Social Performance Indicators Initiative (SPI): Summary Report Phase 1
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Measuring social performance of micro-finance institutions: A proposal Social Performance Indicators Initiative (SPI) Final Report Manfred Zeller University of Göttingen, Institute of Rural Development, Germany ([email protected]) Cécile Lapenu CERISE, France ; www.cerise-microfinance.org Martin Greeley Institute of Development Studies, UK; www.ids.ac.uk October 2003 Submitted to Argidius Foundation and Consultative Group to Assist the Poorest (CGAP) Zeller, Lapenu and Greeley Summary Report Social Performance Indicators Initiative (SPI): Final Report Manfred Zeller Cécile Lapenu Martin Greeley • Summary Report 1. Background to the SPI........................................................................................................3 2. Definition of social performances...................................................................................... 4 2.1 Social performance in the literature ........................................................................... 4 2.2 Defining dimensions of social performance with respect to microfinance..................... 5 3. Selection of operational indicators of social performances ............................................... 6 3.1 The steps for the selection.......................................................................................... 6 3.2 The indicators proposed ............................................................................................. 8 Dimension 1: Outreach to the poor and excluded.............................................................. 8 Dimension 2: Adaptation of the services and products to the target clients ...................... 9 Dimension 3: Improvement social and political capital of clients................................... 10 Dimension 4: Social Responsibility of the institution...................................................... 11 3.3 Weighting systems proposed.................................................................................... 12 Arbitrary weights.............................................................................................................. 12 Weights given by principle component analysis (PCA) .................................................. 12 3.4 Graphical presentation..............................................................................................13 4. Conclusions ...................................................................................................................... 14 The summary report compiles findings of the following four complementary reports : • SPI-Report No. 1: Towards defining social performance of micro-finance institutions: Literature review and synthesis (Lapenu and Zeller) • SPI-Report No. 2 : Questionnaire to MFIs on measuring social performance (Zeller, Lapenu, and Greeley) • SPI-Report No. 3: Analysis of the information provided by micro finance practitioners (Lapenu) • SPI-Report No. 4: Proposal for a limited choice of indicators and their aggregation (Lapenu and Zeller) Social Performance Indicators Initiative (SPI) 2 Zeller, Lapenu and Greeley Summary Report Social Performance Indicators Initiative (SPI) Summary Report With the summary report, the research team gives a summary of the background, objectives (i.e. terms of reference), activities, and recommendations of the Social Performance Indicators Initiative (SPI). 1. BACKGROUND TO THE SOCIAL PERFORMANCE INDICATOR INITIATIVE (SPI) Reporting on social performance by micro-finance institutions (MFIs) is still largely anecdotal in the absence of a clear, industry-wide, accepted framework for social performance reporting. It can be seen as a complement to, and on equal footing with, financial performance also allowing comparison between peer groups of MFIs. In the future one can expect diminishing resources for development assistance from public donors. At the same time, there is a growing interest for MicroFinance on the part of private social investors. In this setting, it would be important for MFIs to develop the capacities for the simultaneous pursuance of financial and social objectives, and for reporting on it in a manner which can stand the test of external auditing on both accounts. This can also help to improve understanding of possible trade-offs between economic and social returns on investment. Objectives During its first initial phase, the SPI research project aims to1: (1) Develop a conceptual framework for defining social performance in the MFI sector, i.e. what are the dimensions and elements of social performance to be measured? (2) Suggest a set of operational indicators designed to measure the different dimensions and elements of social performance of MFIs. During a potential second phase, these indicators may be field-tested with a number of MFIs and eventually revised and finalized. Organization of the research project The Social Performance Indicators Initiative was launched in June 2002 at a meeting in Amsterdam convened by Dr. Koenraad Verhagen (Argidius Foundation) and Dr. Syed Hashemi (CGAP). The initiative is supported by the Argidius Foundation. The research project is administered by CERISE2, and CGAP provides the overall coordination. The SPI is guided by a steering Committee formed by Dr. Syed Hashemi (CGAP, USA), Dr. Renée Chao Beroff (CIDR/CERISE, France), and Dr. Koenraad Verhagen (Argidius Foundation, Switzerland). 1 The above objectives are similar to the terms of reference. 2 CERISE (Comité d’Echange, de Réflexion et d’Information sur les Systèmes d’Epargne-crédit) is a platform of France-based leading Microfinance support organizations (CIDR, CIRAD, GRET and IRAM). CERISE was started in 1998, and since then it has organized various studies and seminars on the following themes : financing of agriculture, governance, social impact, MFIs in remote rural areas, etc. Each CERISE member is part of an extensive network of MF practitioners providing MF services in countries of the South. Social Performance Indicators Initiative (SPI) 3 Zeller, Lapenu and Greeley Summary Report The research team is formed by Prof. Dr. Manfred Zeller (Team leader – Institute of Rural Development, Göttingen University, Germany), Dr. Martin Greeley (Institute of Development Studies, Manchester UK) and Dr. Cécile Lapenu (CERISE, Paris, France). Members of the research team have already participated in similar initiatives (M. Zeller and C. Lapenu are co- authors of the Poverty Assessment Tool developed for CGAP and M. Greeley is member of IMP-ACT project led by IDS and funded by the Ford Foundation). 2. DEFINITION OF SOCIAL PERFORMANCES The first objective of the SPI is to develop a conceptual framework for defining social performance in the MFI sector, and identify the dimensions and elements of social performance to be measured. 2.1 Social performance in the literature On the basis of an extensive review of scientific literature, of activities of the Global reporting initiative3, and of a similar project of commercial banks seeking to establish a standard to report on social and environmental performance in the banking industry, the research team completed a paper by December 2002 containing a conceptual framework for defining social performance of MFIs (see SPI-report N°1). A narrative definition of social performance synthesized from the literature review is described below. The social performance of an organization (whether a private-for-profit firm, cooperative or NGO) comprises the relations of the organization with its clients and with other stakeholder groups. Social performance is not equal to social impact4, i.e. the change in welfare and quality of life (in all of its dimensions) among clients and non-clients (and the wider local, national and global community) due to the activities of an organization. Following the Structure-Conduct-Performance (SCP) paradigm of industrial organization, the impact of an organization on socio-economic and environmental dimensions follows from its structure, conduct and performance and is influenced and/or conditioned by the external environment of the organization. 3 GRI is an independent institution whose mission is to develop and disseminate globally applicable Sustainability Reporting Guidelines. It was started in 1997 by the Coalition for Environmentally Responsible Economies in partnership with the United Nations Environment Program (UNEP). 4 The measurement of impact is not part of this research project on developing an operational, practitioner- oriented tool for measuring social performance as part of a double-line approach. Social performance encompasses poverty outreach but is more than that. For measurement of poverty outreach using a relative measure of poverty, operational tools such as the PAT, already exist. The assessment of impact is methodologically very demanding, time- and cost-intensive. Other on-going action-research (IMP-ACT) as well as long-term policy research projects (e.g. IFPRI, World Bank) deal with assessing the MFIs’ impact on income, education, nutrition and so forth. While impact assessment is important for policy evaluation, it is not obvious that it should be done by, with and for the MFI industry as an on-going effort (unless a particular MFI or MFI- network wishes to conduct impact analysis on its own). Impact assessments (of any policy, organization, or project) are done infrequently, are externally financed by a donor or external evaluating body, and usually conducted for reasons of objectivity by external consultants with considerable empirical experience in impact