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Date: 2024-09-27 Page is: DBtxt003.php txt00004783

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Social Performance Task Force

Social Performance Task Force ... FAQ

Burgess COMMENTARY

Peter Burgess

http://www.sptf.info/how-do-i-start/faqs Frequently Asked Questions

  1. What is social performance?
  2. Why is social performance important?
  3. How do I get my institution started in social performance?
  4. How much does it cost to develop a social performance system?
  5. What is the difference between responsible finance and social performance?
  6. What is the difference between social performance and impact?
  7. What is the difference between managing your financial performance and your social performance?
  8. What are the various social performance initiatives and how do they fit together?
  9. What are the tools and resources for measuring and managing social performance?
  10. Are there industry standards for social performance?
  11. What is the difference between a social audit and a social rating?
  12. Why are donors and investors interested in social performance data?
  13. What is Social Return on Investment (SROI)?
  14. What is the Social Performance Task Force (SPTF)?
  15. How can I get involved?
1. What is social performance? Social performance is defined as “the effective translation of an institution’s mission into practice in line with accepted social values.” In other words, it is about making an organization's social mission a reality, whatever that social mission is. Commonly accepted social values include providing financial and/or nonfinancial services to greater numbers of poor and excluded people, improving the quality and relevance of services already being offered, reducing poverty, creating certain benefits for clients (e.g., increased revenue from their businesses, greater sense of empowerment, decreased vulnerability), and improving an MFI’s impact on the environment or the community, among many others. Social performance management (SPM) is an institutionalized process of translating social mission into practice. It includes setting clear goals, monitoring progress towards them and using this information to improve performance and practice. Social performance management is about achieving your goals and being socially responsible. Return to Top
2. Why is social performance important? Financial institutions that also have a social agenda cannot know whether they are meeting the social goals set out in their missions without deliberately assessing their social performance. Yet, the common performance measures in microfinance focus almost exclusively on an institution's financial performance. As a result, institutions are generally well aware of their financial positions, and have a range of financial data available to guide their strategic decisions, but have no clear idea of how they are performing against their social goals or what steps they would need to take to improve their social performance. Additionally, social performance management is good for the financial bottom line. Tracking and using social performance information to tailor services to client need not only better supports clients’ businesses and well-being, but also increases client retention rates while reducing the likelihood of default due to client over-indebtedness. Furthermore, data from even relatively simple social performance indicators can be powerful marketing tools, providing tangible indicators of achievement that attract funding from socially minded investors and donors. Note: Even financial institutions that do not have a social mission will find some of the tools and resources that fall under the umbrella of social performance useful. In particular, client protection or “do no harm to clients” is a non-negotiable aspect of social performance that any financial service provider should observe. Client protection means, for example, making sure that each client fully understands the terms of a financial product before he/she chooses to use it; securing the privacy of client data; and following ethical practices in debt collection, among other principles. Return to Top
3. How do I get my institution started in social performance? Developing a social performance system is possible for every institution, even those with limited time or financial resources. Generally, the most important reform will be for the organization to incorporate a focus on social performance in all of its activities. To accomplish this, the first step will be to get buy-in from management and staff. Without this, even the most sophisticated social performance management system will not work. Next, there should be a detailed exercise to determine the specific social goals (derived from the mission) of the institution, followed by the establishment of clear and realistic social performance objectives and performance targets. Next comes developing the information systems needed to track these performance objectives, and creating a 'feedback loop' so that the institution actually uses the information it gathers. This typically involves sharing and reviewing the data across departments, assessing performance based on the data, soliciting comments, and making operational changes and strategic decisions based on lessons learned. Sharing and learning with other stakeholders, such as associations or investors, will also increase the effectiveness of the social performance management system. Return to Top
4. How much does it cost to develop a social performance system? There has not yet been enough research to prove a general range of how much it costs to develop a social performance system. From the studies that are currently underway, however, it seems plausible that the long term financial benefits of a social performance system will offset some, if not all, of the cost of implementing it. Specifically, case studies are highlighting many areas in which practitioners have found social performance management to facilitate higher revenue and/or lower cost: Higher retention of clients through monitoring of, and responsiveness to, their satisfaction with the program. Higher client retention rates translate into lower costs, as the cost of recruiting and training new clients exceeds that of retaining existing ones; Higher retention of staff, as job satisfaction increases when staff are treated well and see clearly how their work effects positive changes in clients’ lives. Higher staff retention rates also translate into lower costs, as organizations spend less on hiring and training new staff; Lower operational costs, as organizations use their resources more effectively when they better understand where their investments (e.g., publicity efforts, additional services offered) have been most or least successful; Improved ability to attract new clients, as the institution’s ability to targets its services more closely to client need leads to positive word of mouth; Demonstration of social performance to stakeholders, thus improving the institution’s position in a competitive funding market. Return to Top
5. What is the difference between responsible finance and social performance? “Responsible finance” and “social performance” are not the same, though they do partially overlap. Responsible finance refers to the delivery of financial services in a transparent and equitable fashion. It involves responsibility to do no harm, and act ethically (also called corporate citizenship) toward clients, staff, the community, and the environment. While responsible finance seeks to create an enabling environment for clients to use microfinance effectively, it does not intend or commit to positive change for clients. Social performance incorporates the elements of responsible finance, but also makes an express commitment to positive change for clients. The specific targeted positive change varies by institution, but frequently involves objectives such as outreach to the underserved, poverty reduction, and empowerment of women. To summarize, “responsible finance” is about “doing no harm,” while social performance also incorporates “doing good.” Return to Top
6. What is the difference between social performance and impact? The concepts of 'social performance assessment' and 'impact assessment' are often confused and used interchangeably, but there is a distinction. Impact refers to an outcome (change) that can be directly attributed to a program, and is just one element of social performance. The term “social performance” encompasses the entire process by which impact is created, often broken down into the following elements:
  • declared objectives of the institution;
  • internal systems and activities, and their effectiveness in furthering the stated objectives;
  • direct outputs of the institution (e.g., range and quality of services offered, numbers of very poor households reached, etc.);
  • outcomes observed in clients’ lives (e.g., increased revenue from their businesses, greater numbers of their children sent to school);
  • impact (i.e., the amount of the observed change in the client’s life that can be directly attributed to the institution’s programs).
For example, a client may enjoy increased revenue from his fruit stand. In part, that may be due to the products and services provided by the MFI, and in part, the revenue hike may be due to the construction of a new road to the client’s town financed by the state. Impact assessment will define what percentage of the total revenue increase is attributable to the MFI’s program. Another important distinction is that impact assessment is a much more complicated and costly analysis than the observation of outcomes, and is almost always undertaken by an external party, whereas the MFI itself typically designs and manages all other elements of its social performance. Return to Top
7. What is the difference between managing your financial performance and your social performance? Financial performance management (FPM) focuses on the solvency of the financial institution, also called its financial health, and is measured through systematic book-keeping and accounting. Social performance management (SPM) measures benefits for clients, their families, and the wider community, and is measured through the routine monitoring of services, outreach, client satisfaction, and changes in client and community level indicators. Data from both FPM and SPM can and should be used to guide the institution’s decisions about prices, products, service delivery systems, and strategies. In general, FPM is validated through internal and external audits, while SPM is validated through internal cross-checks, external reviews, and social audits. Imp-Act Consortium's 'Introduction to Social Performance Management' chart, show below, compares and contrasts financial performance and social performance:
  • Financial Performance Management (FPM) Social Performance Management (SPM)
  • Main goal Solvency of the financial institution Benefits for clients, their families and the wider community
  • How is it assessed? Systematic book-keeping and accounting Routine monitoring of scope, outreach of services and changes in client conditions, plus periodic more in-depth understanding of the reasons behind patterns and trends observed through monitoring
  • How is it used? To influence decisions about prices, products, service delivery systems, and strategies
  • How is it validated? Internal and external audits Internal cross-checks and external reviews
Source: Imp-Act Social Performance Management Practice Guide. Return to Top 8. What are the various social performance initiatives and how do they fit together? Leaders in the microfinance industry have for years been developing a family of complementary initiatives that promote transparency, best practices, and standards for the wide range of activities that fall under social performance: Initiative Website Purpose and Fit with Other Initiatives Smart Campaign www.smartcampaign.org Promotes the client protection principles. In the area of pricing, coordinates with the work of MFTransparency. MFTransparency www.mftransparency.org Promotes transparent pricing standards and prices (coordinates with Smart Campaign). Publishes interest rates and materials to increase understanding of pricing. Universal Standards for Social Performance, developed by SPTF www.sptf.info Adopts the principles of client protection / transparent pricing developed by Smart Campaign and MFT. Adds standards of social performance across key areas of operation for an institution (e.g., governance, client monitoring) for both MFIs and investors/MIVs. Microfinance Information eXChange (MIX) www.themix.org Collects and validates financial, operational, product, client, and social performance data from MFIs around the globe. The social performance indicators that institutions report to MIX were developed jointly by MIX, SPTF, Smart Campaign, and MFT, with feedback from other stakeholders. Principles for Investors in Inclusive Finance http://www.unpri.org/piif/ Principles, developed by and for investors, to guide expansion of access to financial products by the poor in a way that protects client interests. The principles fully incorporate the CPPs and add other concerns (e.g., environmental impact). Return to Top
9. What are the tools and resources for measuring and managing social performance? There are now a wide variety of tools and resources available to help stakeholders measure and improve their social performance. SPTF has created a toolkit for MFIs: http://inthiseconomy.org/SPTF/ SPTF has created a toolkit for Investors/Donors: http://inthiseconomy.org/SPTF/investors-map.html A toolkit for Associations is under development. Return to Top
10. Are there industry standards for social performance? SPTF is in the process of developing the SPTF Universal Standards for Social Performance Management. These are a set of standards to which all double- and triple-bottom line microfinance institutions should be held. They establish clear expectations for both social performance and social performance reporting, and are presented in the following categories: Social goals and target clients Governance and employee commitment to social goals Protection of clients’ rights Products and services that meet client needs Social responsibility to employees Client monitoring Responsible financial performance Each standard represents an important concept (e.g., the institution regularly calculates its client drop out/retention rate), but is not an indicator (e.g., client retention rate is X%). Most standards do, however, have a corresponding indicator in the Social Performance Report Administered by MIX, and additional indicators related to the social performance standards may be developed in the future. In the second quarter of 2011, the SPTF held an initial member comment period, during which the 1,000+ members of the SPTF were invited to review the draft Standards and provide feedback. SPTF received over 70 responses, with rich input from every stakeholder group. To read the complete set of comments SPTF has received to date on the proposed Standards, please visit www.sptf.info/sp-standards. In June 2011, at the SPTF Annual Meeting, members discussed the Standards during every pre-meeting session, during every plenary session, as well as in break out group discussions. SPTF collected rich and varied input during the meeting, which will inform the ongoing work of five separate working groups that will be formed during the third quarter of 2011. In addition, the Networks Working Group of the SPTF will be distributing the revised standards to the national networks in Latin America, Africa, Eastern Europe and NIS, MENA, and Asia in order to manage input from MFIs in their countries. Each region will submit their collective input to the SPTF by the end of January. This input will be combined with that of the five working groups and the standards will be finalized by February 2012 and benchmarks will be completed by the next SPTF Annual Meeting, June 2012. Return to Top
11. What is the difference between a social audit and a social rating? A social audit is an internal diagnostic tool that the management team of an MFI can use to assess its social performance. Generally, an audit explores whether the institution’s stated intentions are aligned with its actions, and whether the institution has the means and processes in place to attain its social objectives. A social rating is a process conducted by an external organization and provides an objective opinion on an MFI’s degree of success in translating its mission into practice. As of now, different rating agencies use different rating systems. Social audits and social ratings typically consider the same dimensions of an institution’s performance (e.g., effectiveness of internal systems, depth of outreach, quality of services, etc.), but there are important differences: The audience for a social audit is internal. Also, the process of the audit is interactive, it typically involves staff at all levels, and it results in suggestions for internal use. The focus of the audit is improving practice within the MFI. The audience for a social rating is external. The rater does not provide recommendations for improving practice, but reviews documents and assigns a rating based on its findings. One important use for social ratings is to verify data that were self-reported to MIX Market. A good rating may also attract interest from investors and donors. For a list of social audit tools and social rating tools, see the toolkit that SPTF created for MFIs. Return to Top
12. Why are donors and investors interested in social performance data? Donors and investors are well aware that investment in microfinance does not automatically produce positive social returns. Therefore, those who are committed to supporting organizations that are both financially sound and successful in their social mission demand credible data. In the early years of microfinance, anecdotal stories of client transformation were often accepted as such evidence, but investors and donors today are generally too sophisticated in their due diligence to base investment decisions on anything less than comprehensive, high quality data and analysis. Specifically, investors and donors tend to use social performance data in these ways: To make prudent investment decisions: Invest in MFIs that treat clients and staff well, and offer products and services that clearly serve client need To establish the true performance of an MFI: Get data, not stories To support a particular social mission: Invest in MFIs that have success in certain, prioritized areas To establish social performance standards and benchmarks: To gain a better understanding of how to measure success, and what degree of success is plausible, across the spectrum of social performance indicators To build reputation / reduce reputational risk: Demonstrate positive social effects to peers and critics To improve relationships with investees: Build trust and loyalty To compare investees: Compare social performance among institutions, contexts, and countries to guide portfolio decisions Additionally, experience in a variety of sectors suggests that social performance and financial performance can be mutually reinforcing. Thus, investors whose primary focus is the financial health of an institution may still be interested in social performance data, particularly in areas such as client retention, avoidance of client over-indebtedness, and social responsibility. For further information on this topic, see the “Making the Case for SPM: A note for Investors, Donors, and MIVs” document on the SPTF website. Return to Top
13. What is Social Return on Investment (SROI)? SROI is a financial concept that incorporates principles from return on investment and cost-benefit analysis to derive an estimate of net social benefit. Typically, the net social benefit would be expressed as either the dollar value of social benefits minus social costs, or the ratio of social benefits to social costs. SROI has not yet been calculated in the microfinance industry. Return to Top
14. What is the Social Performance Task Force (SPTF)? The Social Performance Task Force consists of over one thousand professionals from all over the world and every microfinance stakeholder group: practitioners, donors and investors (multilateral, bilateral, and private), national and regional networks, technical assistance providers, rating agencies, academics and researchers, and others. SPTF is governed by a Steering Committee composed of leaders from a variety of stakeholder organizations (e.g., MFIs, investors, networks). SPTF defines social performance as the effective translation of a microfinance organization's mission into practice in line with commonly accepted social values, such as: Serving increasing numbers of poorer and excluded people sustainably; Improving the quality and appropriateness of financial services available to target clients through systematic assessment of their specific needs; Creating benefits for clients of microfinance, their families and communities in terms of increasing social capital, assets, income, and access to services, reducing vulnerability, and fulfilling basic needs; Improving the social responsibility of the MFI towards its clients, its employees and the community it serves. Vision: Social performance management is standard business practice and considered fundamental to achieving the social promise of microfinance. Mission: To engage with microfinance stakeholders to develop, disseminate and promote standards and good practices for social performance management and reporting. To achieve its vision and mission, SPTF pursues the following activities: Providing a platform for dialogue, learning and collaboration; Facilitating engagement and advocacy across the industry at all levels – practitioners, networks, support agencies, donors, investors, regulatory authorities; Working toward setting industry standards for social performance management, measurement, monitoring, reporting and training; Promoting good practices and demonstrated success of MFIs engaged in social performance management; and Gathering quality evidence and research to demonstrate the business case for social performance management. Return to Top
15. How can I get involved? To start, read the Declaration of Principles developed by SPTF. If you agree, go the SPTF homepage (www.sptf.info) and sign up to be a member of the Task Force. This will keep you updated on the latest social performance research, conferences, and trainings. If you are interested in a particular topic within the umbrella of social performance, you may also join one of the Task Force working groups, of which there are currently five. Additionally, the Task Force supports four working groups on the Universal Standards for Social Performance. Social Investors Microfinance Associations Good practices in Social Performance Management Gender Standards working groups: Social goals and target clients & Client monitoring Governance and employee commitment to social goals & SR to employees Products and Services that meet client needs Responsible financial performance Additionally, please share information regarding any social performance initiatives that you or organizations with which are familiar have started. We also would welcome any impact studies you could share that have been conducted on your organization. We post all relevant materials submitted by our members to the Social Performance Management Resource Center and/or SPTF’s website. You are also invited to attend SPTF’s annual meeting. Open to all Task Force members, the annual meeting usually takes place in June and provides a forum to update members on progress made in the previous year, to set the Task Force’s agenda for the upcoming year, and to explore/debate in detail particular areas of interest within the field of social performance. The 2012 meeting will take place in June, in Jordan. Return to Top
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