Social Investor Working Group Meeting

SPTF Annual Meeting 2015, Siem Reap

June 9, 2015

High-level summary of discussions held at the social investor working group meeting (for detailed notes refer to pages 3-10, for list of participants refer to page 10)

  1. Introduction to the SPTF and the role of the social investor working group– Overview of the SPTF as global platform to coordinate and harmonize among initiatives in the responsible inclusive finance sector, the role and activities of the social investor working group in particularly coordinating with MIVs and financial service providers (FSPs) to help advance SPM, update on the Lenders Guidelines for Setting Covenants in Support of Responsible Microfinance (initiative that emerged out of the working group) and next steps in further dissemination and implementation to ensure harmonization across the sector. Other initiatives of the working group were discussed later in the day (e.g., SPI4 ALINUS, MIMOSA, etc)
  2. SPM Part I: Overview of the Universal Standards and the SPI4 (“the FSP/MFI perspective”) – Summary on the process to develop the Universal Standards including integration of the work of various leading initiatives in the sector, 5-step framework for better SPM practices, introduction to SPI4 (social performance assessment tool that enables FSP to assess their level of implementation of the Universal Standards) and case studies from FSPs ACAD (Palestine) and Kushhali Bank (Pakistan) implementing the SPI4 and translating the results to improve management practices across the organization.
  3. SPM Part II: Overview of investor use of SPI4 and the SPI4 ALINUS (“the investor perspective”) – Overview of the ALINUS working group and their work with the SPI4 in co-funding and developing an SPI4 ALINUS with a reduced number of indicators (80 vs. 200+ in the standard SPI4 version) that allows investors to use the SPI4 ALINUS for social due diligence and monitoring of their investees. The SPI4 ALINUS is available online (ALINUS version is under “reporting options”). Wide implementation by investors of the SPI4 ALINUS will enable higher quality of data and benchmarking across the sector. Investors can help their investees that are not yet familiar with USSPM to use the SPI4 methodology by introducing them to the tool, its rationale and its structure and sharing the completed SPI4 ALINUS, created during the due diligence, to use that as a starting point to complete the full SPI4. If adopted widely the SPI4 will reduce the reporting burden of FSPs. Cordaid also shared its version of the SPI4 (customized for Cordaid) and showed examples of its graphical and practical dashboard and scorecard. Investors in the room who were previously not as familiar with SPI4 showed excitement for the tool, mentioning it has the ability “to change the sector”. They recognized the value of committing to use it and the value to the industry if widely used/implemented by many investors.
  4. Preventing over-indebtedness (OID)– Overview of MIMOSA 2.0 (index tool to understand market saturation), the case of Cambodia according to MIMOSA 2.0 with high risk of over-indebtedness, and plans for expansion of the index (into being able to have coverage on further countries) subject to funding. Panel discussion on risks and mitigans of OID in Cambodia. Incofin shared the results of a study conducted 2 years ago that looked at village-level data and did not find Cambodia to be in a systemic risk high risk of OID (as compared to MIMOSA), even though the criteria that MIMOSA looks at are relevant to analyze when considering market penetration in Cambodia. PhillipCapital mentioned that in Cambodia it exists a strong sense of repayment and talked about the local informal lending sector, which is quite developpedand has recently increased through the presence of newly established NGO-money lenders. Daniel Rozas added that informal lending is a common feature of financial services markets in developing countries, for clients, it is easy and accessible and until countries have wage income, informal lending is likely to stay.

5.  Measuring outcomes – Overview of the outcomes working group and discussion with investors on their expectations and experience on reporting outcomes. Anthos mentioned they are developing an impact framework. Triple Jump added that outcomes data is not only valuable to the investor but also to the FSP (e.g., to help improve their offering, understand whether they are aligned with their, etc). Also mentioned was the importance of standardizing the way indicators are measured once what needs to be measured is defined (e.g., if measuring food security ensure all organizations measure it the same way) as this is the only way data can be compared and benchmarked across organizations.

  1. Transparent pricing - Overview of the work of Microfinance Transparency (MFT) since 2008 in gathering pricing data, achievements and shortfalls of the approach and suggestions for continuing the work. Participants discussed possible ways in which to continue to gather, use, and share data on pricing (such as using an existing common tool –SPI4- as the common tool for FSPs to report on pricing data, or in the medium-term updating the Reasonable Covenants document to include requirement of pricing data).


Detailed notes:

Dina Pons and Jurgen Hammer welcomed everybody and introduced the topics to be discussed during the day. They emphasized the nature of the meeting, a working group meeting, where the objective is for participants to share, discuss, and work together.

The topics discussed included:

  1. Introduction to the SPTF and the role of the social investor working group
  2. SPM Part I: Overview of the Universal Standards and the SPI4 (including case studies from FSPs)
  3. SPM Part II: Overview of investor use of SPI4 and the SPI4 ALINUS
  4. Preventing over-indebtedness
  5. Measuring outcomes
  6. Transparent pricing
  1. Introduction to the SPTF and the role of the social investor working group- Dina gave an overview of the SPTF, a global membership organization with +2600 members from 127 countries around the world and all stakeholders in the microfinance sector. In 2012, after working with its members for many months and including best practices from leading organizations in the sector (e.g., ILO, Smart Campaign) the SPTF released the Universal Standards for Social Performance Management (Universal Standards).

Dina then gave an overview of the social investor working group and its role in coordinating with investors and with financial service providers (FSPs) to advance social performance management (SPM) through the Universal Standards. If a FSP SPM, it should look at the Universal Standards (which incorporate the Client Protection Principles from the Smart Campaign). If an investor wants to make sure its practices are responsible, it should look at the PIIF, which is also aligned with the Universal Standards. While the Client Protection Principles focus on “doing on harm”, the Universal Standards are more comprehensive going beyond client protection into implementing social performance management. Client Protection Principles apply to all financial institutions (preventing harm and having transparent, respectful, and prudent financial services to all clients is key to all financial organizations). The Universal Standards apply to institutions with a double-bottom line (including client protection but going beyond it).

The role of the SPTF is as a platform to coordinate and harmonize among initiatives in the responsible inclusive finance sector. SPTF works to ensure that SPM becomes a standard business practice for FSPs

Dina also mentioned some of the activities, action groups, and initiatives that the group has worked on in the past such as over-indebtedness, pricing transparency, and SPI4. She gave a very brief summary of the last investor working group meeting that took place at the EIB in March of 2015. Finally, Dina gave an overview of one of the initiatives and achievements of the social working group, which was the development and publishing of the Lenders’ Guidelines for Setting Covenants in Support of Responsible Microfinance (Reasonable Covenants). This initiative emerged as part of the group with the objective to define common covenants and social undertakings in loan agreements to encourage responsible finance. Currently, 15 investors have endorsed the Reasonable Covenants. Going forward, the working group will continue to disseminate and raise awareness on the Reasonable Covenants to ensure wide implementation by MIVs so that covenants for FSP partners are harmonized across the sector.

  1. SPM Part I: Overview of the Universal Standards and the SPI4 (including case studies from FSPs) – Jurgen explained that the first part of this session “SPM Part I” will focus on the perspective of the FSPs, while the second session (SPM Part II) will focus on the perspective of investors.

Laura Foose (SPTF) gave an overview of the Universal Standards and the process for its development. She mentioned that the content for the Universal Standards integrates the work of many leading initiatives from around the world (e.g., Imp-Act, ILO, Smart Campaign, MicroSave, MIX, investor scorecards, among many others). The development of the Universal Standards involved 5 public comment periods and several rounds of review and final approval from the SPTF board of directors.

Laura then explained the 5-step framework for better SPM practices.

1. Learn (by reading the Universal Standards) > 2. Assess (assess practices/implementation of the Universal Standards by using the SPI4 tool) > 3. Plan (develop an action plan for improvement) > 4. Implement (by using the Universal Standards Implementation Guide) > 5. Report (demonstrate results internally or externally)

Cecile Lapenu (CERISE) introduced the SPI4, a social performance assessment tool that enables FSP to assess their level of implementation of the Universal Standards.

Since their release in 2014, the SPI4 has been used now by 100 MFIs from 50 countries.

It is organized around the 6 dimensions of the Universal Standards, and also includes a green module.

The SPI4 is also aligned with Smart Assessment, meaning than an MFI that has conducted a Smart Assessment can integrate the indicators.

The SPI4 (excel) can be downloaded from the following website: http://cerise-spi4.org

Case studies on FSPs implementing the SPI4: ACAD (Palestine) and Kushhali Bank (Pakistan)

Jurgen presented the case of ACAD in using the SPI4. He explained the results an SPI4-based SP evaluation produces, to illustrate the type of reports that an organization can receive after completing the SPI4 and the use of these reports to review all operational areas of the organization in order to improve its social performance across all areas (USSPM dimensions – clients, employees, products, governance etc). The detailed scorecard, along the 6 dimensions of the Universal Standards, as well as more in-depth detail for each of the dimensions, allowed ACAD to analyze its strength and weaknesses and to develop an action plan as a result of conducting the SPI4 assessment with priorities, times-lines, concrete steps to be undertaken and responsibilities of each department for implementation.

Lubna Tiwana from Kushhali Bank shared their experience with SPI4. Using the tool, Kushhali was able to identify many areas to improve. Since completing the assessment the organization has:

·  Improved targets on social indicators on which management and staff may be appraised

·  Improved transparency with “key fact sheets” detailing key product features

·  Prevented client over-indebtedness by revising the credit policy and procedures, ensuring cash flow analysis and credit bureau check for each loan

·  Created an SPM sub committee of their board of directors

Lubna also showed the SPI4 tool completed by Kushhali and explained the different steps the organization went through to fill it as well as showed some of the reports. When asked about the time it took the organization to complete it, Lubna explained that originally it took 4-5 days to complete the SPI4, but once completed it takes very short time to update it.

Lubna also explained that the organization did the assessment on their own, without any outside expert help, since their objective was to “put the house in order” before they took any outside assessments of certifications. The reports obtained out of the SPI4 are shared with the Kushhali board quarterly.

Laura explained how the Universal Standards Implementation Guide is a very good resource to accompany the SPI4 as organizations can look into the detail of how to implement specific practices, depending on how they do with the SPI4.

Frank asked whether it was better for an organization to do an SPI4 assessment by themselves or with external help. Cecile explained that in most cases, FSPs conduct accompanied assessments (at least for the first time) to help the organization get familiarized with the tool and structure. That being said, it is also good for organizations to first go through the SPI4 on their own so that they understand the questions they will asked, the data they will need, and the reports they will obtain.

3.  SPM Part II: Overview of investor use of SPI4 and the SPI4 ALINUS

Jurgen gave an overview on the ALINUS working group and their work with the SPI4. The SPI4 was finalized in September 2014. Some investors realized that the full SPI4 was too comprehensive for a SP due diligence and monitoring (the standard tool has +200 indicators). Still wanting to use the SPI4 (vs. each investor developing their own version), the group decided to work with Cerise to create a selection of most relevant indicators among the full SPI4, called SPI4 ALINUS, which with a reduced number of indicators. Everyone agrees that wider use of a harmonized evaluation methodology (the SPI4 and the Universal Standards) by FSPs will allow for better quality of indicators reported, and allow for benchmarking across the industry, which is not possible with individual tools.

14 MIVs participated in and co-funded the process of developing the SPI4 ALINUS. After 4 rounds of discussion, investors decided on 80 indicators that were the most relevant and important for their due diligence process.

Characteristics of the SPI4 ALINUS: the standard SPI4 can be filtered to only select the SPI4 ALINUS indicators. The assessment tool is neutrally weighted across all indicators and standards to allow for benchmarking, but it is possible to define specific weights for each indicator (to reflect the importance that each organization assigns to a specific dimension or standard). It is also possible to extract the ALINUS indicators from the SPI4 and import them into investors’ own scorecards and into a standards ALINUS scorecard.