In recent years donors and practitioners have demonstrated a renewed interest in and commitment to understanding how to reach poor people effectively, assess their level of poverty, and judge the social performance of MFIs. However, for all the public and increasingly private money that flows to microfinance, there has been limited guidance on how to reach, serve, and have a positive and sustainable impact on the lives of poor and very poor people. It is time MFIs realise and deliver on this vision by becoming more responsible for who they reach and how.
There is growing evidence and recognition that serving poor people requires more intentional outreach to those living below a nation's poverty line. However, matching intent with action requires strong management commitment to improving the lives of poor people through better incentives, leadership, communication, and culture. It also requires effective use of information systems - electronic or manual methods of systematically collecting, analysing and acting on information in a timely manner.
Prizma - an MFI in Bosnia and Herzegovina - faces the challenge of serving people impoverished by war and economic transition. Prizma has sought to strengthen its social performance by building greater understanding of the nature of poverty among staff, management and the executive board. It has also shaped its organisational culture around a pro-poor social mission, designing appropriate incentives to align staff behaviour with this mission, and developing systems to assess the poverty status of clients and changes in this status over time. Prizma uses a scorecard that is integrated in its automated management information system (MIS) to assess and monitor the poverty status of new clients. This has helped to identify ways in which clients were inadvertently excluded from its services as a result of existing policies, procedures, or the design of its products. Other MFIs such as LAPO (Lift Above Poverty Organisation) in Nigeria use a poverty-scoring tool while CARD (Centre for Agriculture and Rural Development) in the Philippines combines several poverty targeting and assessment approaches for similar purposes.
Measuring performance Use of information systems is fundamental to MFIs' ability to measure and enhance their financial performance. However, using information systems to monitor the profile of incoming and departing clients and drawing out historic data to analyse trends over time can also yield other critical insights. This can show who an organisation is reaching, who it is leaving behind, and what the effects and role of its financial and non-financial services are in the lives of the people it serves. Existing information systems represent a critical resource to measure and strengthen social performance. Rather than gather large amounts of information, emphasis on the collection and use of a few select robust social indicators of clients' poverty status and changes in this status is more useful. By using select indicators institutions can control their existing systems rather than create new ones to balance:
accuracy of results with practicality of their use proving impact with improving their practices internal with external stakeholder information needs cost-effectiveness with timeliness of information.
Managing performance Several factors are particularly important to understanding and enhancing social outcomes that signal potential longer-term impacts on client, including the need to:
be aware that program design determines whether poor people will access services ensure focus and clarity of purpose about the primary role of the institution build management and board commitment to serving poor people with intent shape organisational culture and staff incentives to support clients' well-being identify clear indicators for measuring social and financial performance emphasise vision and mission when recruiting, inducting and training all staff train management and non-management staff to influence social performance provide regular, transparent reporting on social performance to all staff.
Prizma has identified these factors through an intensive process to re-evaluate its primary social purpose, which may well have important lessons for other MFIs worldwide.
Social performance management: 6 questions MFIs committed to social as well as financial performance need to have clear answers to the following questions:
What are your social performance goals?
How do you monitor who uses and who is excluded from using your services?
How do you assess the effect of these services on clients?
How do you assess the reasons why some clients leave?
How do you use your social performance information to improve your services and achieve your social goals?
How do you review and seek to improve the quality of the systems and processes through which you answer these questions?
By clearly defining who to reach, the quality and nature of services to be provided and the intended benefits to clients and non-clients, MFIs will be better able to design strategies to achieve them.
Sean Kline Freedom from Hunger 1644 DaVinci Court Davis CA 95616
To learn more about this author, visit id 21's Website.
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