SPECIAL REPORT: Diffusing Excuses for Failing to Measure Microfinance Institutions’ Social Performance

Amelia Greenberg of the Social Performance Task Force (SPTF), at a SAM session on measuring social impact, reviewed some of the excuses microfinance institution leaders use to postpone measuring client outcomes. Some say satisfaction surveys are sufficient, or they feel a robust process will be too expensive. Some worry that it is unreasonable to claim a cause-effect relationship between their institution’s financial services and changes in clients’ lives.

Colin Rice of South Africa’s Small Enterprise Foundation (SEF) argued that it is valuable to start by measuring just a few parameters that the organization is already tracking. Monitoring the amount that clients save over time is a prime example. It is easy to measure and directly (though not exclusively) attributable to the institution’s services. In addition to savings, SEF tracks variables such as housing quality, assets, and the amounts of – and reasons for – withdrawals. To help interpret its data, SEF developed thresholds for outcomes that it deems successful, merely acceptable or not acceptable.

Implementation was a slow process, Mr Rice explained. Retraining staff was difficult. SEF had to revise its financial education system. It dropped certain indicators of poverty that were difficult to measure and had too long of a time horizon. Now, however, the data allows SEF to see how its system changes affect clients. The institution can run product tests at certain branches to see if it should roll them out across the institution. Overall, Mr Rice says, measuring outcomes “allows us to be proactive rather than reactive.”

Snezana Jovic of Cerise discussed her organization’s tools for social performance management for both microbanks and investors. The tools offer frameworks for evaluating the products an institution offers, assessing internal procedures, mapping criteria to the UN’s Sustainable Development Goals, and collecting data from clients – for example, yearly by phone.

Machal Karim of the CDC Group described looking at impact at all stages of her institution’s investment life cycle, including (1) impact management; (2) establishing an impact thesis to go along with the investment thesis; and (3) considering investees only if they have built impact into their business models. Regarding data collection, CDC works to avoid superfluous requests by starting with the data the business is already collecting, including subdividing the balance sheet by product. For example, this subdivision might delineate collateral-free versus traditional loans or rural versus urban business. Getting started can be as simple, Ms Karin argues, as asking oneself, “What effect do I want to have as a business?”.

Antonique Koning of CGAP argued that customers who use financial services have more resilience and are more able to capture opportunities that arise. She described six areas of focus, following the customer journey: (1) Is the product suitable to the client’s need?; (2) Does the client have choices?; (3) Are the client’s money and data safe?; (4) Is the service fair to the client?; (5) Does the client have a voice in service delivery, such as to get questions answered and issues resolved?; and (6) Does the product meet one or more client goals?

Ms Greenberg listed reasons that a product may not be working as intended, such as: insufficient staff training, clients using the product outside of its intended purpose, high product prices, lack of client trust, inappropriate expectations regarding time horizon, lack of needed complimentary services, products that are inappropriate to the market segment, poor data and unrelated stressors causing client setbacks.

To address such issues, data is key. The process involves planning, data collection and data analysis before taking action. The business case for all this work includes that successful clients are more likely to become long-term clients that repay loans and refer new clients. In addition, institutions with good data will make better decisions about where to put new branches, what staff to hire, what products to offer, how to train staff and how to market products. Another key is the ability to identify emerging problems before they become big problems. The takeaway, Ms Greenberg said, is to start now, with the data you already have. Simply talking to a few clients can really get the ideas to start flowing.

This article is part of a sponsored series on SAM (the French acronym for African Microfinance Week), a major conference dedicated to financial inclusion in Africa. The most recent SAM took place in Ouagadougou, Burkina Faso, from October 21-25, 2019.

ADA, an NGO based in Luxembourg, co-organizes SAM every two years with the support of Luxembourg’s Ministry for Development Cooperation and Humanitarian Affairs. The SAM steering committee members are: ADA, Luxembourg’s Ministry of Foreign and European Affairs, the Microfinance African Institutions Network, the African Rural and Agricultural Credit Association, and the Fédération des Association Professionnelle des Systèmes Financiers Décentralisés de l’Union Economique et Monétaire Ouest Africaine. We invite you to learn more about SAM at http://www.sam.africa.

MicroCapital has been contracted to promote and document each SAM since 2015.

Additional Resources

SAM
http://sam.africa/

Other MicroCapital coverage of SAM and vignettes demonstrating its value to participants
http://www.microcapital.org/category/semaine-africaine-de-la-microfinance-sam/

Vignettes demonstrating the value of SAM en francais
https://www.ada-microfinance.org/fr/evenements/semaine-africaine-microfinance/objectif-sam-2019/paroles-de-nos-participants