Social Performance Management

September 13th, 2011 14:30-16:15　

PlaNet Finance Japan – Head of ProjectsDaichi Hirose

TBLI Conference Asia

PlaNet Finance at the glance

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Overview of PlaNet Finance Group

PlaNet Finance is an international NGO that support development of microfinance sector

Overview

Established: 1998年Headquarter: Paris, FranceNo. of staff: 900 Founder: Jacques Attali（ Founding chairman of EBRD ）Offices ： South Africa, Ghana, Egypt, Palestine, India, Cambodia, Vietnam, Philippines, Colombia etc (31 countries)

PlaNet Finance Japan

Established in 2006 in Japan. Engaged in awareness raising, project development and implementation of microfinance

Rating agency conducting financial and social performance assessment.

Microfinance investment advisory service

MFIs operating company. Operates MFIs （ 5 MFIs in Africa,　 2 in China）

Promotion of micro-Insurance for rural poor and micro-entrepreneurs

Venture capital providing capital to micro entrepreneurs in France

Person 2 person online micro-lending platform.

Microfinance training institution for staffs, universities and experts

Technical assistance provider for microfinance institutions (MFI).

Provide holistic services in pursue of development of microfinance sector

31 offices around the world

2000: PF Senegal2003: PF Benin

2009: PF Burkina Faso, PF Mali

2006: PF Madagascar

2003: PF Mexico

2004: PF Brasil

2006: PF Argentina

2006: PF Egypt2006: PF Palestinian Territories

2007: PF Israel

2002: PF Morrocco

2005: PF UAE 2003: PF China

2007: PF Japan

2002: PF India

2005: PF Nepal

2008: PF Philippines2011: PF Cambodia2011: PF Vietnam

2005: PF USA

2001: PF Italy2002: PF UK

2003: PF Belgium2004: PF Portugal2006: PF France

2007: PF Germany2008: PF Luxemburg2009: PF Switzerland

2008: PF Colombia

2009: PF South Africa

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Assistance projects held globally funded by governments, foundations and corporations.

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Project: Economic Empowerment – Women Shea producers

Business Line: MF + Value ChainCountries: Ghana

Funders: SAP

Project: Food Security

Business Line:

Upgrading - Rural

Countries: Vietnam,

Cambodia, Philippines

Funders:

European Commission

Project: Tongwei Rural Biogas Program Business Line: MF + Environment

Countries: ChinaFunders: European Commission, Areva

Project: Mobile Money Project Business Line: BFI – Mobile Banking

Countries: Cote D’Ivoire, Kenya, Philippines

Funders: Bill & Melinda Gates Foundation

Project: Banco PostalBusiness Line: BFI –

Postal BankingCountries: Brazil

Funders: Bill & Melinda GatesFoundation,

Universal Postal Union

Project: Downscaling - Uruguay

Business Line: BFI - Downscaling

Countries: UruguayFunders: Banco de la

Republica Oriental Del Uruguay (BROU)

Project: Rural Women Entrepreneurs

Business Line: MF + EducationCoun≈tries: Egypt, Syria

Funders: European Commission

Projects held from Japan office

Project: Fieasibility Study on Reinforcing Biofuel Energy Access through Microfinance (2009)Countries: Kenya, UgandaFunders: Ministry of Economics, Trade and Industry of JapanPartner: Toyota Tsusho Corporation

Project: Needs survey on clothing of poor households (2010)Countries: Cambodia, VietnamFunders: Fast Retailing Co., Ltd

Project: Value chain finance product development and building human resource training system (2010)Countries: PakistanFunder: Japan International Cooperation Agency (JICA)

Project: Improving financial access to rural farmers in Mindanao (2011)Countries: PhilippinesFunder: Japan International Cooperation Agency (JICA)

Project: University Meets PlaNet Finance (2011)Countries: JapanFunders: Toyota Tsusho Corporation

Tohoku Tsunami Rehabilitation

“Kamaishi” Initiative

France O-kaeshi Project

Emergency ResponseProvide warm clothing from one month after Tsuna in Kamaishi city, Iwate

The supplies are provided by companies from france including Air France, Serge Blanco, Rossignol, Fusalp, Adidas etc

The local partner, “Kamaishi Seawaves RFC” , a professional rugby team handed over the supplies.

“Kesennuma” Initiative

Economic RehabilitationConducted feasibility study on economic rehabilitation of Tsunami affected Small & Medium Enterprises through improving financial access

The study was held with Mercy Corps, global NGO committed to emergency response which is supporting Kesennuma, Rikuzentakada, Ofunato and Minami-Sanriku

Currenlty, the project is considering to develop a support scheme to reinforcing financial access with local financial institutions.

Industry RecoverySupport project of Oyster industry in Sanriku devastated by the Tsunami. French companies, foundations and chamber of commerce provide financial and supply support to restart the oyster farming.

Local partner is Ilink, a Sendai based company involved in Oyster marketing and Japan Oyster Association.

French oyster industry has almost died in 1980’s by the spread of epidemic. The industry has recovered by seed oyster from Sanriku.

Rapid expansion of capital flow in microfinance arena

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Historical investment by funder type (2005-2010)

( bn.)

Source: CGAP Funding Survey

2.3 bn 3.5 bn 6.4 bn 8.9 bn 10.9 bn 12.9 bnTotal Amount

Increasing number of players in Microfiannce investment

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Source: Microrate State of Microfinance Investment 2010

Microfinance Fund

responsAbility

Developing World Markets

Oikokredit

Calvert

Blue Orchard

Dexia

Triodos

Gray Ghost

Triple Jump

Individuals

Pierre Omydiar

Kiva

Development Financial Institutions

(multilateral and bilateral)

ADB

IFC

AFD (France)

DFID (UK)

kfw (Germany)

FMO (Netherlands)

USAID (US)

JICA/JBIC (Japan)

Public Investors Institutional Investors

Banks, Insurance, Foundation

AXA

Morgan Stanley

Citibank

Credit Suisse

Deutsche Bank

Dexia

HSBC

Triodos

ABN AMRO

ING

MIV: Procredit, Oikokredit, EFSE, Dexia, Blue Orchard, ResponsAbility 1,5 bn

1,5 bn 50 mn700 mn

350 mn950 mn

2 bn

Source： CGAP 2006

Individual (retail) Investors

Microfinance Institutions11

Examples of microfinance investors

“Commercialization” of Microfinance

12*Deutche Bank Research 2006

*CGAP Data

*CGAPData

Microfinance “Mission Drift”

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“we ve seen a major mission drift in microfinance [institutions], from ‟being a social agency first to being primarily a lending agency that wants to maximize its profit”

-Indian Institute of Management, Wall Street Journal, 2009

“when you are making profits you are moving into the mentality of the loan shark. We are trying to get that loan shark out”

- Prof. Muhammad Yunus, Nobel laurete, Financial Times, 2008

Microfinance “Mission Drift”

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MFIsSocial Performance Financial Performance

Expansion of Outreach•Reach out to “poorer” clients•Access to more remote areas•Product diversification to suite the various financial needs

Cost Reduction•Reduce labor cost•Lend to non-risky clients•Minimize product offering •Reduce cost of fund

Affordability for low income •Low interest rate•Suited loan size

Earnings•High interest rate•Larger loan size

Welfare•Provision of non-financial services•Customer satisfaction•Staff training •Financial Literacy

Improvement in Efficiency•“Minimalist” approach

VS

VS

VS

Social Performance Management (SPM)

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Mission

Social Performance

Financial Performance

Strategy

Operation

Human Resource

Management

Result

Impact

A Social Performance Management approach enables MFIs to: Incorporate their social objectives within their day-to-day operations Keep track of their progress in attaining their social mission Attract skilled staff and enhance its motivation Improve their score in social audit and social ratings Prove to investors, donors and clients that their activities are resulting in positive social changes≈

Project: Improving financial access to rural farmers in MindanaoCountries: PhilippinesFunder: Japan International Cooperation Agency (JICA)Duration: September 2011 – August 2014Budget: 67,000,000 yenPartner: Mindanao Microfinance Council

Project Task: 9.Conduct research on financial needs of rural low income farmers for development of Agri-microfinance product 10.Integration of Social Performance Management (SPM) into 2 microfinance institutions11.Provision of financial literacy programs through training of trainer’s approach

SPM projects on-going in PlaNet Finance

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Project: Improving Financial Inclusion and Social Impact towards Food Security in Southeast AsiaCountries: Vietnam, Cambodia, PhilippinesFunder: European Union (EU), Agence Francaise Developpement (AFD)Duration: January 2010 – December 2012Budget: 1,720,000 euroPartner: Vietnam Microfinance Working Group

Cambodia Microfinance AssociationMicrofinance Council of the Philippines

Project Task: 11.Develop financial and non-financial services that meet the needs of low income farmers12.Integration of Social Performance Management (SPM) into 45 participating MFIs via 3 local microfinance networks13.Integration of financial literacy, consumer protection and transparency in participating MFIs14.MFI Network strengthening, action research, peer learning and exchange or expertise

Social Performance Management Tools

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MissionIntent Design

Internal Control

Output

Outcome Impact

Audit:SPI 3

Quality Audit ToolGRI

FMO E&S Risk Audit

Rating:M-CRIL

MicroFinanza RtgPlanet Rating

MicroRate

MeasurementProgress out of Poverty Index

SEEP/AIMS toolsMicroSave tools

INAFI (Oxfam/Novib)

[---------------------------- Process -------------------------------- [--------------------------- Results -----------------------------]

Social Performance Strategy Development

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Social Performance Strategy Development

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Social Performance Strategy Development

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Social Performance Strategy Development

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Breaking strategy down into objectives, targets and to action plans…. (Balanced Scorecard)

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Conclusion

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• MFIs’ capacity to absorb new capital is reaching limit

• Over capitalized MFIs causing unintended Mission drift

• Social Performance Management emerged as new norm to align the social performance with financial