NAB: measuring the social value of microfinance programsCommunity Investment strategy update February 2013

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Community Investment at NAB

Inclusion

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Our aim is to contribute to a more inclusive

Australia, by providing people access to

employment opportunities and finance, so as to

more actively participate in society.

Focus 1. NAB as the number one corporate

champion for promoting inclusion in Australia.

2. Deliver world class microfinance programs with significant scale and efficiency.

3. Engage in meaningful employment programs for those often marginalised, that result in real jobs in banking and finance.

4. Develop innovative, alternative and more cost-effective delivery models such as impact investment to build new sources of revenue for the community, while supporting social initiatives that address inclusion.

Education

Young people are the future of our country and our business. That’s why at NAB, we support the development of skills in young Australians so that they are financially capable, socially minded and work ready.

NAB also recognises that the education of our young people rests on the shoulders of the entire community and requires a multi-faceted approach.

Inclusion Continuum

Why measurement?

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Need to know that shareholder funds are being invested in worthwhile activities

In 2012 NAB invested $55.7M in the community.Until now programs have been assessed in terms of inputsCharitable giving and donations 6.5%

In kind volunteering and secondments 16%In kind support 0.5%Foregone revenues and interest 31.4%Community investment 22.4%Commercial initiatives (sponsorships) 16.9%Management costs 6.3%

Under this analysis BIG IS BETTER

SROI

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Bottoms up measure of the change that matters to stakeholdersA more detailed insight as to how the programs impact the

community and whether the investments actually address the market failure they aim to correct Microenterprise loans program Step UP Loan Foresters CDFI pilot (Community Development Finance

Institution) NILS Indigenous Money Mentor Program African Inclusion Program MLC lifeline partnership

SROI

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Measuring impact is helping us answer more sophisticated questions: what is the client experience – did the loan make a

difference? which program makes the biggest difference? Which part of the program made the most difference?

Cornerstone to our readiness for future impact investments

BIG IS NOT ALWAYS MOST EFFECTIVE

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SOCIAL & ECONOMIC MODEL RESULTS

Economic benefit

• Savings on welfare payments

• Reduction in use of emergency credit and payday lending

• Savings on fringe credit

Social benefit

• Reduction in anxiety/stress

• Improvement in confidence and self-esteem

• Improvement in living conditions

= net benefit of $12.1 million (for 6,748 StepUP loan recipients)

For every dollar invested, $2.69 worth of social and economic value was created

$10.1 million $9.2 million $7.1 million

Power of the $

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Bankers understand $Government also understands $Brings to forefront the importance of social impacts such as increased capability and self esteemSignificant to the business case of future funding

The power of $ is also its greatest downfall

Challenges

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Each study is expensive and time consuming – at least 3-6 monthsStudies are more meaningful if replicated over time – is this realistic?Methodology complex - deadweight and attribution Will the voice of the stakeholder really drive corporate expenditure? NFP – will they be able to change their services to become less output and more outcome focussed