MicroCapital: What is the value of social performance management (SPM)?
Lucia Spaggiari & Amelia Greenberg: Financial service providers (FSPs) do not achieve their social goals without deliberately managing their social performance. Providing access to financial products and services can have a neutral or even harmful effect when it is not done responsibly. Even the best-intentioned FSPs have been shocked upon seeing their first data about client outreach, satisfaction and exit. Simply put, they were not reaching their target clients; their products were not well adapted to clients’ needs; and they were not achieving their missions.
MC: What social performance outcomes are you measuring?
LS & AG: We are looking to answer questions such as: What actually happens to clients? Do their situations get better? Do they deteriorate? For whom specifically? Why? What measures can be taken to improve outcomes?
MC: How do investors fit in?
LS & AG: Investors want to know if and how they can consolidate outcomes measurement across their portfolios. They wrestle with when – and whether – to give input into FSPs’ decisions about outcomes indicators. Another issue is how asset managers can help asset owners redefine financial and social returns.
MC: What are some common misconceptions about SPM?
LS & AG: That it is too difficult or too expensive. Some changes are small and almost cost-free, like changing an internal policy that is unintentionally excluding some clients. FSPs that have been working on SPM for a while tell us that it is not something new or complicated. It is common-sense business practice to make sure you are accountable to your own stated goals – that you care about client outcomes as well as the financial sustainability of your institution.
MC: Is there a financial return on this work?
LS & AG: Going from little or no SPM to strong SPM requires investment, but it pays off in the long-term in areas like reduced portfolio-at-risk ratios, higher client retention, improved reputation and lower staff turnover. Now we are seeing signs that quality SPM can attract more investor funding as well.
MC: What do investors gain from their involvement in e-MFP’s Social Performance Outcomes Action Group?
LS & AG: Both peer and complementary organizations can offer successful approaches, mistakes to avoid and questions to keep in mind. Sharing these ideas can advance the industry debate around client outcomes and accelerate the evolution of strategies for managing them.
MC: What will you cover during your session at European Microfinance Week?
LS & AG: We will offer case studies of social investors engaging with FSPs to support client outcomes management. We will also have released [UPDATE: have now published] the “Guidelines on Outcomes Management for Investors,” which leads its readers on a journey toward tailored and cost-effective systems for the collection, analysis and use of outcomes data. The guidelines help investors digest a range of complex questions, many of which revolve around the issue of how the good looking, but mature, “financial inclusion” sector can use her experience to face the young and sexy “impact finance.”
This interview is part of a sponsored series on European Microfinance Week,
which will be held from November 16 through November 18 by the European Microfinance Platform (e-MFP), a 124-member network located in Luxembourg. MicroCapital has been engaged to cover the event on-site.
Lucia Spaggiari of Microfinanza Rating & Amelia Greenberg of the Social Performance Task Force serve on e-MFP’s Social Performance Outcomes Action Group. On November 17, they will participate in a double European Microfinance Week session titled “New Frontiers on SPM: Measuring Client Outcomes.”
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