now known as the SPI Audit Tool from CERISE designed an widely tested by over 100 MFIs to asses and promote Social Performance in Microfinance (SPI = Social Performance Indicators) (see www.cerise-microfinance.org/homeuk.htm for the English version). Main criteria sets relate to outreach to the poor and excluded; adaptation of services and products to target clients; economic and socio-political benefits for clients and their family, and the institution's social responsibility towards staff, the community and environment The other one, is the framework developed by the international Social Performance Task Force and has been adopted by different categories of industry stakeholders which constitute the TF m e m b e r sh i p . w w w . m i c r o f in a n c e g a t e wa y .o r g / resource_centers/socialperformance/article/28257/ The basic idea is that you have a model and a set of well defined core indicators that are widely accepted by the industry, but at the same time leaves space for indicators which are more country or MFI specific. It incorporates the lessons learned from applying social performance management, and provides the basis for social rating by the recognized rating agencies.

7. How would you ensure truthful reporting ?

10. What percentage of current MFIs, in your opinion, engage in sufficient SPM practice ?

By promoting (external) social auditing and rating as an accepted practice in the MF industry of each country. Further, by promoting reporting of basic social indicators at international level to the MIX ( 10 -20 indicators) . This will make that those MFIs who will not report truthfully on key issues and indicators in the next 3-5 years, will marginalise themselves and could put their image and creditworthiness if they need external support, at risk.

I am not in a position to give you precise information on this and the word ‘sufficient’ leaves room for wide interpretation. My guess is over 300 now, assuming that most of the MFIs which have participated in the testing of the models referred to earlier, and have undergone intensified training on SPM and use of tools, are indeed applying it. ***************************************

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Microfinance Focus [ April 2009 ] 29

Microfinance Focus April issue 2009  

A Global Magazine on Microfinance and Sustainable Development

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