Practices, results and challenges analyzed by Mathilde Bauwin, ADA, in collaboration with CERISE
Since 2014, CERISE has been supporting microfinance institutions (MFIs) wishing to evaluate their social performance management practices, thanks to the SPI4 social audit tool, fully aligned with the Universal Standards for Social Performance Management. CERISE centralizes the SPI4 audits carried out within a database. In 2018, ADA and CERISE joined forces to analyze this database and to draw up a global inventory of social performance assessment and management practices (GPS).
Mathilde Bauwin‘s study for ADA highlights the progress of the GPS sector in 2018, the strengths and weaknesses of MFIs in GPS, as well as the potential synergies between performances (social, environmental and financial). The study covers 435 audits conducted and transmitted to CERISE by 368 MFIs in 73 countries (mainly in the regions of Latin America and Caribbean, sub-Saharan Africa and Asia).
Among the highlights, the study shows that the MFIs in the sample score an average of 65.4% for GPS practices, knowing that “institutions with the lowest scores are those located in sub-Saharan Africa, cooperatives, institutions which have a small portfolio and those which target urban areas.” These types of institutions therefore particularly need support on GPS issues.
The study focuses on comparing the scores of the sample MFIs in each dimension of the Universal Standards. Thus, dimension 2 shows the lowest score – implementation of procedures and processes to ensure the commitment of all of the institution’s stakeholders to the social goals – while dimension 6 relating to the balance between financial and social performance, obtains the highest score.
“Whilst the differences between the scores should be interpreted with caution, since certain good practices are easier to implement than others, they can, nevertheless, help to identify the areas in which particular support is required.”
This study also analyzes the relationship between social performance and financial performance. Unlike other work on the subject, social performance is considered here in terms of management and not results. It is also the first time that it is defined according to the Universal Standards in such an analysis. The results notably show that there is a positive relationship between good GPS practice and portfolio quality.
“The analysis shows that, all other things being equal, the link between good social performance management practices and the quality of the portfolio is significant from a statistical point of view and that it is both a strong and positive link: the higher the social performance management scores, the lower the portfolio at risk.”
In conclusion, the study reveals several issues that the GPS sector should respond quickly in order to better support MFIs in the matter of social performance management, to adapt standards and tools to the recent evolution in the sector and take up the major challenge of continuous data collection and analysis.