Microfinance institutions are now actively encouraged to pay attention to social performance of their operations, partially because of some negative attention gained by the sector, questionable practices and research papers that gave mixed results about the social impact of microfinance as a development tool.

The Social Performance Task Force (SPTF), along with CGAP, Microfinance Information Exchange (MIX), Michael & Susan Dell Foundation, and the Ford Foundation partnered to encourage microfinance institutions to “demonstrate their commitment to transparency” through an award that recognizes the MFIs’ efforts. Microfinance institutions apply for the award by submitting completed forms of Social Performance Standards/Indicators Report, which looks at indicators such as:

• Education level of clients’ children
• Mission and social goals of MFI
• Poverty levels of clients
• Geographic outreach and client retention rates
• Social responsibility activities for clients, environment and communities, and many other indicators.

The award is composed of three levels, as reported by the Mix site:

Gold Award: awarded to MFIs that complete the report, provide data on poverty measurement, and have a social rating that includes auditing of the poverty tool used by the MFI.

Silver Award: awarded to MFIs that complete the report, and also provide data on poverty measurement.

Certificate: awarded to MFIs that complete the Social Performance Standards Report.

This year, around 350 microfinance institutions submitted data about their social performance to MIX, (as opposed to 200 MFIs for last year) around half of which received awards/certificates for their efforts. The award is also considers microfinance networks with at least 50% of member MFIs submitting their data.

This is an encouraging trend as it bespeaks better social performance on the part of microfinance institutions across the world. Time will tell if this initiative led to a significant improvement in the lives of microfinance clients.

Reference: Sheth, D . (2010). Microfinance Institutions Responding to Call For Better Social Reporting. Available: http://www.themix.org/press-release/microfinance-institutions-responding-call-better-social-reporting. Last accessed 28th Nov 2010.