This post mentions one of the 5 ways social performance can be measured in microfinance.

This is a summary of the Social Performance Standards Report created by MIX (based on the 22 indicators selected by The Social Performance Task Force – SPTF, in Switzerland this year), which “that looks at the entire process by which social impact is created” by a microfinance institution (MFIs).

The following table sorts the 22 indicators in terms of area of impact, each is looked at in detail below.

Note: Indicator Numbers have been jumbled deliberately (see diagram for explanation).

An MFI’s intent drives the wheels of change

(Core Social Performance Indicators)

Indicator 1, Mission and Social Goals of an MFI, looks at

The targeted poverty level (persons living below the poverty line, low income persons, no target market defined, etc.)

The targeted population group (women, minorities, urban inhabitants, rural inhabitants, youth, etc.)

The scale of supported enterprises (micro, small, medium, or large enterprises)

The type of development objectives (financial inclusion, education, employment, support for start-ups, growth of existing enterprises, health, etc.).

Indicator 2, Governance of an MFI, looks at

Documentation of governance framework (manuals, meeting minutes, etc.)

Composition of board of directors (number of members, number of women, positions filled by government, community leaders, clients, or professionals, etc.) and their area of expertise (finance, legal, development, etc.)

Mechanisms to increase board members commitment to MFI’s social mission (regular field visits, separate social performance committee, etc.).

Internal systems translate an MFI’s mission into tangible outputs

Indicator 3, Range of Products and Services, looks at

Type of microloans offered (agricultural, education, micro enterprises, housing, consumption, etc.), micro-savings services (voluntary savings, compulsory savings, checking account, fixed term deposit, etc.), and micro-insurance services (house, life, health, workplace, etc.), and any other types of financial services (money transfer, remittances, etc.)

Lending methodology (solidarity group lending, individual lending, village banking, etc.)

Types of non-financial services (type of enterprise development services, type of health care services, type of educational services, type of women empowerment services).

Indicator 4, Training on Social Performance, looks at

Which level of staff members (directors, top management, loan officers, etc.) undergo trainings related to social performance

Areas of focus in training (social objectives, gender sensitivity, poverty measurement, avoiding over-indebtedness, open communication, responding to client needs, client data privacy, etc.).

Indicator 5, Staff Performance Appraisal and Incentives, looks at

Whether staff appraisals/incentives related to social performance management (women’s outreach, geographical outreach, portfolio quality, retention rates, etc.)

Staff level to which these appraisals/incentives apply (top management, loan officers, etc.).

Indicator 6, Market Research on Clients, looks at

Market research conducted to determine client needs and develop new products (client satisfaction surveys, focus groups, interviews, etc.)

Frequency of market research on clients.

Indicator 7, Measuring client retention, looks at

• Client retention rate and whether exit surveys are conducted
• Any event that may have impacted drop-out rate
• Social responsibility to clients.

Indicator 8, Social Responsibility to Clients, looks at

Components of client capacity analysis (client indebtedness level, peer guarantees, co-signers, etc.)

Whether staff incentives are un-biased

Disclosure of all financial fees, terms and conditions prior to sale (insurance premiums, late fees, minimum balances, linked products, etc.)

How MFIs overcome communication barriers between loan officers and clients (reading aloud terms of loan, using language of client, full understanding of product by staff, etc.)

Availability of manual about acceptable/unacceptable debt-collection practices and effective client redress mechanisms

Corporate culture based on ethics.

Indicator 9, Transparency on Cost of Services to Clients, looks at:

Method of expressing interest rates (declining balance or flat rate)

Number of client that are also served by other MFIs/money lenders, and method of determining these figure (internal auditing, loan proposal stage, annual sample survey, etc.).

Click here to read social performance indicators 10-22 for MFIs. (The post has been divided into two sections to keep the length manageable).