RIF Working Group presentation

Editor's Notes

• #2: Over the last few years as interest in and commitment to social performance management has grown, the number of initiatives has grown with it. While this is a positive step toward making our industry client-centered, it has created some confusion. Many MFIs have expressed confusion about which initiatives, resources and tools apply to them or where to even start to improve practice in responsible inclusive finance. And while the different major initiatives in responsible inclusive finance have always communicated with and supported each other, it has become clear that we need an even stronger strategy for alignment in order to reduce that confusion, make sure we avoid duplication of efforts, and facilitate the sharing of information in the most effective way. That’s our goal for today, to provide clarity on the resources available to you in improving practices in responsible inclusive finance.
• #3: To start, let’s clearly define what we mean by responsible inclusive finance. The Responsible Inclusive Finance Working Group defines responsible inclusive finance as “Every institution along the value chain of ‘responsible inclusive finance’ – whether socially or financially motivated – employs responsible, client-centric practices at every level of its business and demonstrates commitment to fulfilling its mission.” [ON CLICK] That means that institutions along the value chain of responsible inclusive finance – whether socially or financially motivated – employ responsible, client-centric practices at every level of business and demonstrate commitment to fulfilling their mission.
• #4: Next, we wanted to take a moment and clarify the two main pillars of responsible inclusive finance: client protection and social performance management. Client protection ensures that MFIs are protecting clients from harm through practices such as transparent pricing. Social performance management makes an organization’s social mission a reality. Every financial institution should engage in client protection, no matter if they have a double-bottom line. If an MFI is a double-bottom line institution, it should work on social performance management. [ON CLICK] It’s important to remember that social performance management encompasses client protection.
• #5: As we noted when we started, there are several initiatives that focus on responsible inclusive finance. These initiatives each come from the microfinance industry look at the issues of social performance, client protection and transparency. In the absence of being regulated, these initiatives are being proactive about responsible inclusive finance. [ON CLICK] Since 2013, we have been working together as the Responsible Inclusive Finance Working Group. This group convenes the leaders from each of these initiatives to explore how best to advance responsible finance practices within the microfinance sector. We focus on collaborating to streamline efforts where possible, avoid duplication of efforts and reduce confusion of the various resources and tools related to responsible inclusive finance.
• #6: So, if you are a financial institution is interested in responsible inclusive finance, what are the initiatives and tools available to help you learn more and how do they each fit in the realm of responsible inclusive finance? Each of these initiatives develop norms, resources and/or tools around social performance and client protection. While all of these initiatives collaborate, the Social Performance Task Force serves as an umbrella organization for responsible inclusive finance.
• #7: In 2005, CGAP, the Ford Foundation and the Argidius Foundation brought together leaders from various social performance initiatives in the microfinance industry to come to agreement on a common social performance framework and to develop an action plan to move social performance forward. Today, the task force consists of more than 2,200 members, including: Practitioners Donors and investors (multilateral, bilateral and private) Global, regional and national networks TA providers Regulators These stakeholders work together as the task force to develop the Universal Standards for Social Performance Management (USSPM).
• #8: Some of you are very familiar with the Universal Standards and helped create the resource we have today. Other might be seeing this for the first time – so I want to spend a little time here explaining what the Standards are and what they are not.  [CLICK TO ANIMATE FIRST ICON] The Universal Standards bring together good practices implemented successfully throughout the industry in one comprehensive manual—to clarify and standardize social performance management. The fact that many financial service providers are already putting these standards into practice shows that the standards are realistic and practical and came from practitioners.   [CLICK TO ANIMATE SECOND ICON] They were created by and for people in the field: financial service providers, networks, investors and other stakeholders around the world identified the need for a common resource and worked together to create it. The role we played at the SPTF was to consolidate this input and learning into one resource. The collaborative development of the Standards is what I believe was so critical in building their legitimacy.   [CLICK TO ANIMATE THIRD ICON] The Universal Standards are a resource for financial service providers seeking to achieve social goals. They do not dictate what an institution’s goals should be, but help identify the best way to achieve them.   [CLICK TO ANIMATE FOURTH ICON] By uniting the industry around a common approach to achieving social outcomes, the Universal Standards demonstrate that financial service providers are working to improve their performance management —helping to enhance the credibility of our institutions and the reputation of our industry. They demonstrate a significant, voluntary effort to self regulate.   [CLICK TO ANIMATE LAST ICON] Implementing the Universal Standards is a process that will be different for each institution. Financial Service Providers can work with investors, networks and other partners to set realistic social performance management goals and implement the Universal Standards at their own pace. This is where we want your help – encouraging and working with your partners to implement these practices over time. Some financial institutions are waiting to see if investors care about these issues before they take measures to enact them. These standards can help institutions identify their strengths and weaknesses and this analysis can help investors and institutions to determine what areas to prioritize over the course of their investment. You can reinforce in your interactions with institutions that these practices make good business sense.
• #9: The Universal Standards are based on leading industry initiatives and practices implemented successfully by MFIs. It’s a voluntary resource – not a rating, regulatory or certification system. As we said, the Standards are a comprehensive manual of best practices. SPTF worked with each of the initiatives in the Responsible Inclusive Finance Working Group to make sure the Standards were as comprehensive as possible and that MFIs have the resources tools necessary to help them improve practices. Given that the Universal Standards serve as the umbrella for the other initiatives and tools, SPTF serves as the manager of the RIF Working Group.
• #10: Now, we’ll tell you a quick three things to know for each of these initiatives, focusing on its mission, relation to responsible inclusive finance and the first step MFIs can take to become involved with them. Each of the initiatives on this slide have worked and continue to work with SPTF to make the Universal Standards as comprehensive as possible. Going through each of the initiatives, as we mentioned, they can be split into client protection and social performance. The first half of that -- client protection -- applies to ALL financial institutions and helps ensure that no harm comes to clients. Within this category, the initiatives are the Smart Campaign and MFT SMART CAMPAIGN MAIN MISSION: To embed a set of client protection principles deep within the fabric of the microfinance industry. Client protection must be a focus for all MFIs. There’s a thinking that MFIs are much further ahead than they actually are in client protection, which is something that has come up in most of our work in assessments that we do. The Smart Campaign developed the seven Client Protection Principles that financial institutions must follow to protect clients. CLIENT PROTECTION PRINCIPLES Appropriate product design and delivery Prevention of over-indebtedness Transparency Responsible pricing Fair and respectful treatment of clients Privacy of clients data Mechanisms for complaint resolution RELATION TO RIF: Protecting clients is a pillar of social performance. HOW TO GET INVOLVED: Educate yourself on the framework through the website, through workshops and through webinars. The website is meant to be the main way of communicating with our various audiences. Next, complete the self-assessment.
• #11: As we said, the Standards are a comprehensive manual of best practices. SPTF worked with each of these initiatives to make sure the Standards were as comprehensive as possible. [ON CLICK] Here, you can see where the Smart Campaign’s Client Protection Principles are part of the Universal Standards. In fact, almost one-third of the Universal Standards come verbatim from the Client Protection Principles.
• #12: Also on the Client Protection side, is MFT Transparency, which addresses the lack of transparency in MF product pricing. As we mentioned, pricing transparency is one of the key principles of Client Protection. MF Transparency does not tell institutions what their interest rates should be. Rather, it works to make the industry transparency about the true prices of products. MFTRANSPARENCY MAIN MISSION: MFTransparency promotes the welfare of microentrepreneurs as a poverty alleviation practice through addressing the lack of transparency of microfinance product pricing. RELATION TO SP:  MFIs can improve social performance through MF product pricing transparency. By becoming more transparent in your prices, you’re really conforming to client protection principles and to the social performance framework. It’s one of the crucial pieces to client protection. And, it’s an activity that will probably become mandatory in the future. So by providing it voluntarily now, you can show that you’re putting themselves ahead of others when it comes to social performance and client protection. HOW TO GET INVOLVED: Visit the website and check to see if MFT is present in the country. Even if MFT is not present, you can complete a self-assessment with the calculator. MFIs also should educate themselves with the Truth-in-Lending Table – trend data that can show MFIs where they stand compared to countries in their region.
• #13: MFTransparency collaborated closely with SPTF to ensure that Dimension 6 – Balancing Financial and Social Performance – aligned with the pricing transparency guidelines it had developed.
• #14: On the other side of responsible inclusive finance, we have social performance management. If you are an institution with a poverty-focused mission, Truelift has developed principles to make sure your institution has the proper management practices in place to reach those poverty goals. TRUELIFT MAIN MISSION: Truelift aims to renew focus on the pro-poor objective of microfinance, and to improve practice through a community of learning and sharing. RELATION TO SP: Truelift is building a roadmap for a particular application of social performance. For those that are focused on poverty social mission – such as those with poor clients or focused on reducing poverty – Truelift provides a roadmap to navigate through the initiatives. HOW TO GET INVOLVED: Sign up and join the community of practice, and then complete the self-assessment to see how we think about pro-poor microfinance.
• #15: Truelift doesn’t apply to a specific dimension of the Universal Standards. Rather, it applies a poverty LENS to the entire standards. [ON CLICK] As we’ve said, the Universal Standards help financial institutions achieve their social goals, no matter what they may be. Truelift says that if those social goals happen to be focused on alleviating poverty, here are a set of additional principles to help you achieve those goals.
• #16: Again, these are the initiatives that help set standards and norms for MFIs to improve practice. The group has also been coordinating to align the tools that help MFIs assess and implement their practices against these standards. PPI, CERISE and MIX are three such tools that align with the Universal Standards. MISSION: For example, the Progress out of Poverty Index (PPI) is a poverty measurement tool for organizations and businesses with a mission to serve the poor.  RELATION TO RIF: If institutions have a poverty-focused social mission, they must be able to measure poverty to assess their progress against those goals. FIRST STEP: Download the Standards of Use to learn what actions must be taken to ensure your organization’s PPI data is accurate and relevant.
• #17: To comply with Dimension 1 of the Universal Standards, Define and Monitor Social Goals, institutions that have a poverty-focused social mission MUST use a poverty measurement tool. PPI is one such tool.
• #18: As institutions look to improve social performance management practices, they must first identify their strengths and weaknesses. CERISE, working with each of the initiatives here, has developed a comprehensive social performance assessment tool. MISSION: To help institutions assess themselves against the Universal Standards RELATION TO RIF: Developed the SPI4 to help institutions identify strengths and weaknesses against the Universal Standards for Social Performance Management FIRST STEP: Download and complete an SPI4.
• #19: [On click] The SPI4 is a free tool that allows financial institutions to assess their social performance management practices against the full set of Universal Standards indicators, allowing them to identify their strengths and weaknesses and then create an action plan for improvement. The SPI4 also features four additional modules – gender, rural, poverty and green – for institutions that want to tailor their assessments to specific social goals.
• #20: It’s also important to make sure there’s a platform for MFIs report social data, allowing them to be transparent about social performance to clients and investors. MIX provides such a platform. MISSION: To strengthen the microfinance sector with objective data and analysisRELATION TO RIF: Provides platform to share and benchmark social performance data FIRST STEP: Share social performance data with MIX
• #21: For many years, MIX has worked to collect and report social performance data from MFIs. Now, through collaboration between SPTF, CERISE and MIX, MFIs can directly report social performance data through the SPI4, reducing their reporting burden.
• #22: Again, these are the main standards and tools that are available.
• #23: We’ve been talking about standards and tools, and how our initiatives have worked to align them. But how can institutions take these standards and begin to improve practice? The exact path will differ from institution to institution, but we have worked to create an overall pathway for improvement. (Pass out handout) As you can see on the handout, the first step is to choose a lens through which you look at responsible inclusive finance. This depends largely on your mission, but also includes considerations like resources and any previous work in responsible inclusive finance. The three lenses are: Client Protection. The Client Protection track ensures no harm comes to clients. This track applies to all financial institutions and includes pricing transparency. Social Performance. Organizations should choose the social performance track if they want to improve their overall social performance. This includes institutions with a double-bottom line. Following this track will also include client protection and pricing transparency. Poverty Focus. While microfinance organizations have different social goals, many tend to have specific poverty goals. For that reason, we have included a special lens for poverty-focused institutions. For organizations that have a social mission focused on poverty or have many clients living in poverty, there are resources that apply a poverty focus to the client protection lens or the social performance lens. Once you have chosen a lens, there are five broad steps of improving practice. Step 1: Learn. As you start to approach responsible inclusive finance, it is important to take time to learn about various initiatives and issues. This is the time to understand your mission as an MFI and to determine what is right for you. These resources listed on the handout will help you do that. These are the main resources we’ve covered today. For client protection, you have the Client Protection Principles and MFTransparency. For social performance management, you have the the Universal Standards and for the poverty focus, you have the Truelift Pro-Poor Principles. Step 2: Assess. Next, it is important to assess where your strengths and weaknesses are in the areas you are trying to improve. Several tools are available, for both third-party assessment or self-assessment. We just talked about the SPI4, which is the most comprehensive of all of these tools, but there other tools, such as the Smart Assessment and Truelift Assessment, depending on your track and resources. All are listed on your handout, with links to access them. Step 3: Plan. Planning is all about improving practice at your own pace. These tools help you understand where the gaps are. During the planning phase, it is important to prioritize what you want to address first. Step 4: Implement. After focusing your plan, there are several tools and resources available to help implement that plan. Step 5. Demonstrate. While all the previous steps have been about improving, this last step is about proving. Proving progress in responsible inclusive finance will help boost credibility in the eyes of stakeholders, such as investors, networks and associations. We don’t have time to go through each of these resources but on the handout, you will see the resources and tools outlined at each stage, for each track. And, they each have links to where you can access them. Please note that there are several different ways to go about doing this. Nobody will walk through these steps in the same way. As we’ve mentioned, determining which track to take will depend on your institution’s mission. However, it will also be determined by your institution’s human resources, budget and previous work in responsible inclusive finance.
• #24: Finally, please note that this is not a one-time pathway. In practice it is more like a cycle. You assess, you make a plan to improve, you implement that plan, then you reassess, plan for further improvements, implement your next plan, etc. Periodically you will report externally to demonstrate your performance. All of these steps are important, on an ongoing basis, so that your institution never stops learning and improving.
• #25: That’s the end of our formal presentation. Now, we want to make sure that everyone has been paying attention!
• #26: FALSE About one third of the Universal Standards for Social Performance Management are taken directly from the Client Protection Principles. This is just one example of initiatives aiming to streamline and coordinate efforts in responsible inclusive finance.
• #27: FALSE. MFTransparency reveals the true prices of loan products, creating transparency for customers and practitioners. It does not indicate where interest rates should be. MFT presents information on products and their prices in a clear and consistent fashion, so that all microfinance stakeholders can work with full understanding of the true prices paid by clients.
• #28: FALSE The Universal Standards are a set of management standards that apply to all institutions pursuing a double bottom line. These are standards for how an institution manages its social performance, not standards for the performance outcomes the institution should achieve. The Standards specify how an institution should act on their stated social goals, but not what those social goals. What these Standards do specify about social goals is that:  (i) Goals should be clearly defined and have measureable targets; (ii) MFIs should monitor their progress toward their social goals and use this information to improve their operations; and (iii) Employees, managers, and the Board should be accountable for achieving the institution’s goals. This is based on the assumption that improved clarity, transparency and accountability on performance helps to improve it, just as we argued years ago for more transparency on financial performance.   NO, Standards do not apply to all financial institutions irrespective of their mission but especially to those that have a double-bottom line. Client protection applies to all financial institutions. We are defining a double bottom line institution as one which: (i) Seeks not only financial sustainability, but also to achieve one or more social goals. (ii) A double bottom line institution works toward increasing financial inclusion and creating benefits for clients, beginning with reducing client vulnerability. (iii) And finally a DBL institution ensures that clients are not harmed. In other words, they protect clients. A double bottom line institution seeks to achieve one or more social goals, but the Standards do not dictate which social goals and institution should have. While we expect all financial institutions - including those that have a single bottom line and especially those that serve low income clients - to meet certain minimum standards on client protection, double bottom line providers are expected to go beyond that.