social investor meeting on responsible inclusive … financial inclusion (prev. sks) what do you...

Social Investor Meeting on Responsible Inclusive Finance

Customer Centricity Learning EventChennai, India

Monday February 19, 2018

Agenda• 11.00-11.10: Welcome and Updates

• 11.10-11.40: Understanding the risk for over-indebtedness in India

• 11.40-12.20: Implementing the Universal Standards in India

• 12.20-13.00: Responsible Exits

• 13.00-14.00: Lunch

• 14.00-14.30: SPI4 and ALINUS

• 14.30-15.00: Update on lender guidelines monitoring in Cambodia

• 15.00-15.45: Assessing S&E performance of SME finance

• 15.45-16.00: Coffee Break

• 16.00-16.45: Digitalization & Fintech

• 16.15-17.00: Data Platform

• 17.00-17.45: Aligning efforts with the impact investing field

• 17.45-18.00: Wrap up and conclusions

• One of the most active working groups of the SPTF..

• …with a growing number of investors joining and committing to our shared objectives - ~400 members from 133 organizations.

• We work together to advance responsible investment in inclusive finance. Together, we:

▫ Raise awareness and create ownership among investors of ongoing initiatives and developments in SPM

▫ Identify areas of concern in responsible inclusive finance

▫ Take collective action in areas where it can help the market develop in a positive and unified direction

Welcome

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1. Harmonizing investor due diligence and monitoring on social performance through the common tool of SPI4 ALINUS

2. Evaluating client protection risks in fintech investments during due diligence and ongoing monitoring (CDC-SPTF fintechwebinar series)

3. Aligning efforts with the broader impact investing sector, particularly related to accelerating impact measurement and management (WEF, GIIN, IMP, UNPRI)

4. Assessing S&E performance of SME finance5. Other areas of priority include preventing over-indebtedness

(guidelines and MIMOSA), managing social outcomes (outcomes working group), harmonizing loan agreement covenants (“reasonable covenants”), pricing transparency (data platform), and responsible exits

Current priorities of the SIWG

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We’ll be discussing updates on most of these today

• 2017: Zurich (March), Mexico (May)

• Next meeting in 2018 likely to take place in June in Luxembourg

• We also meet several times throughout the year via webinars in areas of common interest to group members

In-person meetings: 2x a year

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Sign up to become an organizational member

• Being 100% donor-dependant is no longer an option

• SPTF recently introduced a new fee-based organizational membership model

• Thank you to Oikocredit, Grameen Credit Agricole Foundation, Symbiotics that recently became organizational members

• Your organization will be receiving an invoice very soon

• To sign up visit https://sptf.info/about-us/membership

• For questions contact [email protected]

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https://sptf.info/about-us/membership

mailto:[email protected]





• 13.00-14.00: Lunch









Frances Sinha & M-CRIL teamwww.m-cril.com

USSPM Dimension 5: Treat Employees ResponsiblySome observations on MFI Practices in India

SPTF Social Investor Working GroupFebruary 2018

M-CRIL

M-CRIL

M-CRIL

v Engaged with microfinance since 1998

v Now merged with EDA – training, research, social businesses

Ø 2017 ADB equity investment; strengthens our work in

microfinance and other sectors across Asia

Ø Offices outside India – in Myanmar, Cambodia

Ø In India: Applying for Rating license from RBI – to be recognized

by banks in India. Fewer ratings, more Client Protection

Certifications, Code of Conduct Assessments, Loan Portfolio

Audits, Third Party Evaluations

M-CRIL

Observations overall – India context

Ø Formal Banking o Distanced from low income people o Labour unions seen to be self-serving, disruptive, (and public

sector – politicized)

Ø MFIso Close to target market – low income people o Margin cap; drive for operational efficiency: staff are the

major operational expense – but sometimes very high compensation to CEOs/senior management

o Differences: geography (north vs south; urban vs rural), size (Tier 1 = >250,000 clients, vs Tier 2/3)

M-CRIL

Observations overall – MFIsØ MFIs contd.

o Field staff often recruited from same background as clients; school leavers (class 10/12)

o Common policy that local staff are not posted in their home area; rotated across branches every 6 months (fraud mitigation)

o Work requires early start to working day, mobility (motor bike)

o These are reasons for low % women field staff

Ø Sector concerns since 2010 – client protection; less attention to staff protection, though recognition of HR issues, having an HR policy

USSPM 5 - summary

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Source: CERISE SPI-4 Benchmarks, Feb 2018

Inde South Asia

South East Asia

Number of FSP 5 16 28

DIM 5: TREAT EMPLOYEES RESPONSIBLY 84% 83% 70%

5A - HR policy 79% 81% 68%

5B - Communication of terms of employment 95% 88% 78%

5C - Employee satisfaction 77% 79% 63%

4 Urban, 2 Tier 1, 2 headquartered in S India

M-CRIL

The high flyers

Recognised as among top ‘best companies to work for’ in India, past 3 years and more:

v Ujjivanv Equitasv Bharat Financial Inclusion (prev. SKS)

What do you think about this?

Tools applied: Trust Index - quality of employee experienceCulture Audit - evaluates people practices

Do we need such tools to reinforce USSPM 5?

M-CRIL

EP 5A.1. HR Policy/Employee Rights

• Most MFIs have an HR policy –available at branches; updated via circulars;

• Specify standard working hours/holidays

• Accommodation (and food) is provided to staff at the branch

• No field staff back up – so long working hours; Sunday a training day; holidays not given easily

• Very basic accommodation, questionable - ventilation, lighting, hygiene

• Women field staff – 0-22%

• Women board members –0/1-4/5

M-CRIL

EP 5A.2. Staff compensation

• Staff awareness of salary structure is high

• High incentives for growth making a comeback

• High targets for LOs set immediately after LO induction

• Performance evaluations often based only on targets

LOs: Other comparable industries provide better monetary compensation and reduced working hours to candidates of similar backgroundOutstanding Issue of CEOs/senior staff: field staff pay (USSPM6)

Benchmark by minimum wage –appropriate?

M-CRIL

• MFIs have systems in place • Tier 2/3 MFIs lack multiple channels that work effectively and maintain confidentiality; affects staff confidence in system –seldom complain

EP 5A.3 Staff complaints

M-CRIL

EP 5A.4 Staff Health and safety

• Shift from cash collections by staff – because of security concerns

• Nearly all MFIs provide private health and life insurance for staff

• Review of staff health risks –limited to road accidents and wearing helmets

• Risks and incidents not reported to Board/Management Committee

M-CRIL

EP 5B.1 Job description/performance evaluation

• MFIs provide written contract letters that contain JD or reference to it.

• Most staff are well aware of their roles and responsibilities

Tier 2/3 MFIs:• Criteria for promotion not

clearly defined• HR staff mostly perform

only admin tasks related to HR

M-CRIL

EP 5B.2. Staff training/skill development

• At least a one week induction program for new employees

• Task related refresher trainings provided regularly

• Promotions (field level) -few FIs train on soft skills (e.g. leadership)

• Performance appraisals and training needs not linked

Project updateFeb 2018

Publications to date

Apr 201722

Country reports

Jordan Apr 2018 EnNicaragua Mar 2018 En, SpIndia

Uttar PradeshMaharashtraTamil Nadu

Feb 2018 En

Morocco Jan 2018, Dec 2015 En, Fr

Kyrgyzstan Aug 2017, Nov 2015 En

Cambodia Nov 2015, May 2016 En

Bolivia Dec 2015 En, Sp

Peru Jan 2016 En, Sp

Azerbaijan Apr 2016 En

Senegal Sep 2016 En, Fr

Circulars Cambodia Jun 2016, Dec 2016 En

Apr 201723

Subscribers can now access all reports on

MicrofinanceReports.com

2018 Subscription Fee Schedule

24 Apr 2017

Annual subscription Access to all current & past reports

€9,900

Single report One country report (current & past)

€1,500

Commissioned reports Report on country of choice + annual subscription

€15,000

MicroFinanza Rating discount

For subscribers to MicroFinanza rating & country reports

15%

Subscriber list is growing…

v BNP Paribasv Deutsche Bankv Kiva (in-kind)v MCE Social Capitalv Proparcov responsAbilityv Triple Jump

v Commission from IFC (for Jordan)

v And core funding & administrative support from e-MFP

25 Apr 2017

A whole new look at India data

26 Apr 2017

Data Analytics

MIMOSA scores and multiple borrowing data

§ State level for all India

§ District level for UP, TN, and MH

§ Targeting trends for different loan segments – comparing

banks and MFIs

§ Changes in competitive landscape

§ Analysis of impact of demonetization

27 Apr 2017

Field survey of 450 interviews

§ Aggressive collections

§ Intra-household borrowing

§ Loan “bicycling” examples

§ Other input to shed light on the numbers…

28 Apr 2017

And much more…

§ Competition levels at state-level

§ MFI survey results

§ Market trends

§ Etc.

29 Apr 2017

Expanding MIMOSA dataset (and knowledge!)

30 Apr 2017

MIMOSA in Cambodia:

from knowledge to impact

31 Apr 2017

Thank you!

32 Apr 2017

M-CRIL

EP 5C. Staff satisfaction/turnover

Larger MFIs:• conduct staff satisfaction

surveys regularly; analysedata by position

• conduct exit interviews; share data with Board

• Exit rate formulae not standardized (do not disaggregate for staff on probation)

• Tier 2/3 MFIs: Less regular surveys; lack formal exit process

M-CRIL

EP 5C. Data

• Average figure often cited for staff exit: ‘25%’

• Reported data, 29 MFIs, north and east: average 35% 2015-2016, 5 MFIs >50% (Ujjivan, 6%)[38% in 2016-17, after ‘demon’]

Staff dissatisfaction – example, 1 Tier 1 MFI, north q 37% not satisfied with leave days q 31% not satisfied with salaryq 27% inadequate training for the job q 15% management communication not good

M-CRIL

To conclude…

v Responsibility to staff – some strong examples, but needsattention

v Beyond policies to actual implementation

v Aim for more transparency, real data on staff conditions (field) –(as well as on remuneration to top staff)





• 13.00-14.00: Lunch









Responsible Exits:Buyer Selection

Catalina von Hildebrand, NpMDaniel Rozas, e-MFP

1. Feasibility of regulatory approval

2. Preliminary exclusionary criteria

A.History of malfeasance or criminality

B.Non-transparent finances or sources of funding

C.Links with sectors tied to ESG exclusion list or other exclusionary criteria legally binding to the seller

D.Negative headlines or rumors

E.Reasonable suspicion of bad faith

PassPass

• At each progressive step, all prior criteria should be already met• Importance of most criteria (including prior steps) increases with size of stake sold

3. Minority stake

A. Buyer’s social responsibility profile (rank order)i. Buyer is an established

social investorii. No, but has established

track record in financial inclusion

iii. No, but is acceptable to existing shareholders

B. Demonstrated commitment to client protection & SPM

C. Strategic value to investeeD. Likely timeline to complete

transaction

A. Buyer profile (e.g. fintech, bank, VC, etc.)

B. Strategic goalsi. For the investeeii. For the buyer

C. Buyer’s stated & effective investment horizon

D. Capacity and willingness to provide additional financial resources post-purchase

E. Capacity and willingness to provide non-financial resources

F. Retention of management at MFI

G.Capacity to facilitate external funding

H. Explicit commitment to maintain social mission (egletter of comfort)

I. Geographical proximity to investee

Pass4. Minority stake

Multi-seller Consortium?Agree on threshold

of acceptability

Buyer Selection Framework

1. Feasibility of regulatory approval

2. Preliminary exclusionary criteria

A. History of malfeasance or criminalityB. Non-transparent finances or sources of fundingC. Links with sectors tied to ESG exclusion list or

other exclusionary criteria legally binding to the seller

D. Negative headlines or rumorsE. Reasonable suspicion of bad faith

Pass

3. Minority stake

A. Buyer’s social responsibility profile (rank order)i. Buyer is an established social investorii. No, but has established track record in financial

inclusioniii. No, but is acceptable to existing shareholders

B. Demonstrated commitment to client protection & SPM

C. Strategic value to investeeD. Likely timeline to complete transaction


A. Buyer profile (e.g. fintech, bank, VC, etc.) B. Strategic goals

i. For the investeeii. For the buyer

C. Buyer’s stated & effective investment horizonD. Capacity and willingness to provide additional financial resources post-

purchaseE. Capacity and willingness to provide non-financial resourcesF. Retention of management at MFIG. Capacity to facilitate external fundingH. Explicit commitment to maintain social mission (eg letter of comfort)I. Geographical proximity to investee

4. Minority stake Multi-seller Consortium?Agree on threshold

of acceptability


Thank you!

inclusivefinanceplatform.nl e-mfp.eu fiecouncil.com

@NPM_inclfinance @e_MFP @Accion

http://www.inclusivefinanceplatform.nl/

http://www.e-mfp.eu/

https://fiecouncil.com/

How Equitas Small Finance Bank Balances Financial and Social Performance

• Voluntary cap on interest rates of 26% since inception

• Target ROE ~20% and cap of 25% • Cap on CEO salary of 40x lowest paid employee• Annual 5% profits to social programs, like housing,

food security, healthcare, livelihood skill development, and supplemental education for Equitas Small Finance Bank clients and the ultra poor

• 15% of net worth invested in land and buildings for schools

• Smart Certified43





• 13.00-14.00: Lunch









SPI4 and ALINUS: uptake, support, state of practicesSPTF ANNUAL MEETING – SOCIAL INVESTOR WORKING GROUP

CHENNAI, INDIA, FEB 19, 2018

SPI4 and ALINUS, a brief reminder

SPI4.xlsm

Green Index

FSP ID/ Org Info

50

Each participating MIV selected from SPI4 the

indicators they wished to use during due

diligence/monitoring.

CERISE analyzed this list, and asked MIVs to reconsider

their choices when they had selected indicators that few other MIVs were interested

in.

These iterative rounds of input made it possible to

finalize a list of 80 indicators from the SPI4.

In July 2016, SPI4 revised, with 20% fewer indicators.

ALINUS 2.0 frozen at 68 indicator until 2020.

68

Development of ALINUS

www.cerise-spi4.org

CONCENTRATE

CONVINCE

COMPILE

COMPARECOMMUNICATE

SPI4-ALINUS, Why?

MIV/DFIs using ALINUS

Full use (direct or aligned indicators)ADA/LMDF, AFD, Alterfin, Blue Orchard, BNP Paribas, Cordaid, European Investment Fund, Gawa, GCAMF, Incofin, Oikocredit, Pamiga, Proparco, Sidi, Stromme MF/EA

Testing/strategic planningDeutsche Bank, European Investment Bank, FAS, GrassRoot, Symbiotics, Triple Jump, Verdant Capital

Awareness raising

In contact with CERISE/SPTF for strategic discussions

15

7

17

International/National Networks usingSPI4/ ALINUS

Networks using SPI48 International: ACEP, Advans, CIF West Africa, Microcred, Opportunity Intern’l, Oxus, Pamiga, Vision Fund

6 National: Amcred Brazil, Copeme Peru, Finrural Bolivia, RFD Ecuador, MCPI Philippines, PMN Pakistan

Networks in training/awareness or using reduced network option3 International: AgaKhan, Grameen Foundation, CICM, etc.

10 National: AMA Albania, AMFA Azerbaijan, AMFI Kyrgistan, AMFOT Tajikistan, ASOMIF Nicaragua, CMF Nepal, LMWG Laos, Radim Argentina, RedFasco Guatemala, UCORA Armenia, etc.

14

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Two companion guides to assess and improve

www.RIFacademy.org

MIR Action Group - Lessons learned

•Work in progress with eMFP, MFC, SPTF, CERISE and investors (MakingMicrofinance Investment Responsible)• 4 surveys to FSP, networks, SPI4 auditors and investors• First feedbacks•What would you need, as investors, to improve the awareness/use/progress in the Universal Standards?•What would you like to learn from this work? • Feel free to participate!

Testimonies from other users• SIDI : early stages of adoption, SPI4 vs. SPM

•GCAMF: benchmarks, SP requirements, trends in 2017

• INCOFIN: implementation for due-diligence

Grameen-Credit Agricole Microfinance Foundation

Portfolio Benchmark by dimension –SPI4 ALINUS

GCAMF Database CERISE

N=38 N=85DIM 1: DEFINE AND MONITOR SOCIAL GOALS 56% 46%

DIM 2: COMMITMENT TO SOCIAL GOALS 54% 47%

DIM 3: PRODUCTS THAT MEET CLIENTS' NEEDS AND PREFERENCES

61% 57%

DIM 4: TREAT CLIENTS RESPONSIBLY 69% 60%

DIM 5: TREAT EMPLOYEES RESPONSIBLY 76% 68%

DIM 6: BALANCE FINANCIAL AND SOCIAL PERFORMANCE

63% 62%

TOTAL 63% 57%

GREEN DIM* 14% 26%

0%20%40%60%80%

100%DIM 1

DIM 2

DIM 3

DIM 4

DIM 5

DIM 6

Average score by dimension

GCAMF N=38* Only 36 % of MFIs from CERISE database have filled in the green dimension

Our key strengths: Sub-Saharan Africa, Asia and small size MFIs

0%20%40%60%80%

DIM 1: DEFINE ANDMONITOR SOCIAL

GOALS

DIM 2:COMMITMENT TO

SOCIAL GOALS

DIM 3: PRODUCTSTHAT MEET

CLIENTS' NEEDSAND PREFERENCES

DIM 4: TREATCLIENTS

RESPONSIBLY

DIM 5: TREATEMPLOYEES

RESPONSIBLY

DIM 6: BALANCEFINANCIAL AND

SOCIALPERFORMANCE

GCAMF (SSA region)N=20

0%

50%

100%

DIM 1: DEFINEAND MONITORSOCIAL GOALS

DIM 2:COMMITMENT

TO SOCIALGOALS

DIM 3:PRODUCTSTHAT MEET

CLIENTS' NEEDSAND…

DIM 4: TREATCLIENTS

RESPONSIBLY


RESPONSIBLY

DIM 6: BALANCEFINANCIAL AND

SOCIALPERFORMANCE

GCAMF (ASIA region)N=11

0%20%40%60%80%

DIM 1: DEFINEAND MONITORSOCIAL GOALS

DIM 2:COMMITMENT

TO SOCIALGOALS

DIM 3:PRODUCTSTHAT MEET

CLIENTS' NEEDSAND…

DIM 4: TREATCLIENTS

RESPONSIBLY


RESPONSIBLY

DIM 6:BALANCE

FINANCIALAND SOCIAL

PERFORMANCE

GCAMF (Tier 3) N=20

GCAMF vs benchmark by region: Sub-Saharan Africa GCAMF vs benchmark by region: Asia

Our achievements• Strong ALINUS score for Africa• 5 out of 6 dimensions above benchmark. • Well above for Dimension 1: Our partners have a clear social

strategy and properly measure these social goals.

• ALINUS score for GCAMF portfolio in Asia above benchmark for all dimensions.

• Strong over-performance on staff (5) and client protection (4)

• Tier 3 partners of GCAMF Portfolio are well above the benchmark.

• Our Tier 3 partners are in particular highly committed to social goals and their Boards, management and staff are aligned with these goals

SUB-SAHARA

N AFRICA

ASIA

TIER 3

62 Grameen Credit Agricole Foundation

social investor meeting on responsible inclusive … financial inclusion (prev. sks) what do you...

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