At the European Microfinance Week conference today in Luxembourg, representatives of the European Microfinance Platform (e-MFP) Action Group on the Implementation of Responsible Microfinance led a discussion on its work. The group presented graphics compiling existing social performance tools such as social audits and the publication of pricing data via the US-based nonprofit Microfinance Transparency. One of the suggested steps for microbanks embarking on the process of evaluating its social performance is to make a public commitment through an effort such as the Smart Campaign, which is backed by US-based nonprofit Accion, or the Global Appeal for Responsible Microfinance, which is promoted by a set of institutions led by Oxus Group, an initiative of French NGO Agency for Technical Cooperation and Development (ACTED).
Laura Foose, the coordinator of the 1,000-member Social Performance Task Force (SPTF), pointed out that simply endorsing an effort such as the Smart Campaign, which roughly 1,300 microfinance practitioners and investors and others have done, is just a first step: “Commitment to these efforts includes a commitment to implementation.” She polled the several dozen attendees of the event, and – while many had endorsed the campaign – only one represented an institution that had gone through the “Getting Started” self-assessment process.
Carmen Velasco, the co-founder of Pro Mujer, which provides microfinance and other services in Latin America, said, “I can’t stop thinking how useful it would have been to have these tools 10 years ago to avoid the bad reputation that microfinance has had to face.” Ms Velasco continued that these tools are not only for microfinance institutions (MFIs) that have “gone off track” in terms of meeting the needs of clients, but they are also for those that wish to make sure they do not stray from their missions. “It is not just about getting clients out of poverty, but keeping them out of poverty and for the next generation,” she said.
Representing the UN’s Principles for Responsible Investment, Emilie Goodall said, “The key is not that everybody is doing the same thing but to engage microfinance investment vehicles and MFIs in dialogue on the topic.”
Sascha Noe of Netherlands-based Catholic Organisation for Relief and Development Aid (Cordaid) said that using these tools to establish the metrics that Cordaid plans to prioritize was helpful as the organization was rolling out a new information management system.
Loic de Canniere, the CEO of Belgian microfinance investor Incofin, handed out a template of covenants that investors can incorporate into loan agreements with microfinance institutions. The covenants include guidelines for seven financial indicators such as (1) return on assets ranging from zero to 10 percent; and (2) an annualized write-off ratio of no more than 3 percent. The social aspects of the covenant are (1) reporting social performance indicators for publication by the US-based nonprofit Microfinance Information Exchange; and (2) endorsing the Smart Campaign and implementing the campaign’s principles over time. Mr Canniere reports that several of the partners that were involved with developing the template have so far officially endorsed it including Deutsche Bank Global Social Investment Funds, Oikocredit of the Netherlands and French public-private partnership Proparco. This group is also attempting to craft a set of “work-out” principles to be used when repayments become problematic.
This content is sponsored by e-MFP, the organizers of European Microfinance Week. It is part of a series of articles covering the proceedings of the event, which is taking place in Luxembourg from November 14 to November 16. MicroCapital is reporting onsite throughout this time.
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October 18, 2012, “MICROCAPITAL BRIEF: Incofin’s Rural Impulse Fund II Loans $2.6m to Kenya Women Finance Trust, Incofin Investment Management to Finance Technical Assistance Project for AB Bank Zambia,” http://www.microcapital.org/microcapital-brief-incofins-rural-impulse-fund-ii-loans-2-6m-to-kenya-women-finance-trust-incofin-investment-management-to-finance-technical-assistance-project-for-ab-bank-zambia/
September 22, 2012, “MICROFINANCE EVENT: European Microfinance Platform’s Microfinance Week, Luxembourg, November 14-16, 2012, Onsite Reporting to be Provided by MicroCapital,” http://www.microcapital.org/microfinance-event-european-microfinance-platforms-microfinance-week-luxembourg-november-14-16-2012-onsite-reporting-to-be-provided-by-microcapital/
February 6, 2012, “MICROCAPITAL BRIEF: “Paris Appeal for Responsible Microfinance” by Convergences 2015 Reaches 600 Signatories,” http://www.microcapital.org/microcapital-brief-paris-appeal-for-responsible-microfinance-by-convergences-2015-reaches-600-signatories/
April 13, 2011, “MICROCAPITAL BRIEF: “Principles for Investors in Inclusive Finance” (PIIF) Created as Separate Work Stream Within United Nations’ Principles for Responsible Investment (PRI); CGAP (Consultative Group to Assist the Poor), Global Impact Investing Network (GIIN) Standards Observed,” http://www.microcapital.org/microcapital-brief-%e2%80%9cprinciples-for-investors-in-inclusive-finance%e2%80%9d-piif-created-as-separate-work-stream-within-united-nations%e2%80%99-principles-for-responsible-investment-pri-c/
MicroCapital Universe Profile: Microfinance Information Exchange: http://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Microfinance+Information+Exchange+%28MIX%29
MicroCapital Universe Profile: Social Performance Task Force: http://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Social+Performance+Task+Force
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