social investor and dfi meeting on responsible …...2015/03/01 · social investor and dfi meeting...

Social Investor and DFI Meeting on Responsible Finance

Promoting responsible investment in microfinance: Improving Practices &

Measuring Outcomes

March 12 2015 European Investment Bank, Luxembourg

Agenda •  8.30-9.00am - Welcome

•  9.00-10.30am - Responsible finance at the investors and assets owners level: How can we ensure we are investing responsibly?

•  10.30-10.45am - Coffee Break

•  10.45-11.30am - Responsible finance at the level of our investees: How can we coordinate efforts to harmonize SPM evaluation and reporting requirements of our investees?

•  11.30-12.30pm - The importance of SPM as part of good governance: What can we do at the BOD level to promote SPM?

•  12.30-13.30pm - Lunch

•  13.30-15.00pm - Responsible finance for equity investors: Challenges and considerations when exiting

•  15.00-15.15pm - Coffee Break

•  15.15-16.30pm - Measuring and reporting outcomes

•  16.30-17.30pm - Conclusions and next steps

•  17.30pm – ADA cocktail reception

Agenda •  Welcome

•  Responsible finance at the investors and assets owners level: How can we ensure we are investing responsibly? 1.  Transparency and reporting: PIIF, Lenders’ Guidelines 2.  Labeling: LuxFlag 3.  Pricing: How can we make pricing information more transparent? 4.  Preventing over-indebtedness: MIMOSA

•  Responsible finance at the level of our investees: How can we coordinate efforts

to harmonize SPM evaluation and reporting requirements of our investees? •  The importance of SPM as part of good governance: What can we do at the BOD

level to promote SPM? •  Responsible finance for equity investors: Challenges and considerations when

exiting

•  Measuring and reporting outcomes

•  Conclusions and next steps

Principles for Investors in Inclusive Finance (PIIF)

•  2014: First Reporting Framework Exercise •  One example of practical implementation of a Principle

(#3 Fair Treatment) •  Testimony from one endorser: Incofin IM

Luxembourg, March 2015

PIIF: Background •  UN PRI initiative (Principles for Responsible Investment) •  Launched in 2011 •  50 endorsers including large institutional investors, large

microfinance assets owners and managers : USD 9bn of assets •  Seven principles: ▫  Expanding the ranges of financial services to low-income people ▫  Integrating client protection principles ▫  Treating investees fairly ▫  Integrating E&S factors into policies ▫  Promoting transparency in all operations ▫  Pursuing balanced long term returns ▫  Working together to develop common investors standards on

inclusive finance 5

PIIF: 2014 First Reporting Framework

6

PIIF: 2014 First Reporting Framework

7

Achievements • Lenders’ Guidelines for Setting Covenants in Support of Responsible Microfinance were formally included in the PIIFs:

• Under Principle 3: Fair Treatment, there is an existing possible action that reads - Negotiate terms and conditions that are transparent, fair and reasonable, including break-up clauses(*).

•  The Lenders’ Guidelines for Setting Covenants in Support of

Responsible Microfinance provide practical guidance for debt investors to follow”

Example of Implementation of Principle #3 on Fair Treatment of Investees

8

Purpose/ objectives

•  Define reasonable financial (7) and social covenants (2) for debt transactions.

•  Reasonable covenants, are covenants which ensure that the Borrower will adopt a “responsible financing” behaviour which will not harm its end clients.

•  Define common language regarding Borrowers’ and Lenders’ attitudes in case of breach of covenant.


The Lenders’ Guidelines for Setting Covenants in Support of Responsible Finance

9

Endorsers • The organizations that endorse the basic goal of such Guidelines are:

• Agence Française de Développement (AFD); • Agencia Española de Cooperación Internacional para el Desarrollo (AECID);

• Agora Microfinance N.V. and its affiliates; • BNP-Paribas; • Cordaid; • Deutsche Bank Global Social Investment Funds; • Grameen Credit Agricole Foundation (GCAF); • Grassroots Capital; • Incofin Investment Management; • Oikocredit; • PROPARCO; • SNS Asset Management; • Triple Jump


10

Achievements • Lenders’ Guidelines for Setting Covenants in Support of Responsible Microfinance were formally included in the PIIFs:

•  Out of the PIIF signatories who reported, 55% state that they

are using the Guidelines, among which 45% have formalized the use of the Guidelines within their investment process.


11

Testimony of an endorser: Incofin IM

12

•  Discussion team week with management and staff

•  Breakdown of our annual SPM action plan into specific activities

•  Examples of activities under discussion:

•  Debt: Dissemination and systematic use of Lenders Guidelines to debt investees

•  Equity: Simple SPM

action plan for each equity investee

Testimony of an endorser: Incofin IM

13

PIIF Lessons Learnt: •  Direct Investors: outcome indicators tracking is still too limited •  Indirect investors and asset owners: They shall play a more

active role in using the PIIF as a screening and monitoring tool when selecting asset managers. (60% take into account PIIF during selection, while 40% only do so in mandates and contracts)

•  The reporting framework provides a transparency and

accountability tool to collect consolidated data on responsible investment and to benchmark endorsers’ practices.

14

Thank you for your attention!

15

LuxFLAG Supporting Sustainable Finance

Annemarie Arens Luxembourg, March 2015

•  Launched in 2006, LuxFLAG, is an independent organization that supports the financing of sustainable development by providing clarity for investors through awarding Labels to investment funds which meet specific published criteria

regg

Responsibility

Transparency Independence

Sustainability

Clarity for

Investors

Mission and values

17

Responsible Investing Categorisation

LuxFlag labels

18

LuxFLAG Labels offer To Investors: •  LuxFLAG Labels help investors identify investment funds that are active in Responsible Investment •  LuxFLAG seeks to encourage transparency by investment funds on environmental, social and governance (ESG) performance •  LuxFLAG regularly shares with investors relevant information on investment funds active in Responsible Investment To Asset Managers: •  LuxFLAG Labels enhance the visibility of investment funds and reflect the asset managers commitment to Responsible Investment •  The LuxFLAG Labels help managers to demonstrate that they are committed to investing in Responsible Investment •  The LuxFLAG Labels help managers to attract investors interested in Responsible Investment

19 19

LuxFLAG Microfinance Label

20

•  Launched in 2007 •  27 labelled MIVs representing approx. USD 3.5 billion AuM •  More than 50% of worldwide AuM are covered by the labelled MIVs •  7/10 largest MIVs hold the Label

20

LuxFLAG Environment Label

21

•  Launched in 2011 •  09 labelled EIVs representing approx. USD 900 million AuM •  Increasing number of prospect applicants

21

LuxFLAG ESG Label

•  Launched in May 2014 •  First European ESG Label for funds •  Will cover a pool of approximately 1’135 cross-sectoral funds in Europe •  Eligibility Committee composed of 5 international experts •  Three funds received the first Labels in Sept 2014

22

The Importance of Transparent Pricing,

And the Challenges of Achieving it

Chuck Waterfield


30 countries 500 lenders

50+ million clients

80% women Training to

Regulators from

> 20 countries

MFTransparency Results

What have we learned from the data?

24

Tanzania – from 25% to 140%

25

Philippines – from 50% to 150%

26

Ghana – from 50% to 175%

27

Bolivia – from 15% to 60%

28

MFI 1 Pricing Map

29

MFI 2 Pricing Map

30

•  Pricing doesn’t show any real market behavior • Our practice of considering an MFI’s portfolio

yield its “price” is highly flawed • An MFI doesn’t have “one price” • A product of an MFI doesn’t have “one price” •  Prices don’t vary by just a little, they vary in

scary ways • What we didn’t see here, but what is also true is

that the price we tell the client is far from the true price

What conclusions from that data?

31

How do we continue / advance transparent pricing?

If we have pricing data, how can we use it to make informed decisions?

32

30 countries 500 lenders

50+ million clients

80% women Training to

Regulators from

> 20 countries

MFTransparency Results

Most of this coverage came in 2009-12.

We then targeted “refreshing”

of prices and gradual expansion.

In 2014, we dialogued with funders and international networks and decided to

explore pooling of data collected by everyone.

33

Results of the Pilot

1.  The pilot was planned for 3 months and extended to 5 months

2.  40% not contacted; 30% declined; 30% accepted (19 MFIs)

34

Results of the 19 MFIs who accepted

1.  Of the 19, 8 completed the process 2.  Of the 8, Analysts completed 2 of MFIs, and MFT

staff completed 6.

35

Challenges of getting MFIs to agree •  Reluctance to be in transparent minority •  Fear of public criticism of their prices •  Reporting burden •  Challenges of assembling the technical information

required (i.e., weak MFIs)

1.  Time pressures to collect addiLonal data 2.  Was generally delegated to social performance

team instead of due diligence team 3.  Pilot Lming didn’t coincide with analyst site visits 4.  Varied degrees of closeness with MFIs 5.  Concern being only funder requesLng pricing info

Challenges for funders and networks

36

Next Steps for MFT • Based on the results of the pilot the MFT board

has taken the decision to stop facilitating data collection and will be finishing all operations this year

• MFT will share revised versions of it’s pricing tools

• New data won’t be posted on the MFT website; it may be posted wherever the collectors wish

• Educational resources with continue to be available on MFT’s website

37

“Balanced Pricing” An Approach for Judging Pricing Data

• A new MFT tool and approach ▫  What percentage of the clients are paying prices

above a defined threshold price? (some similarity to TJ Traffic Light)

• MFIs can use the approach to evaluate their pricing map, spot weaknesses and make pricing adjustments

•  Investors, networks, and raters can use it to assess the pricing of their partners

38

Preventing Over Indebtedness

Overview of Microfinance Index of Market

Outreach and Saturation (MIMOSA)


39

MIMOSA 2.0

Emmanuelle Javoy, Daniel Rozas, Planet RaMng & David Roodman

40

MIMOSA 1.0: a simple scoring scale

MIMOSA Score Market PenetraMon

Number (share) of countries (HDI<80)

5 >100% above predicted

level 6 (6%)

4 50-‐100% above predicted level

14 (13%)

3 0-‐50% above predicted

level 29 (27%)

2 0-‐30% below the predicted level

32 (29%)

1 >30% below predicted

level 28 (26%)

Microfinance Index for Market Outreach and SaturaLon ( MIMOSA) 41

MIMOSA 1.0: Usual suspects found in category 4 and 5

Market Score

1 5

42

Goals for MIMOSA 2.0

§  Regional: capture capacity & penetraMon differences within country borders

§  Timely: insure that MIMOSA can stay up-‐to-‐date and relevant

§  More robust and microfinance specific: be^er reflect the specifics of microfinance sector

43

MIMOSA 2.0 is currently being built, and will be completed by June 2015

8 supporters/partners •  AfD •  ResponsAbility •  PlaNet Finance FoundaLon •  Cordaid •  Triple Jump •  Oikocredit •  BNP Paribas •  Deutsche Bank (Global Commercial Microfinance ConsorLum)

8 pilot countries: •  Azerbaijan •  Bolivia •  Cambodia •  India – West Bengal •  Kyrgyzstan •  Morocco •  Peru •  Senegal

March 2015 44

Input

HDI

Savings rate (Findex)

Employment rate

PopulaLon density

GNI growth (long-‐term)

MFI/Field surveys Etc.

Candidate Indicators SelecMon Criteria

Available at the regional level?

MF associaLons

Helps predict borrowing rate?

Easy to collect?

Central Banks

NaLonal staLsLcal bureaus

Global databases

Data sources

Associated with past crises?

45

Output

Credit penetraLon score MiLgants & Risks

Per region Per income quinLle Per gender

Current credit penetraLon

EsLmated credit capacity

Sector maturity

RegulaLon quality

Intensity of compeLLon

Transparency

Quality of pracLce

46

Draa MIMOSA Scorecard

March 2015 47

March 2015 48

March 2015 49

THANK YOU MERCI

Emmanuelle Javoy – [email protected] skype: javoy.emmanuelle – m: +33 6 61 32 19 34 Daniel Rozas – [email protected] skype: danrozas – m: +32 389 677 056 Planet RaMng – Edouard Sers – [email protected] skype: pr_esers

March 2015 50


•  Responsible finance at the investors and assets owners level: How can we ensure we are investing responsibly?

•  Responsible finance at the level of our investees: How can we

coordinate efforts to harmonize SPM evaluation and reporting requirements of our investees?

•  The importance of SPM as part of good governance: What can we do at

the BOD level to promote SPM? •  Responsible finance for equity investors: Challenges and considerations

when exiting



SPI4 Module for ALINUS Members

Luxembourg, day 2

Cerise Luxembourg, March 2015

DRAFT – DO NOT CIRCULATE

SPI 4 is already widely used tool: at least 100 MFIs users

§  Downloaded 350 Mmes in the past 3 months §  Over 100 since launch of version 1.2 (Mid-‐Feb. 2015)

§  Since February 2014, 60+ MFIs have reached out to CERISE while filling in the SPI4, coming from 37 different countries

§  85 people trained §  20+ auditors in process for being qualified

LAC 35%

ASIA 28%

MENA 5%

SSA 32%

53


How can SPI4 be used in the investment process?

Due diligence

§  Ask the MFI to fill in a selecMon of USSPM/SPI4 indicators before a due diligence

§  Verify/validate the answers of the MFI on these indicators as part of the due diligence

§  Benefit from other investor’s feedback to the MFI on the same set of indicators/ file

§  Fill in your own scorecard based on this informaMon

Monitoring

§  Ask the MFI to send you updated versions of SPI4 on a regular basis

January 2015 SPI 4 for ALINUS 54


Why use SPI4 in the investment process?

January 2015 SPI 4 for ALINUS

§  Contribute to a wider use of SPI4 / USSPM by MFIs §  Reduce the reporMng burden of MFIs that can then use SPI4

to report on social performance indicators to several MIVs §  Contribute to a be^er quality of indicators reported in SPI4 §  Allow improved benchmarking across the industry on this

set of social performance indicators (notably if these indicators get included in the MixMarket social performance indicators)

55


Cordaid’s experience

January 2015 SPI 4 for ALINUS

§  DemonstraMon of Cordaid’s SPI4 compaMble scorecard

56


MIVs had iniMally selected 160 indicators. Aaer two rounds of revisions, we are down to 124.

February 2015

QUESTIONNAIRE

87

74

51

124

137

160

94

107

122

78

88

89

68

67

69

59

56

57

ROUND 3

ROUND 2

ROUND 1

>=5 >=4 >=3 >=2 >=1 0Indicators selected by how many MIVs?

57


ParMcipaMng MIVs decided to aim for a selecMon of 70 to 80 indicators that they would ask MFIs to

report on

February 2015

• Median number of indicators you each selected 60

• ~Number of indicators selected by at least 3 to 4 MIVs

70-‐80

• ~Number of indicators selected by at least 2 MIVs

100-‐110

QUESTIONNAIRE

58


THANK YOU

February 2015







when exiting



Foundations of Solid MIV Governance The Case of AfriCap


62

AfriCap Legacy Path breaking initiative •  One of first vintage of equity MIVs, together with AIM and SCI (post PF) •  Made the case for commercial MF in Africa with two early exits •  Successful recap after five years tripled initial capital •  In total, 21 investments in 16 African countries over 7 years (vs 4-5 by peers) •  Managed $11 million in technical assistance (TA) support to investees and

the regional industry •  Developed African leadership of both management and governance However

•  Over-ambition: develop sector; outreach; HR; huge, diverse geography •  Instability: Four chairs, three managers, three structures, four strategies •  Misalignment between management, Board, and investors

-> Difficult to achieve social and financial goals

63 For full AfriCap report, visit www.grassrootscap.com or www.calmeadow.com

2001

Fund established

Strategy change

Strategy change

Strategy change

2005 2007 2009 2010

0 0

2 1

2

6

1

4

1 2

0

1

2

3

4

5

6

7

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

AfriCap: no. of investments approved

2002 2003 2004 2006 2008

Strategy change

AfriCap Timeline

64

0

1

2

3

4

5

6

7

8

2002 2004 2006 2008 2010 2012 -4000000

-3000000

-2000000

-1000000

0

1000000

2004 2006 2008 2010 2012

Note: Realized proceeds plus most recent FMV divided by cost of investment. Gross basis; no adjustment for fees and expenses.

Note: Cash out minus cash in and cost of TA

Money Multiples by Year of Initial Investment Value Accretion Net of TA Cost

AfriCap Investments and Technical Assistance

For full AfriCap report, visit www.grassrootscap.com or www.calmeadow.com

65

2. Develop and approve strategic direction (with management); monitor 3. Foster effective organizational planning, including succession planning 4. Ensure that risk is managed effectively; assume fiduciary responsibility 5. Oversee management performance, including selection, support, evaluation, and compensation of the CEO 6. Ensure adequate resources to achieve the mission, including assistance in raising of equity and debt 7. Ensure that the organization changes to meet emerging conditions; particularly in times of distress, temporarily assume management responsibilities 8. Uphold the ethical standards of the organization, with transparency and avoidance of conflicts of interest

Source: CMEF 2012 Governance Guidance Note, http://fiecouncil.com/

Major Board Responsibilities 1.  Define and uphold the social mission and purpose

1.  Define and uphold the social mission and purpose

66 Source: CMEF 2012 Governance Guidance Note, http://fiecouncil.com/

2. Develop and approve strategic direction (with management); monitor 3. Foster effective organizational planning, including succession planning 4. Ensure that risk is managed effectively; assume fiduciary responsibility 5. Oversee management performance, including selection, support, evaluation, and compensation of the CEO 6. Ensure adequate resources to achieve the mission, including assistance in raising of equity and debt 7. Ensure that the organization changes to meet emerging conditions; particularly in times of distress, temporarily assume management responsibilities 8. Uphold the ethical standards of the organization, with transparency and avoidance of conflicts of interest

Major Board Responsibilities

Major responsibilities of the Board: 1. Define and uphold social mission and purpose of the Fund

67

“The board has a major responsibility to set the strategic direction of the organization. This direction is carried out through strategic

planning and oversight of performance vis-à-vis the strategic plan.” (p 27)

AfriCap Experience: 1.  Board tolerated or promoted over-ambitious agenda, multiple

objectives.

2.  “See-saw” existence; managers could not perform satisfactorily

3.   Absence of experienced independent directors potentially deprived sense of proportion and perspective


Major responsibilities of the Board: 2. Develop/ approve strategy w/ management; monitor strategic goals

68

“Maintaining the delicate equilibrium between management versus board capture is at the heart of good governance. (p 12)

“Understand the organization’s strengths and weaknesses (strategic

role is to address these strengths and weaknesses).” (p 6)

AfriCap Experience: 1.  Board lacked confidence in Management

2.  Relationship between Board Chair and Manager was not functional

3.  Board ignored signs of misalignment of objectives / agendas with management


Major responsibilities of the Board: 3. Foster effective organizational planning, incl. succession planning

69

“It is important to ensure that the [Fund] is grooming future management and that there is a plan of succession. Management

succession is a clear and important responsibility of the board.” (p12)

AfriCap Experience: Successions of key leaders at critical junctures were inadequately planned and supported


Major responsibilities of the Board: 4. Ensure risk is managed effectively; assume fiduciary responsibility

70

“The board must be continually alert to potential risks and should expect to devote much of its time to identifying and managing risks, and determining the risk appetite of the [Fund].” (p 27)

AfriCap Experience: 1.  The ICOM, as the key instrument of the Board in managing risk, did not

function effectively. 2.  For significant periods, deal origination was prioritized at the expense of

both deal quality and post-investment value creation. 3.  Coordination of investment and TA functions was inadequate.


71

“The chair is expected to play a more active role than other board members. The board chair should interact regularly with the CEO,

have an active role in recruiting board members [and] be responsible for succession oversight. . . .” (p 20)

AfriCap Experience: 1.  Performance concerns not addressed. 2.  Chair – Manager relationship allowed to go sideways; inadequate support for

new and inexperienced chair.

Major responsibilities of the Board: 5. Oversee management performance


72

AfriCap Experience: Board and ICOM did not appear to assess adequacy of team resources to effectively execute all responsibilities.

Major responsibilities of the Board: 6. Ensure adequate resources to achieve mission


73

“Boards should conduct regular risk assessments and ensure that risk management plans are in place (e.g., scenario, contingency,

and/or continuity) of business plans).” (p 27)

AfriCap Experience: 1.  ICOM and Board did not assess progress of portfolio and risks as portfolio

grew. 2.  While Board did step in to appoint a new manager in 2010, it had waited too

long to take action and then left the position vacant for many months.

Major responsibilities of the Board: 7. Ensure organization changes to meet emerging conditions


74

“When joining the board, each new director should sign a code of conduct agreeing to a primary commitment to the MFI in all board dealings. . . . Members with an acknowledged conflict of interest on a given issue should excuse themselves from voting on that

issue.” p18 AfriCap Experience: 1.  Conflict policies and reporting requirements appear to have been poorly

understood and erratically complied with. 2.  Valuable time and energy lost in resolving conflict situations that should

have been fully aired and agreed processes put in place at their origin.

Major responsibilities of the Board: 8. Uphold ethical standards, with transparency and avoidance of conflicts of interest


Conclusions: How did AfriCap’s governance support or undermine its social performance?

Bear in mind: first launched in 2001!

75

Achievements: 1.  AfriCap fulfilled the goals of its DFI and foundation creators – move first, be

creative, break new ground 2.  Board members were clearly committed to AfriCap’s success, engaged and in

many case, generous with their time and expertise.

Key learnings: 1.  Set stable strategic priorities: financial / social 2.  Match goals with adequacy of resources 3.  Address leadership challenges, especially if there is no dominant shareholder 4.  Create feedback loop: measure performance to plan and take necessary

action

The importance of Social Performance

Management as part of Good Governance


Dina Pons East Asia Regional Director & Social Performance Manager, Incofin IM

[email protected]

Two Investees of Incofin IM

• CASE 1: AMK: Cambodian microfinance institution

• CASE 2: Kushali Bank: Pakistani commercial microfinance bank

77

Case 1: AMK

•  Since the start of its operations, AMK embedded its social mission in its strategy.

•  Founding NGO, Concern Worldwide was looking for an investor which would maintain and enhance AMK’s social mission implementation.

78

Governance and SPM

79

Case 1: AMK

AMK’s social mission: to help large numbers of poor people to improve their livelihood options through the delivery of appropriate and viable microfinance services”.

80

…Result

Village penetration 85%

HHs Penetration 12%

#Clients: 399,217

# Borrowers 326,759

# Savers 86,103

#Transfer Tran 123,138

AMK’s mission is "to help large numbers of poor people to improve their livelihood options through the delivery of appropriate and viable microfinance services”.

Large Number Poor People Appropriate

&Viable Microfinance

Service

Adequacy of

Products Transparency and Client

Protection

Improve livelihood options

Other social responsibilities

81

…Result

AMK’s mission is "to help large numbers of poor people to improve their livelihood options through the delivery of appropriate and viable microfinance services”.

Large Number

Poor People Appropriate &Viable Microfinance Service

Adequacy of Products Transparency and Client Protection

Improve livelihood options

Other social responsibilities

•  Full range of Product: Loans, Savings,

Money Transfer: 14 products •  Drop Out rate : 16% •  Average saving balance: USD 389 •  Average Loan Size/GNI: 36.9% •  % borrowers who save 28%

•  Client satisfaction score: 93% •  Client Awareness score: 0.7 •  Multiple Loans Rate: 38% •  Multiple loan rate against usual policy: 4% •  % Clients experiencing repayment problems

without NPL: 8%

82

Governance and SPM

83

SPM and Governance

How did AMK benefit from embedding SPM aspects in its strategic decision making? • Most innovative rural saving mobilisation in

Cambodia •  First institution to develop emergency loans •  Sole institution to offer agricultural credit line

product

84

Case 2: Kushali Bank

•  Shareholder Agreement mentioned: “ to set-up and E&S function with a dedicated person in charge, within one year after investment”.

•  E&S unit has been set up as part of the Risk

Department •  Discussion on the social mission at the BOD level •  Finalization of a social dashboard in line with the

social mission •  Tracking for USSPM implementation through SPI4 •  Recent creation of an SPM committee at the BOD

level

85

Social Dashboard creation

“To strengthen the economic base of low-income populace and micro-entrepreneurs by improving their accessibility to financial services. By offering a diverse product suite, exemplary service and cost efficient next generation delivery systems, we intend to achieve our core objective of outreach and sustainability.”

86

Tracking Social Performance

EXEMPLARY SERVICE #VALUE!

# complaints:

Retention rate: 86.63%

Satisfaction rate -‐ customer services:

05

1015202530

05

1015202530 Behaviour-‐

relatedProduct-‐relatedTechnical-‐related

3%

97%

Dissatisfied

Satisfied

Geographic scope (# clients):

Rural penetration:

7%

74%

16%1%

2% 0%KP

Punjab

Sindh

Balochistan

AJK

92%

8% Ruralclients

Urbanclients

87

Embedding SPM in the Governance

• Can be simple and cost effective: ▫  Part of the regular reporting (BOD Package) ▫  Optimize functions depending on your

institution’s history ( AMK: research vs Kushali: risk)

• Allows to verify whether we are meeting our

double bottom line claim and to proactively make relevant changes if necessary.

88

Thank you for your attention!

Dina Pons East Asia Regional Director & Social Performance Manager

[email protected]







when exiting



Loïc de Cannière, Managing Director, Incofin Investment Management Jean Gabriel Dayre, Senior Investment Officer, PROPARCO Paul DiLeo, President of Grassroots Capital Management

Steven Van Weede, Managing Director, Capital Advisory Services, Enclude

Responsible finance for equity investors: Challenges and considerations when

exiting








when exiting



Measuring and reporting outcomes: Realistically, credibly, cost-effectively State of practice, lessons, challenges,

future focus

Frances Sinha Luxembourg, March 2015

Agenda

• Background

• Experience/Discussion

•  Plans/Working Group

94

•  ‘Impact investment’ for what impact? • Clarity/agreement on meaning is important • Otherwise – mix of data and reports – not

comparable….

The challenge of defining social returns BACKGROUND

95

Challenges of measuring social return

• Pragmatic concerns – ease of measurement and reporting

• Easiest – rely on supply side indicators ▫ Average loan outstanding, growth of accounts,

repayments –(win-win) ▫ Maybe add geographies, gender, loan use ▫ And a few nice photos and success stories

• Can actually be misleading - client dropout, multiple borrowing; realistically how can we always expect success?

BACKGROUND

96

Not expecting to ‘prove impact’

• RCTs • Ethnographic studies –financial diaries • Useful insights at high cost – requires strong

research capacity; time • RCTs – short term; remind us to distinguish

between near-term and longer-term changes; recent useful application – to compare different approaches to promoting savings

BACKGROUND

97

Shift focus to outcomes

• Outcomes = Change for clients that is plausibly associated with the financial services

• Reporting on value for clients (accountability) and issues that need attention (improving)

• Getting beyond the statistics, averages – analyzing the data: what works, for whom

BACKGROUND

98

Theory of change - framework

OrganizaMon’s Value proposiMon

Mission and

objecLves

Strategies

Target Population

Inputs

Outputs

Outcomes Near-‐Term/ Longer Term)

Impact

Key Performance Assessment Metrics

Impact studies

CONTINUOUS LEARNING AND IMPROVEMENT Occasional Research

99

Overview: What have we learned?

Practical academic perspective Malcom Harper - Professor Emeritus


• Lots of studies, meta-studies, qualitative, quantitative.....

• D Hulme 1995, BASIX 2001, Karlan, Banerjee, Duflo.....

What is the impact of microfinance? (or, what are its “outcomes”)

101

MOLDING CLAY UNDER THE BLAZING SUN IN ALEJANDRA ALVAREZ’S OPEN-AIR WORKSHOP 102

• MF is marginally beneficial to large numbers of poor people

• MF is marginally damaging to rather smaller numbers, particularly the poorest

• MF is life changing for a very small number • MF is life destroying for an even smaller number

Unsurprisingly…

103

• February 2015, Poverty Action Lab at MIT Summary of 7 large-scale RCT evaluations, India, Mexico, Bosnia, Mongolia, Ethiopia, Philippines, Morocco

“Where credit is due”

105

• Modest demand for credit, 13% to 31% of those offered did not want it

• Some increased business investment, but no significant profit increases

• No significant income increases • No + or – impact on woman’s empowerment or

children in school • Rates of interest made no difference

PAL study – Main findings

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• Modest demand for credit, 13% to 31% of those offered did not want it

• Some increased business investment, but no significant profit increases

• No significant income increases • No + or – impact on woman’s empowerment or

children in school • Rates of interest made no difference

PAL study – Main findings

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• Who are excluded from MF, how does exclusion affect them ?

• Who drops out of MF; do they fly out, slide out or drop out ?

• What difference does it make to provide ‘real’ banking; savings, transfers, not only micro-debt ?

BUT – questions remain unanswered

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• Must there be ‘controls’ • Are RCTs the ‘gold standard’ • For how long should clients have received MF

services ? •  ‘In-house’ or by outsiders ? • Special studies or as part of routine

management ?

When, how and by whom should impact be measured ?

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Options for investors

• Monitoring key indicators as part of MIS • Research department within FI • Commissioning external evaluations

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EXPERIENCE

Learning from recent work EXPERIENCE

• Why do you measure outcomes - what are the outcomes questions you are interested in and why?

•  What approaches do you use – how do you guide investees?

• What have been the challenges ? What have you learned?

• How has the data been used? • What are the issues that need attention? further

areas of work?

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Investor experiences and perspectives

SPTF Outcomes Working Group: Overview

SPTF Outcomes Working Group

Started October 2014

Purpose: To develop practical guidelines

for credible measurement and reporting of

outcomes, drawing on experience with

different approaches and tools.

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Outcome measurement Getting the most out of available data


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The study: New insights from client monitoring databases

Questions: •  Can MFIs make better use of

the data they already have? •  What process does this entail? Participating MFIs: •  Fundacion Paraguaya •  IDEPRO (Bolivia) •  Fundacion Genesis Empresarial

(Guatemala) Approach: •  Analyze monitoring databases •  Assess data management

process •  Recommend how to use results

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Data example

Indicator mean before mean after Av change ⇑ ⇓ ⇔

Revenues 592 689 97 88% 7% 5%Profits 238 276 38 73% 26% 1%

Net worth 21,118 24,731 3,614 77% 15% 8%Employees 2.4 2.8 0.4 30% 3% 67%

Av US$ excl outliers % clients

IDEPRO, Bolivia Mission – improvement of productivity income and employment of client business ProCadenas loans specialised to a value chain, with TA Business level economic data collected for all clients at each new credit evaluation – Systematically entered, validated and analyzed 572 clients, baseline + 12 months

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Framework – an end-to-end process

Define

Collect

Store

Analyze

Utilize

A selected number of impact indicators that closely mirror the MFI’s mission, theory of change, and motivation for impact measurement.

Integrate data collection into underwriting process. Improved data collection technology has the potential to reduce cost, time burden and error, as does careful consideration of loan officer incentives.

Databases should allow for easy linkages between datasets and simple exports.

Good analysis requires appropriate software and human resources, as well as effective communication between analysts and decision makers.

MFIs should be encouraged to utilize their results for internal program improvement as well as external promotion and accountability.

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How we can help? Triple Jump Advisory Services can finance and implement several more such assessments in 2015

targeted technical assistance on key areas

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SPTF Outcomes Working Group: Plans

SPTF Outcomes Working Group

• A forum for investors, practitioners, TA providers, researchers

• Engage with different experience, examples • Pragmatic • Selected themes • Develop practical guidelines – peer/expert

reviewed, jargon free, relevant materials • 18-month time frame

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OWG plans

• Near-term vs. longer-term outcomes • A menu of field tested outcomes indicators • Internal vs. external options • Appropriate tools - data collection, quality

control; sampling option • End-to-End process: integrated, systematic from

selecting indicators, to reporting, and use • Demonstrating data analysis and use – evidence

for results, and for improving

SPTF Outcomes Working Group: Emerging themes

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SPTF Outcomes Working Group: Linking in with other initiatives

Microfinance CEO Working Group

Menu of indicators – by theme Practical criteria for selection on key outcomes areas

Acumen Online training materials – social impact measurement, lean data

Big Society Capital Outcomes matrix for different outcomes areas

Mission Measurement Identifying efficacy factors that predict outcomes – to simplify measurement

Entrepreneurs du Monde MIS software Grameen Foundation PPI and standards of use Women’s World Banking Baseline/endline research

OWG plans

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• Scan of recent, relevant materials • Webinars, bi-monthly: specific themes and

practical examples, issues (varied presenters/experts)

• Working sessions – SPTF annual meetings • Briefs from SPTF meeting in 2014, and 3

webinars to far

OWG plans

SPTF Outcomes Working Group: Activities

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Inviting your involvement

• Aligning with investor priorities

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Thank you

•  For follow up, please contact: [email protected] [email protected]

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when exiting



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