Microfinance is big business in India. A $4.5 billion portfolio serving more than 37 million clients. An innovative financial tool that combats poverty. But it does not come without its complications. Success has been difficult to evaluate in an industry with the daunting goals of delivering a return on investment and supporting social progress among customers. The financial side of the equation is a little easier; it’s dictated by established norms. But there’s little discipline around measuring and reporting on social returns.
We aim to ensure client protection and responsible finance practices in microfinance so that the benefits of market-based opportunities reach urban poor families. We support initiatives with the potential to drive industry-wide adoption of microfinance social performance indicators.
Those initiatives include the Progress Out of Poverty index, which tracks a set of standardized metrics to assess the social performance of MFIs. We also support the nationally-adopted Common Code of Conduct for Microfinance Institutions. This aims to standardize customer-centric practices such as disclosures made to the client at the time of loan sanctioning, ensuring that the client has the best information and ability to compare different financial products.
Microfinance entrepreneurs have different reasons for setting up their institutions. Some have a very strong focus on the social side of the bottom line – like providing the poor with access to financial services, improving income levels or empowering women; others are more interested in making profits in an untapped market. That’s why we’ve focused our support on the establishment of meaningful norms of good governance that balance social and financial ROI.