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Managing social performance in microfinance

Topic :

MOST MICROFINANCE institutions (MFIs) have a social mission. They may seek to reduce poverty, to reach people excluded from financial services, to empower women or to promote community solidarity. Social performance is the effective translation of an institution’s social mission into practice; social performance management (SPM) helps an organisation set and achieve its social goals by tracking social performance and using this information for decision-making that puts learning into practice.

Social performance management is good both for clients and for business. It should be seen as a core part of good business practice. If MFIs know what the market ‘wants’ as well as the developmental ‘needs’ of their clients, they can improve services. This builds loyalty, reduces default and increases demand for savings, credit and other services. Social performance indicators warn about problems and provide social and financial information that helps influence future performance.

This guideline provides a series of steps and checklists to assist managers in designing and using an effective SPM system. The framework provided is drawn from Imp-Act’s experience with 30 MFIs around the world. It is meant to be used in conjunction with the other Imp-Act Practice Notes that address more specific and technical aspects of this broad subject. The steps outlined for a successful SPM system are:

  1. Setting your social performance objectives
  2. Monitoring and assessing your social performance
  3. Using SPM and making it part of your everyday work

Even if your SPM system is well designed, it will only be useful if it is fully integrated into the organisational structure and daily work. You need to make sure that SPM is aligned with other processes, such as human resources, marketing, financial management, budgeting, strategic planning, incentives, communications and governance.

As with all Notes in this series, this one is clear, practical and applicable to a wide variety of financial institutions which have a social objective.

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