Pre-Program Landscape
Microfinance institutions (MFIs) have a high level of financial transparency and accountability. However, microfinance is a double-bottom line industry that values social returns as much as financial returns. A key challenge for the microfinance industry has traditionally been the lack of reliable, comparable and publicly available information on a combined analysis of financial strength and social performance of institutions. To ensure adequate levels of transparency on these social returns, a comparable level of consistent, transparent reporting and measures are needed.
The critical need for insight into social performance (SP) is highlighted by the achievements of the MF industry in recent years - a rapid growth of over 15 percent per annum and scale of over 100 million borrowers with more than $22 billion in loans. The availability of comparable social data would enable better decision making by all microfinance stakeholders – the MFIs, lender, donors, investors, and regulators. In the same way that financial reporting and analysis help drive sustain profitability, objective social performance reporting and analysis will enable ongoing social benefits.
Enabling public reporting and transparency of social performance indicators in microfinance
As the information backbone of the microfinance industry, the Microfinance Information Exchange (MIX) has acted as both a promoter of financial reporting standards as well as the centralized information collection and dissemination point. MIX has leveraged this expertise and network to introduce reporting standards on the social performance of MFIs, and to drive industry wide transparency and performance standards.
Funded in part by the Michael & Susan Dell Foundation, MIX has worked with a wide array of leading industry experts to develop a metrics-based report on social performance standards (SPS). This social performance report has been endorsed by the Social Performance Task Force (www.sptf.info), the international body charged with clearly defining and addressing questions about measuring and managing social performance. MIX has co-led several international subcommittees on developing social performance indicators (SPIs) since October 2005. The set of SPI standards were tested by a select group of 100 MFIs in a pilot survey. Based on the feedback from this pilot survey, the SPI standards were refined prior to wider distribution.
Beyond development of the SPS report (available here), MIX is working to encourage and facilitate SPI reporting by MFIs across the world. To this end, MIX has produced education and outreach materials and conducted numerous trainings for MFIs, MFI networks, and regulators. Additional orientation and training materials on implementing SPI standards are in various stages of development.
As of 2010, MIX had collected social performance data from over 400 organizations, all of which is publicly available on the www.mixmarket.org. MIX continues to encourage reporting through SP reporting awards. By migrating this social performance data onto the platform that houses MFIs’ financial and operational data, MIX can conduct comprehensive analysis to better understand how financial and social performance are linked.
Going Forward
Looking across the next few years, MIX will continue to refine standards, expand the collection and validation of data, and drive analysis of social returns as well as of the links between social and financial performance. Only with full, public transparency can institutions, lenders and investors make fully informed decisions on funding and growth strategy; and only then can politicians, the media and other observers accurately assess social returns. But ultimately, standards and data are just tools to inform. The Microfinance Information Exchange’s end goal is to help the industry drive change and improve social performance, not simply measure it.