SPECIAL REPORT: Aligning Incentives, Setting Realistic Expectations for FSPs’ Outcomes Measurement at the e-MFP Investors Action Group

European Microfinance PlatformDuring European Microfinance Week last week, Célia Fernandez of the French NGO Comité d’Echange, de Réflexion et sur les Systèmes d’Epargne-Crédit (CERISE) described LabODD, a project to help mission-driven organizations measure their progress toward the UN Sustainable Development Goals (SDGs). LabODD is a four-year project funded by the French government’s Agence Francaise de Developpement. Among its outputs is a brief due out in December 2021 that will cover outcomes management for financial services providers (FSPs). Cécile Lapenu, also of CERISE, described several trends that will be presented in the brief.

The demand of impact investors for accountability from FSPs is growing. However, the focus now is more on measuring outcomes – which can be associated plausibly with the work of FSPs – rather than impacts – which must be shown to result from client-FSP interactions. This is due to the expense and other difficulties of the latter. Meanwhile, the cost to collect outcomes data has been on the decline. There is also a sense among many stakeholders that it is too ambitious to expect FSPs to reduce poverty as many aimed for in the past. Goals such as smoothing consumption and creating jobs are more attainable. Among the challenges for getting outcomes data from FSPs is that some requests are too detailed and thus difficult to collect. Also, some FSPs do not see the value of the data for their own operations, which is demotivating.

Veena Yamini of Ankuram Social Ventures agreed that the selection of which indicators to collect is important. The number of variables should be limited – not only to keep the process manageable, but because of the need for consistent data. Complex data that changes each year is not useful for benchmarking progress year-to-year or for comparison to data from peer institutions.

When indicators are tied to the mission of the FSP, this is much more motivating. Staff will do a better job collecting quality data if they see how it is used, for example to improve the products that they sell. Because data quality is key, it must be validated at each step in the process of collection and analysis. If managers do not trust the data, they will not use it. An important part of motivating staff to create quality outcomes data are for the CEO to drive the effort. Consequently, the board of directors should include outcomes measurement among the criteria on which it bases the CEO’s periodic evaluation.

Ariane Schoen of Invest in Visions described her firm’s collection of output indicators from its 80 investees on a quarterly basis. One challenge is that some of the FSPs are limited in the depth of data they collect, which in turn limits the extent and usefulness of the portfolio-wide data that Invest in Visions is able to construct. While Ms Schoen’s firm does not have technical assistance funds to offer FSPs, she suggested this would be very helpful to enable FSPs to improve their reporting. Haruna Tanaka of Gojo and Company agreed that, “It’s a very big challenge for investors to collect client impact data.” One way to make it easier, she suggested, is to include data collection efforts within FSPs’ existing satisfaction surveys.

Nicolas Karambadzakis of ECLOF described his network’s experience working with 60 Decibels to conduct telephone interviews with hundreds of ECLOF clients in their local languages. ECLOF used the surveys to support clients during the early stages of COVID-19, for example by allowing borrowers to use their guarantee funds (savings) to repay their arrears, determining when clients were interested in resuming borrowing to pay school fees and expanding farmer training in Kenya.

Editor’s note: The above discussions occurred during a meeting of the European Microfinance Platform (e-MFP) Investors Action Group. This report excludes the portion covering child labor, which is scheduled for inclusion in a separate report.

This feature is part of a sponsored series on European Microfinance Week 2021, which took place online November 17 through November 19. The event is held annually by e-MFP. MicroCapital has been engaged to promote and report on the conference each year since 2012.

Additional Resources

European Microfinance Week 2021
https://www.e-mfp.eu/european-microfinance-week-2021

MicroCapital coverage of European Microfinance Week, including the European Microfinance Award
https://www.microcapital.org/category/european-microfinance-week/

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