developing a global approach to social performance measure

Developing a Global Approach to Social Performance Measure

Jody RaschPresented at various international conferences

SEPTEMBER 2013

2Social Performance Assessments

Table of Contents

Level 1: Use of the SPA by Individual MFIs4

Level 2: For Local, Regional and Global Analysis of Microfinance Practices 11

Level 3: Global Research on the Effectiveness of Microfinance 19

About Moody’s Corporation 21

Contact Information 22


Using the Moody’s Analytics Social Performance Assessment (SPA)

The Moody’s Analytics SPA can be used for three different audiences:

Uses of the SPA:

For an MFI’s analysis of its practices

For understanding regional and global practices

For global research on microfinance effectiveness


Level 1: Use of the SPA by Individual MFIs


Key Features of the SPA for Individual MFIs

Granular analysis of MFI performance and changes

over time

Benchmarking performance against different peer groups


Example of Analytics Provided to an MFI

Guide by factor

Score and grade by factors and sub-factors so MFI can track its progress

over time

Graph of the relative contribution of each factor

and sub-factor to the overall SPA grade


Example of Analytics Provided to an MFI (cont’d)Relative Contribution

» Relative contribution charts show how each factor contributes both positively and negatively to an MFI’s final SPA score. It allows an MFI to focus on the areas that will have the most impact on its overall SPA grade.

» The relative contribution analysis is presented at both factor and sub-factor levels to make the tool more useful for social performance management, reporting and self evaluation.

Main Factors Sub-Factors (Strategy and Leadership) Sub-Factors (Governance)

Of the Main Factors, Strategy and Leadership contributes most negatively to the overall score

Within Strategy and Leadership, Governance contributes most negatively to the overall score

Within Governance, Board Composition contributes most negatively to the overall score


The SPA Maps to Other Social Performance Initiatives

Universal StandardRef. code

Universal Standards for Social Performance ManagementMoody's Analytics Mapping

Reference

Degree of Match to Moody’s Indicator

Does MFI Meet the Standard

Y=1 N=0

SECTION 2: Ensure Board, Management, and Employee Commitment to Social Goals2a Members of the Board of Directors are committed to the institution’s social mission

2a.1 The institution provides Board members with an orientation on the social mission and goals, and the Board’s responsibilities related to the social performance management of the institution, and confirms that each member agrees S&L-1K4 Moderate 1

2a.2 The institution requires Board members to adhere to the institution’s code of ethics (see Essential Practice 2b.5) HR-D8 Moderate 1

2a.3 One or more of the Board members has expertise in some aspect of social performance (e.g., experience as a microfinance practitioner, product design experience, market research experience, human resources experience)

S&L - 2A3, 2A4, 2A6, 2A10

Perfect 1

2a.4 Board members have a mechanism for direct contact with clients (e.g., field visits, Board meetings with client representatives) S&L-2BCD4 Perfect 02b Members of the Board of Directors hold the institution accountable to its social mission and social goals

2b.1 The Board reviews social performance data, including: mission compliance, performance results, human resource policy, social performance related risks (e.g., reputational risk, client exit), client protection practices, growth, and profit allocation S&L-2I1-2I4 Moderate 1

2b.2Based on its review of the above information, the Board provides direction for, and oversight of the institution’s strategy (detailed in 1a), taking into account both social and financial goals (e.g., how growth targets will affect profitability and service quality for target clients

S&L-2I2-2I3 Moderate 1

2b.3 The Board incorporates social performance management criteria (e.g., achievement of outreach targets, client retention) into its performance evaluation of the CEO/Director

HR-P1 & S&L-1D2 Perfect 0

2b.4 The Board prevents institutional mission drift during changes in ownership structure and/or legal form (e.g., transformation) S&L-2I4 Moderate N/A

2b.5Client protection practice that applies: A written code of business ethics spells out organizational values and the standards of professional conduct expected of all employees. The code of ethics has been reviewed and approved by the Board. (Client Protection Principle 5)

HR-D1-D8 Perfect 1

2b.6 The Board is formally organized (e.g., a social performance sub-committee, a “social performance champion,” mainstreaming SPM into the audit process) to review the social performance data detailed in Essential Practice 2b.1

S&L-2I4 & HR-P4 Moderate 0

2b.7 The Board is evaluated on its effectiveness (internal or external review) and these evaluations include social performance criteria (e.g., how often social performance is discussed at meetings, profit allocation decisions that reflect social goals) S&L-2G3 Moderate 0

The SPA can be mapped to other initiatives (SPTF’s Universal Standards or the SMART Campaign). Lists can be created specifying which standards an MFI meets.


Delivery of the SPA

Document request Moody’s Analytics sends data and document request to MFI

Desk research Data/documents review, identify information gaps

Telephone interviews Telephone /Skype interviews with senior, middle and branch managers

Scheduling and logistics Schedule on-site visit and logistics

Interviews with senior, middle and branch management Review of operational processes, management information systems, and implementation

Interviews with branch employees and loan/extension officers

Customer surveys Surveying of customers on awareness of loan terms and transparency verification, validation of customer feedback and MFI procedures

On-site visit Off-site data collection

and scheduling

Analysis, report writing Analysis of primary and secondary information, verification of information with MFI, drafting of final report

Completion of SPA scorecard

Draft report sent to assessment committee

Analysis and report writing

Review and report finalisation

SPA grade review Report and assessment rationale reviewed by assessment committee

Draft sent to MFI for comments

Incorporating comments MFI’s comments, if relevant, are incorporated

Report finalization Report is finalized by assessment committee and sent to MFI

Assessment committee Teams from Moody’s Analytics and local affiliates take part in an assessment committee to determine SPA grades

Term of the SPA Once completed the SPA grade is monitored over the course of the year. After one year the SPA must be renewed or the

SPA grade is withdrawn and is no longer valid

Initiation Completion6 – 8 weeks


Level 2: For Local, Regional and Global Analysis of Microfinance Practices


Using the Moody’s Analytics Social Performance Assessment

MFI

MFI

MFI

MFI ConsolidatedMoody’s Analytics

SPA Analysis

SPA

SPA

SPA

SPA

Reduce MFIs’ reporting burden

Attract funding from investors

Tool to communicate with public

Roadmap for improving social

performance

Track/share/monitor MFA members’ social

performance

Help prevent inappropriate

regulation

Benefits to Individual MFIs in Using the SPAThe SPA is a state-of-the-art analytical tool MFIs can use

to manage social risks and communicate with stakeholders

Benefits to Global Adoption of the SPAThe global adoption of the SPA would enable Moody’s

Analytics to create a research database that would provide the market with needed information

Communicate with stakeholders

Tool to answer key questions facing the

industry

Increase the effectiveness

of technical support

Move industry to more empirical

methods of analysis

By combining individual reports the Moody’s SPA can be used to analyze microfinance practices in countries, regions or globally


Using the Moody’s Analytics Social Performance Assessment (cont’d)

The SPA combines comprehensive market research with clear, user-friendly analytics to serve as a tool for MFIs to:

Communicate with InvestorsConduct Self EvaluationsCommunicate with Regulators

» Reduce MFIs’ Reporting Burden Moody’s Analytics can provide custom social performance reports to investors to meet their reporting demands

» Track/Share SP Data Show incremental improvement in social performance over time as well as specific social performance factors and indicator metrics

» Attract Funding Transparent, user-friendly and easily shareable social performance metrics help attract social investment funding

» Roadmap for Improving Performance Identify MFA members’ areas of relative strengths and limitations to be used as a template for improving social performance management within the region

» Benchmarking SPA grades, granular scorecard-implied scores, and SPA sub-factor tables allow MFAs and members to easily compare their performance against peers

» Track Important Links for Research Track links between indicators, social outcomes, SPA grades and financial performance

» Minimize Risks of Inappropriate Regulation Use of consolidated data from an MFA’s members reported by a globally recognized, independent third-party can demonstrate current social performance practices and trends to regulators

» Present the Social Performance of the Industry Moody’s Analytics can consolidate MFI data by region and country (where available) to highlight the social performance achievements of MFAs and members


Countries/Groups Can be Compared to the World/Region

Source: 2009 MIX social data mapped to MA’s SPA scorecard

SPA Factors Group World RegionSocial Mission 71 79 78

Strategy and Leadership 30 38 33Customer Relationship 51 52 54

Measurement of Social Outcome or Impact 49 55 53Human Resources 57 64 63

Environmental Performance 23 42 33

Mean SPA Score 48 55 53

» The Moody’s Analytics SPA can be used to gather data on a market and compare that market’s performance against different peer groups.

» This is one example of how the SPA can help an MFA consolidate its social performance data and communicate it to regulators, investors and the public

» Customized consolidated analysis can be done on any and all SPA factors or sub-factors to highlight MFAs’ social performance strengths

» Customized analysis can help MFAs focus on the social performance issues that its members need the most assistance with


Countries/Groups Can be Compared to the World/RegionReporting can be done on any of the 144 different factors in the SPA


Countries/Groups Can be Compared to the World/Region (cont’d)

Reporting can be done on any of the 144 different indicators in the SPA


Using the SPA to Increase Effectiveness of Technical Assistance

MEAN SCORESSPA Sub-Factors Country World RegionFocus of social mission 84 76 81Customer protection 81 73 83

Debt collection practices 80 71 82Management quality 52 54 56

Governance 44 38 43Depth of outreach 48 31 44

Region:

Country:

World

Region:

Country:

World

Country:

Region:

World

The SPA allows technical assistance providers to assess existing practices and determine where assistance is most needed


Using the SPA to Increase Effectiveness of Technical Assistance (cont’d

By using the scorecard approach, TA providers can monitor the impact the assistance is having on MFIs’ social performance practices versus local and global benchmarks

A granular scorecard identifies incremental changes in social performance practices over time and can serve to gauge the effectiveness of the technical assistance program

Sub-Factor SP5 SP4 SP3 SP2 SP1

Management quality 51

Governance 36

Outreach and access 30

Administrative setup 60

Region:

Country:

World

By using the scorecard approach a technical assistance provider can target MFIs that may be performing below the mean for certain practices and monitor their progress


Level 3: Global Research on the Effectiveness of Microfinance


Global Reach

The SPA will be delivered by a global team of analysts that combines the oversight of Moody’s Analytics, the local delivery by Moody’s affiliate relationships, and the analytical abilities of Moody’s Analytic’s subsidiary, Copal Partners

Together these three entities deliver vertically-integrated, state-of-the-art analytics combined with local country knowledge to ensure the highest quality analysis of social performance

Moody’s Analytics Methodology and Oversight

Copal Partners

Administration and Analytics Eastern

EuropeCentral

Asia(MFC)

Local Deliveryby affiliates and partners

Latin America

(Equilibrium)

MENA(DFS

Group)

Global Developmentby Moody’s Analytics and Copal Partners

Sub-Saharan

Africa(AFMIN)

India/Asia(ICRON)


About Moody’s Corporation Leading global provider of credit rating opinions, insight and tools for credit risk measurement and management Founded in 1900 Approximately 6,100 employees worldwide Presence in 28 countries Revenue in 2011: $2.3 billion Publicly listed (NYSE: MCO) Largest shareholder: Berkshire Hathaway Inc.

» Independent provider of credit rating opinions and related information for over 100 years

» Ratings and analysis covering more than:

− 110 countries

− 11,000 corporate issuers

− 22,000 public finance issuers

− 94,000 structured finance obligations

» MIS’s published research and investor briefings draw thousands of attendees each year

Moody’s Investor Services (MIS)

» Research, data and software for financial risk analysis and related professional services

» Main areas of expertise: credit research and risk measurement, economic and consumer credit analytics, enterprise risk management, professional services, and structured analytics and valuation

» Client base includes leading asset managers, banks, corporates and insurers

» Outsourced research and analytical services arm – Copal Partners

Moody’s Analytics


Contact Information

Alan BonillaAssistant Vice PresidentTel: (415) 874-6286Email: [email protected]

Jody RaschSenior Vice PresidentTel: (212) 553-3797Email: [email protected]

Michael RauenhorstVice PresidentTel: (212) 553-2866Email: [email protected]

www.moodysanalytics.com/microfinance

United States


Contact Information – Affiliates and Partners

www.moodysanalytics.com/microfinance

Latin America India/Asia

Middle East North Africa

Sub-Saharan Africa

Nagla BahrDirectorDFSGroupTel :(+20-2) 37499883 Email: [email protected]

Eastern Europe/Central Asia

Davy Serge AZAKPAME Chief Executive Officer AFRICA MICROFINANCE NETWORKTel: +229 21-307441Fax: +229 21-307496Email: [email protected]

Lilya PeskovaMicrofinance CentreTel: +48 622 34 65 ext. 212Email: [email protected]

Ms. Rajalakshmi SrinivasanICRA Online LtdTel: +91-44 30061703Mobile: + 91 9840565126 Email: [email protected] Alvarado

Equilibrium Clasificadora de Riesgo S.A.An Affiliate of Moody's Investors Service, Inc.Tel: (511) 616-0400 221-3676 221-3688 221-2759 Email: [email protected]

mailto:[email protected]


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