Social Performance Management
An Interview by Nikhita Raman and Pallavi Jain

Social performance is the effective translation of an institution’s social mission into practice in line with accepted social values (Social Performance Task Force). Social performance management (SPM) is an institutionalised process which involves setting
clear social objectives, monitoring and assessing progress towards achieving these, and using this information to improve overall organisational performance (Imp-Act consortium). CMF had the opportunity to interview Ragini Chaudhary and Laura Foose, both pioneers in this domain on the subject. Here are some extracts from the two separately conducted interviews:

What is the difference between impact assessment and SPM?
RC: I’m glad you asked this question, because every time you bring up social performance, people talk about impact assessment. Impact assessments are often long drawn costly exercises, the results are often debated, rigour of research is always in question, and the focus is always on proving impact. Social performance helps in improving impact instead of proving impact.

LF: Impact assessment requires attribution- it measures whether or not the changes in the lives of the clients are happening because of that programme and produces a report at one point in time. Social performance advocates constantly monitoring your organisation to achieve your social goals. The emphasis in on being aware of what your client needs. Impact assessment is just one element of social performance.

Why should MFIs understand SPM given its cost and time commitments and how can one incentivise it for MFIs?
RC: SPM is about translating your mission into practice so you really should not need any incentives to abide by your own mission statement. It is a cost that MFIs bear in order to improve sustainability in the long run though. MFIs need to look at SPM as
a risk mitigation strategy. It can also give them a competitive edge.

LF: In 2005, social performance was criticised for being costly, time consuming and an extra burden for loan officers. After the Nobel Peace Prize, microfinance was suddenly receiving a lot of negative press because some of the reporters digging deeper found no evidence linking microfinance to economic growth. Then the financial crisis hit and investors became more selective, wanting to invest in financially sound institutions. Social investors too want to invest in institutions they know are making a social impact. Demonstration of social performance to stakeholders improves an MFI’s position in a competitive funding market. SPM can also lead to financial sustainability. Higher retention of clients through monitoring and responding to their satisfaction translate into
lower costs and higher profits. In the long term, these benefits could cover the cost of implementation of SPM.

What is the level of interest of MFIs in SPM at present?
RC: People are just becoming aware of SPM. On their own, not many MFIs have come forward because they are not aware of social performance, and also because there are many myths surrounding social performance being soft and difficult to measure.

LF: I think it is very high. The majority of the interest is in the social responsibility area. People enter into the realm of ‘do no harm’. A lot of people come in to implement client protection measures but soon realise that it is really just the bare minimum and that they can actually do much more. The turn of events that led to the economic crisis has also given rise to an increased level of interest in social performance as investors have become selective. Social Performance is now seen as a basic element of doing business well.

Can you give us illustrations of how SPM has been incorporated by MFIs?
RC: One of our pilots was with Shikhar Development Services in Delhi which had good results with their Progress out of Poverty Index (PPI). They set a goal to have 80 percent of clients below poverty. For this, they included indicators of PPI into their loan application form, which would help them analyse data and become part of their decision making process.

LF: FINCA international’s mission statement used to be ‘We want to reach the poorest of the poor.’ After incorporating SPM into their organisation, their mission statement is “to provide financial services to the world’s lowest income entrepreneurs so they can create jobs, build assets and improve their standard of living”. Compartamos does both social performance and impact assessment and very shows how it is changing the practices that brought it to attention. In the Philippines and Latin America social performance is completely incorporated. In Africa and India it is still relatively new. MicroRate has just incorporated the social
rating into their standard rating.

Do we have standardised indicators of social performance?
RC: In the Progress out of Poverty Index (PPI), each country has its poverty data benchmarked with the national poverty line. Statistically too, they can be standardised for the rural and urban context. However, the indicators may need to be slightly altered from one context to another.

LS: Yes. The Social Performance Task Force (the Task Force) has created a standardised set of social performance indicators which were distributed in early 2009 to the more than 1,300 MFIs that report to the Microfinance Information Exchange (MIX).

What are the biggest challenges that you face in implementing SPM at this point of time?
RC: One major challenge is in convincing MFIs to make this a part of the way they run their businesses. There are skill-level issues in providing training and technical assistance in collecting and analysing data. We also need to understand that the pressures
on MFIs are huge - they are in no comfort situation. With some MFIs in India operating with 1000 clients to one field officer, staff time is a big constraint.

LF: In my mind, the most important thing we need is technical assistance for which we are setting up a fund for now. Getting enough trained folks to be follow-up mentors to MFIs who really want to incorporate SPM into their management is what we really need and are trying to address.

Ragini B. Chaudhury is a South Asia member of the Imp-Act consortium and the EDA Director of Training for SPM. The Imp-Act Consortium is a global group of organisations working to promote the management of social performance by MFIs, train them to implement SPM and build capacity to support it through training modules, practice guides and mentoring guidelines.

Laura Foose is the Chair of the Social Performance Task Force that was formed in 2005 by the Ford Foundation, CGAP and the Argidius Foundation. It consists of over 350 leaders from every microfinance stakeholder group all over the world: practitioners, donors, investors, national and regional networks, technical assistance providers, rating agencies, academics, researchers etc and tries to get them to agree on a common social performance framework and to develop an action plan to move social performance forward.