How does Social How does Social Performance Management Performance Management (SPM) initiative translate (SPM) initiative translate

into social returns into social returns (benefits and costs of (benefits and costs of

SPM)SPM)

Irina Ignatieva, Microfinance Advisor,

Concern Worldwide

www.concern.net

About Concern WorldwideAbout Concern Worldwide

• Non-governmental, international, humanitarian organisation

• Dedicated to reduction of suffering and ultimate elimination of extreme poverty in the world’s poorest countries

• In 2008 worked in 30 countries and reached 10 million people directly

• Long-term development work: health, education, livelihoods, HIV and AIDS programmes

• Responses to emergency situations

• Addressing the root causes of poverty through its advocacy and development education work

Objectives of the PresentationObjectives of the Presentation

Review a case study of AMK, in Cambodia

Discuss Concern Worldwide’s approach to Social Returns and SPM

Where Concern Worldwide is involved Where Concern Worldwide is involved in SPM in microfinancein SPM in microfinance

AMK, Cambodia– a subsidiary of Concern Worldwide in Cambodia; serving the rural poor;

200,000 clients across the country, 85% of clients are women

– Concern Worldwide’s focus at AMK governance level - SPM committee in AMK: overseeing social research and reporting; advisory role to the Board

Africa Microfinance Initiative

– a joint initiative of Concern Worldwide and Agora Microfinance Fund, since 2009

– access to finance for the poorest where the need for access to financial services is the greatest and the supply is the lowest

– green field microfinance operations in Sub-Saharan Africa; initially, Zambia and Malawi

– defining and measuring social returns in Africa Microfinance Initiative with focus on mission, market and social research, setting reporting standards, ensuring SPM is imbedded in the operations

Financial performance Social performance

Goal Financial self-sufficiency: sustainable delivery of viable services

Large number of the poor improve their livelihood options

Means Appropriate products and delivery mechanisms

Appropriate products and delivery and client protection mechanisms

Information source

MIS, accounting system, audit

Market and social research, MIS, HRM, audit

Indicators Operational and financial self-sufficiency, ROE, ROA

Depth of outreach, client satisfaction

Financial and Social Performance in case of Financial and Social Performance in case of AMK, a non-deposit taking MFIAMK, a non-deposit taking MFI

Costs of SPM in case of AMK Costs of SPM in case of AMK as percentage of operating costsas percentage of operating costs

2006 2007 2008

Direct field work (personnel, transport, data cleaning and entry)

1.3% 0.7% 0.9%

Software development 0.3% 0.0% 0.0%

Analysis and report writing 1.3% 0.7% 0.7%

Workshops, meetings, conferences (internal, social performance committee, external)

0.6% 0.4% 0.6%

Social performance committee (SPC) costs 0.8% 0.2% 0.2%

Total research and SPC costs 4.2% 2.0% 2.3%

Staff 3 of 188 4 of 349 5 of 519

Number of clients interviewed 450 of 67,006 375 of 120,111

1,271 of 151,604

AMK’s accomplishmentsAMK’s accomplishments

System for balancing financial and social objectives at management and Board (SPC) levels

Commitment to long-term strategies that incorporate SP + FP when assessing if AMK is achieving its mission

Client-level data and “intelligence” for informing decisions

Know-how/expertise within AMK self-reliance and culture of consultations/discussions

Working towards definition of social returnsWorking towards definition of social returns

Focus on savings – tracking progress from subsistence to growth • Moving from borrowers’ capital limited to the means of

subsistence• Through developing savings habit and providing loans for

productive activities• To savings as capital for investment in productive activities

The indicator should be• Comparable to return on equity (ROE)• Measurable and verifiable• Data available from MIS• Reported on a monthly, quarterly, annual basis

Defining social returns: Defining social returns: savings as a source of capital for the poorsavings as a source of capital for the poor

• Financial returns: capital growth indicator in MFI = ROE

• We suggest social returns: capital growth indicator in client households = the borrowers’ average deposit amount change, viewing savings as clients’ capital

Comparing average deposit amount change and ROE, 56 sustainable MFIs, 2006-2008Comparing average deposit amount change and ROE, 56 sustainable MFIs, 2006-2008

P erc entag e c hang e of averag e depos it amount in 56 s us tainable depos ti-taking MF Is

02468

101214161820

P ercentage change

Number of MF Isin each category

2006

2007

2008

R eturn on E quity in 56 s us tainable depos it-taking MF Is

0

2

4

6

8

10

12

14

16

18

20

R OE

Number of MF Isin each category

2006

2007

2008

Comparing social returns to financial returnsComparing social returns to financial returns

Observation:Observation: MFIs clients’ savings diminished: 2008 in 61% of MFIs;

2007 in 16 % of MFIs; 2006 in 18% of MFIs

while the capital of the MFIs increased

Conclusion:Conclusion: If social returns reflect average savings amount growth

in poor households, social returns in 34 MFIs (61%) were negative in 2008, while the MFIs’ financial returns were positive

Compounded savings change and return on equity in 31 deposit-taking MFIs in LAC

-80%

-50%

-20%

10%

40%

70%

100%

130%

160%

190%

220%

250%

280%

1 31

31 deposit-taking MFIs in LAC

Percentage changeROE 2006-2008

Savings change 2006-2008

Are social and financial returns (savings change and Are social and financial returns (savings change and ROE) correlated? – No. ROE) correlated? – No.

Should they be correlated? – Yes.Should they be correlated? – Yes.

What is the right balance between financial and social What is the right balance between financial and social returns?returns?

A sample of 7 African Deposit-Taking MFIs, 2006-2008A sample of 7 African Deposit-Taking MFIs, 2006-2008 Compounded savings change and return on equity in 7 deposit-taking MFIs in Africa

79%

16%16% 22%6%

30%

121%

356%

43%

-46%

9%

40%

121%

30%

-90%

-60%

-30%

0%

30%

60%

90%

120%

150%

180%

210%

240%

270%

300%

330%

360%

390%

1 2 3 4 5 6 7

7 deposit-taking MFIs

Percentage change

ROE 2006-2008

Savings change 2006-2008

Four scenariosFour scenarios = goal setting= goal setting

Social Returns can be

I. Positive and exceed financial returns

II. Positive and at the same level as financial returns

III. Positive and at a lower level than financial returns

IV. Negative

-20%

-10%

0%

10%

20%

30%

I II III IV

SocialReturns

FinancialReturns

Decisions to be made by the Decisions to be made by the stakeholdersstakeholders

• What is the expected level of financial returns for the social investors?

• Which returns should be maximised – financial or social?

• What is the desired balance between the social and financial returns?

Thank you !Thank you !

Irina Ignatieva