introducing spm to better achieve the social mission? - microfinance

Introducing SPM to better achieve the social mission? - Microfinance Institutions in the post-crisis era

The case of TYM – Vietnam

Martin SchellhornEuropean Microfinance Program

Brussels - September 2011

Supervisor: Dr. Cécile Lapenu

Assessor: Professor Mathias Schmit

1

Table of Contents Executive Summary (2 pages):........................................................................................................4

1 Introduction and methodology.............................................................................................................. 6 1.1 Intro:......................................................................................................................................... 6 1.2 Research Methodology: Case study on TYM ..........................................................................8

1.2.1 Objectives and Research methodology........................................................................ 8 1.2.2 Methodology:............................................................................................................... 8 1.2.3 Data Collection...........................................................................................................10

2 The commercialisation of the microfinance sector............................................................................. 11 2.1 The microfinance schism........................................................................................................ 11 2.2 The growth period and the pervertisation of microfinance....................................................12 2.3 Competition in microfinance.................................................................................................. 14 2.4 The role of investors............................................................................................................... 16 2.5 Conclusion.............................................................................................................................. 17

3 Managing the social performance....................................................................................................... 19 3.1 Introduction.............................................................................................................................19

3.1.1 What went wrong with capitalism?............................................................................20 3.1.2 MFIs and their social mission.................................................................................... 22

3.2 The role of Social Performance Management........................................................................ 24 3.2.1 Tools for assessing and evaluating the social performance........................................26 3.2.2 The SPI-assessment....................................................................................................28 3.2.3 Stakeholder theory of governance and financial benefits..........................................29 3.2.4 Empirical findings of the correlation between governance and performance............31 3.2.5 The role of funding.....................................................................................................32

3.3 Limits of SPM........................................................................................................................ 33 4 Social performance at TYM – Vietnam ............................................................................................. 35

4.1 The environment.....................................................................................................................35 4.2 Competition: .......................................................................................................................... 36 4.3 The organisation..................................................................................................................... 37

4.3.1 The funding structure/ strategy:................................................................................. 39 4.3.2 Governance and the relation with stakeholders:........................................................40 4.3.3 Social performance at TYM.......................................................................................41 4.3.4 A short Impact analysis:............................................................................................. 42

4.4 Activities:................................................................................................................................43 4.4.1 Using the SPI 3.3........................................................................................................43 4.4.2 SPI summary- Results................................................................................................ 43

4.5 Evaluation and Analysis of SPM at TYM.............................................................................. 48 4.5.1 The opinion of the investors on SPI........................................................................... 48 4.5.2 The board of directors on social performance ...........................................................50 4.5.3 Evaluation of the utility of the SPI 3.3.......................................................................50 4.5.4 Small analysis on TYM's financial performance ...................................................... 52

4.6 Personal remarks on the assessment and the internship in general........................................54 4.7 Lessons learned and own observations on the social performance in Vietnam:.....................55

5 Analysis of research questions ........................................................................................................... 56 5.1 “How did commercialisation influence the achievement of MFIs' social mission ?”............56

2

5.2 “How can social performance best be managed ?”................................................................ 57 5.3 “Why is TYM so successful?”................................................................................................59

5.3.1 Stakeholder governance at TYM: ............................................................................. 59 5.3.2 The role of funding at TYM:......................................................................................60 5.3.3 TYM 's comparison to previous empirical findings:..................................................61

6 Conclusion.......................................................................................................................................... 62 7 Bibliography........................................................................................................................................65

Acknowledgements:.......................................................................................................................72 8 Appendix:............................................................................................................................................ 74

Acronyms:

ASEAN: Association of Southeast Asian NationsCEO: Corporate Executive Officer

CGAP: Consultative Group to Assist the PoorFPM: Financial Performance Management

FSS: Financial Self-sufficiencyGDP: Gross domestic product

IPO: Initial Public Offering (at stock exchange)MFI: Microfinance Institution

MIX: Mix Market (website for MFIs)MNC: Multinational Cooperation

MIS:Management Information SystemMIV: Microfinance Investment Vehicle

NBFC: Non bank financial company (NBFI in India)NBFI: Non bank financial institution

NGO: Non governmental organisationOSS: Operational Self-sufficiency

PAR: Portfolio at riskPAT: Poverty Assessment Tool

PCF: People´s Credit FundsSBFIC: Savings Bank for International Cooperation

SPA: Social Performance AssessmentSPI: Social Performance Indicator

SPM: Social Performance ManagementSPTF: Social Performance Task Force

TYM: Tao Yeu MaiUNDP: United Nations Development Programme

USAID: United States Agency for International DevelopmentVBARD: Vietnam Bank for agriculture and rural development

VBSP: Vietnam Bank for Social PoliciesVND: Vietnamese Dong

VWU: Vietnam Women's Union

3

Executive Summary (2 pages):

Due to a blind focus on simply maximizing shareholder value and a corporate governance

based on the conflict between the board of directors and the managers only, developments of

the corporate sector were rather unsustainable. Recently, in the surge of transformation,

several MFIs have taken the same direction, due to bad risk management and an over-

leveraging of the institutions. This might not have happened if all stakeholders were

consulted. Today, increasingly the viewpoint emerges that multiple, if not all stakeholders

should be involved in corporate governance to be sustainable. Having to uphold the

reputation of alleviating poverty and having been heavily criticised recently for the for-profit

approach of several MFIs, the microfinance industry has already included the concept of

stakeholder governance in a broader approach to managing their social performance, that is

rapidly rising in interest and participation. The alignment of stakeholder interests, the role of

funding and financial viability have emerged as being vital elements for maintaining the social

mission.

Based on an internship at the microfinance institution TYM in northern Vietnam, the empirical

part of this report gives the opportunity to test the theories from the present literature review

on social performance management and to explore other important findings. Despite already

having good results from social ratings and impact analysis, TYM wanted to introduce social

performance management to monitor its social mission more closely, while increasingly

expanding its outreach after its recent transformation into a regulated financial institution.

After identifying TYM's objectives, the SPI assessment from CERISE was conducted together

with TYMs operating staff, making cross checks with other stakeholders, like clients and

investors. It was used as a first step in better managing TYM's performance, to identify new

objectives and to report the results to investors. Once the staff becomes familiar with the SPI

tool, it can regularly monitor its social performance without having to constantly refer to the

services of external consultants. Additionally, the SPI audit permits to have a better overall

view of their performance, according to different dimensions.

Using the empirical case-study of TYM, together with a literature review on the concept of

4

SPM we then proceed to answer the question, can introducing SPM help the MFI to better

achieve its social mission? On the one hand, it was demonstrated that as a self-regulatory

mechanism, SPM is better suited than compulsory government regulation in motivating

companies to improve and monitor their social mission. Moreover, by managing the social

performance itself, the MFI obtains a firm hold on their stakeholder governance through

regular monitoring and assessments. Even before a negative impact appears, the MFI would

be able to adjust its processes accordingly. Especially through regular self-assessments, the

MFI can immediately adopt new procedures, without having to conduct a costly and time-

intensive impact analysis. For the empirical part, the SPI revealed that TYM already managed

its social performance exceptionally well. While this can be primarily attributed to a good

stakeholder governance, the cultivation of long-term relationships, its gradual development

and the good cost-efficiency were equally relevant. Finally, the case study also prove

interrelations between social and financial performance.

On the other hand, the SPI assessment is not apt for taking into account specific local

contexts and may thus give wrong incentives. Applying common sense continues to be

necessary to avoid certain pitfalls. Furthermore, when trying to generalize these results as

TYM benefits from several features that are rather untypical for a transformed MFI. For

instance, TYM is currently in the fortunate situation of not having to work in a highly regulated

environment, with interest rate caps or the prohibition of collecting savings for MFIs, as is the

case in more competitive markets like India. Additionally, as of this moment, TYM's board is

still unusually small, allowing for communication and decision-making to be particularly

smooth. However, this might change when new board members are assigned, possibly

increasing the tensions among the board. In fact, one of the main advantages at TYM is the

quasi-absence of a conflict of interest. The reasons for this are multiple: TYM's founder and

only shareholder is the Vietnam Women's Union, which itself is a political organisation with

the social mission of creating equal opportunities among women close to or below the

national poverty line – which is identical to the social mission by TYM. The fact that the

founder is still the only shareholder, avoids to have conflict between management and the

board. With borrowings coming from social investors only, basically all stakeholders are

embracing the same objective of achieving a social mission.

5

1 Introduction and methodology

1.1 Intro:

The report presents a literature review on the commercialisation of microfinance and the

renewed focus on social performance today. The empirical part, consists of the internship

report. As the empirical part is linked to the debate on social performance, it simply appears

as another chapter of the report, rather than being visibly separated. This report does not

have as objective to question the role of social performance management, but to describe

why social performance is important, to explore how MFIs can better achieve their social

mission, to explain the benefits of self-regulatory mechanisms and to discover the factors that

make a MFI like TYM successful.

After analysing the consequences of the commercialisation on the microfinance industry, this

report will explore why and how social performance management can help MFIs to improve

their social mission. In this context, the importance of stakeholder theory, governance issues

and good financial performance are discussed. Furthermore, the SPI tool from CERISE 1 will

be presented, serving as a valuable complement to social performance management. It's

usefulness will also be tested empirically, by conducting the SPI audit with a microfinance

institution during a field-internship. Finally, the results of the SPI-audit TYM, Vietnam, are then

used to answer more specifically the most interesting question2, what actually determines

TYMs' success? This institution, has a very solid financial performance and with help of the

SPI-audit tool from CERISE, an equally good social performance could be proven as well.

The literature review first describes the origins of the commercialisation of the microfinance

industry and its consequences, like mission drift, will be described and assessed (Chapter 2).

Second, the focus will shift on the recent interest in social investments and the influence of

social performance. In particular, the usefulness of Social performance management will be

assessed towards helping to achieve the social mission (Chapter 3).1 Comité d'échange, de réflexion et d'information sur les systèmes d'Epargne-crédit2 (Galema et al forthcoming)

6

In the empirical part, the research question will be examined with help of a SPI-assessment

from CERISE, which has been found to be a useful tool in introducing a social performance

management system. By means of conducting the SPI, the social performance at TYM, has

been scrutinised through a range of interviews at the MFI and with clients, as well as with

investors and board members. After having seen the benefits of using the SPI tool in the

literature review, the utility of the SPI tool could also be tested in this part. Next to this, the

role of investors and board members could be examined in order to receive a better

understanding of the usefulness of the SPI tool in external reporting as well as to better

understand the reasons of success of TYM (Chapter 4).

The main research question of this report, as reflected in the title, will be answered gradually

throughout the report, by using the subquestions developed in the research methodology.

Whereas the first question will be analysed after the first part of the literature review, the

questions on social performance are only answered following the internship report together

with the empirical findings at TYM (chapter 5). The conclusion will then summarize the results

by trying to answer the main research question at the same time.

7

1.2 Research Methodology: Case study on TYM

1.2.1 Objectives and Research methodology

The main research question is:

“Can introducing social performance management help a microfinance institution to better achieve the social mission?”

Together with the Literature Review as background information on the role of MFIs and social

performance, we will investigate the following subquestions, also in the light of the results

from the internship period at TYM:

1. “How did commercialisation influence the achievement of MFIs' social mission ?”

2. “How can social performance best be managed ?”

3. “Why is TYM so successful ?”

1.2.2 Methodology:

For the reasons explained hereafter, a case study as research methodology was found to be

the most appropriate tool. According to Schramm (1971), a case-study can help to illuminate

a decision, which in this case is how to best manage the social performance. According to

Zaidah Zainal (2007), “...case study research, through reports of past studies, allows the

exploration and understanding of complex issues. It can be considered a robust research

method particularly when a holistic, in-depth investigation is required...”. This is also in line

with Yin (1994), for whom a case study is the preferred method when the questions are 'how'

and 'why' and arises out of the desire to understand complex social phenomena. Following

Yin, there are 3 different categories of case study: Exploratory, descriptive or explanatory. In

this research a descriptive case study will be used, using descriptive theory from the literature

review and the self-study period to complement empirical findings collected during the field-

internship. Finally, Stake (1995) distinguishes between an intrinsic, instrumental and collective

8

case study. Using opinions of different individuals and from different sources for the research,

the study is equivalent to a collective case study, allowing to generalize the findings to a

bigger population. Nevertheless, using a single-case design, caution has to be applied when

making generalizations (Tellis 1997), especially since MFIs can have very different

characteristics.

To evaluate the social performance during the field-internship, the SPI-assessment tool was

used. Evaluating the processes and operations at the MFI, it has to be distinguished from an

impact analysis, measuring the final results. The latter is more time consuming and costly,

having to establish a valid control group, to prove the link of causality. Social performance

assessments (SPAs), however, are specifically designed so as to being able to infer the

impact of a MFI from the internal processes, without having to do an impact analysis. As can

be seen in the causal chain below, the link (causality) between intent&design and outputs is

much closer than with impact. It is thus the 'second best' solution to measure the social

impact of a MFI with output serving as a proxy for outcome and impact if information on the

latter is not available. It therefore provides a simplified representation of the social

performance of a MFI (SEEP, 2008).

As external audits (or ratings) can only be conducted by certified rating agencies with

experienced staff, an internal assessment is the only feasible option for this report.

Additionally, the SPI-audit allows to do an accompanied self-assessment, which eventually

can also be used for external purposes. Finally, there is also the option between a centralized

or participatory approach, the latter including the views of different stakeholders. Due to the

benefits of this viewpoint, the participatory approach has thus been chosen.

9

Illustration 1: Source: SEEP 2008

1.2.3 Data Collection

According to Yin (1994: 98-99), it is essential for case studies to make use of a variety of data

collections ('triangulation') in order to have a more convincing conclusion. In this study, the

collection methods included interviews and surveys with the target group being the CEO,

staff, board of members, investors and clients.

10

2 The commercialisation of the microfinance sector

2.1 The microfinance schism

The microfinance sector today is not in its infancy stage anymore. The sector has grown big,

already affecting the lives of about 1 billion people at the end of 2009, the total number of

clients being 190 Million (Reed, 2011). Total assets in MFIs were US$ 68 billion, 13 billion of

which come from foreign capital investments (Reille et. al., 2011). Compared to the past,

when microfinance was mainly about non-profit institutions (70%) , MFIs today are generally

less dependent on donations or grants, and have access to international capital markets. But

as international investors favour big and financially stable institutions, smaller MFIs continue

to have funding problems. In fact, in 2009 only MFIs with more than US$ 30 Million, the top

250, received around 85% of all MIV funding, from a total of US$ 6 billion available

(Wiesner&Quien, 2010). These developments have created a clear division on the one hand

between the bigger (Tier-1) and smaller (Tier-2 or -3) MFIs3, and on the other hand between

the profit oriented MFIs and the non-profit MFI NGOs.

The first category developed more recently and is primarily interested in financial

sustainability, believing in creating a win-win situation by becoming financially self-sufficient.

Charging a higher interest rates, should ensure the profitability and thus to serve more poor

people. This method has been propagated by many multilateral actors like CGAP, UNDP and

USAID and ultimately led to the creation of profit seeking MFIs like Compartamos Banco,

charging excessive interest rates of almost 100% effectively, yielding a profit margin of 20%

(Morduch, 2000). However, the mere replication of this model has failed (very much like the

banking system prior to the financial crisis) because it did not encourage MFIs to be

innovative (Hulme&Mosley 1996, p.135). In reality only few MFIs really became profitable, as

when charging higher interest rates the quality of the loan portfolio is likely to be reduced as

well. The second category of MFIs, on the other hand, acknowledges that there is no one-size

fits all model, as the level of poverty of clients can differ greatly from one region to another. It

3 For definition of Tier 1-3 MFIs, see Dieckmann (2007); Tier-1 MFIs are accordingly among the top 150

11

is thus not possible to be successful by simply replicating one model. These MFIs actually

resisted the temptation of focusing on profits only, embracing the objectives of traditional MFI-

NGOs. They are concerned not only about their financial, but also their social performance

and outreach to the poor, in order to achieve the so called double-bottom line. But before this

model is picked up again and looked at more thoroughly later in this paper, the next

subsection looks back at the recent growth period of microfinance and the role of for- profit

MFIs.

2.2 The growth period and the pervertisation of microfinance

With the UN announcing the year 2005 as the year of microfinance and handing over the

Nobel Peace Price to Mohammed Yunus, the microfinance sector was in an exceptional

growth period that lasted from 2004 until 2008, with compound annual growth rates of 43

percent (Chen et al. 2010). This was possible due to more and more funding going to fewer

and fewer MFIs (Wiesner & Quien, 2010). The increase in leverage for NBFI went from 2.9 to

4.25. Especially in Nicaragua, Morocco, Bosnia-Herzegovina and Pakistan the financial

12

Illustration 2: Outstanding amounts of the 7 top MIVs from 2007 to 2009 by groups of MFIs (Source: Wiesner&Quien, 2010:14)

performance was very strong, evoking the interest in investors and enabling the MFIs in these

countries to increase their leverage from 3 to 5.5 in this time period (however, the savings

deposit ratio remained below 10 percent for these institutions compared to 46 percent of the

global average of MFIs in the MIX). Wanting to improve their self-sufficiency, many MFIs thus

replaced their current liabilities with foreign debt, improving their dependence from donor

sources but making themselves more vulnerable to movements on international capital

markets, and to the influence of foreign commercial investors that seeks to have profits.The

following figure shows the enormous increase in MFI assets and in foreign capital funds

between 2005 and 2010 (in billion US$):

At the same time several MFIs decided to launch public offerings. The most known examples

are that of SKS India and Compartamos, Mexico. SKS India, achieved growth rates of 300

percent annually after its transformation into a NBFC, and profit levels of 116 and 329 percent

respectively in 2008 and 2009, launching an IPO in 2010 that was oversubscribed by 13.6

times in order to receive more capital.4 Banco Compartamos from Mexico equally launched

an IPO in 2007 that was 13 times oversubscribed, following a period of strong growth and

4 SKS Microfinance Raises $75.4m in Equity Capital in Transaction Led by Sandstone Capital’, Microcapital Story, 14 November 2008;

13

Illustration 3: Growth and internationalisation of MFIs

with a ROE of 38 percent in 2007 after charging effective interest rates of over 100 percent.

However, as mentioned earlier, the majority of MFIs are non-profit organisations, reinvesting

their profits to create future benefits for their clients. Even SKS and Compartamos' IPO had

the objective to increase their outreach to the poor. And indeed, Compartamos had an

increase in clients from 60.000 in 2000 to almost 2 Million in 2010. 5 On the other hand,

Compartamos Banco was established with the help of donor money. By selling part of their

shares, however, the managers could reap considerable profits while their clients might have

to take additional loans to pay back the high interest rates and eventually become over-

indebted. It is in this context that Yunus talks about a 'pervertisation' of microfinance, a tool

originally conceived to create access to financial services for the poor, not as a tool to make

huge profits with them. For Yunus, interest rates should not be more than 10% above the cost

of funds and he is strongly against the commercialisation of the sector.6 But when the need of

funding increases, this does not mean automatically that mission drift is about to occur for an

MFI which may simply be looking to tap commercial funds. This is different from MFIs like

Compartamos Banco or SKS, that developed a commercial approach in their governance

(Morduch&Armendariz, 2010: 241). However, the dilemma is that MFIs wanting to receive

commercial funds, need to be operationally sustainable. In the end, the MFI might thus be

forced to change its governance approach to become more profit oriented as well.

2.3 Competition in microfinance

It is inevitable that as the microfinance sector grows and becomes more sustainable, that this

new market of dealing with the poor is becoming more attractive to other investors. On the

one hand it is the traditional banks that are looking for new clients and profits, downscaling to

serve poorer households. On the other hand, with MFIs increasing their range of products

there is also competition beyond the microfinance sector. Indeed, Porter and Kramer (2011)

argued in a recent publication that there is already a considerable demand to delivering

products to the so called 'bottom of the Pyramid'- a potential market size of 4 billion clients. In

an earlier article Prahalad and Hart (2002) give several examples of multinational

5 1,961,995 as of 31.12.2010, Mixmarket6 Microfinance focus. Commercialization distorted microfinance: Prof Yunus; Available at

http://www.microfinancefocus.com/content/commercialisation-distorted-microfinance-prof-yunus

14

http://www.microfinancefocus.com/content/commercialization-distorted-microfinance-prof-yunus

corporations, like Unilever, discovering the market of those that were previously excluded.

An obvious advantage of this increasing competition, is the higher cost-efficiency (Motta

2004). It is commonly known that increased competition brings down the costs for clients (e.g.

the interest rate decrease in Bolivia), which is also one of the 'raison d'être' for capitalism.

Nevertheless, Hermes et al. (2010) argue that the effects of competition are mainly negative

in the microfinance sector, due to its strong institution-client relationship, and only positive in

contrast to a monopolistic situation. More competition can also lower the quality of products,

and create a 'war' for clients among MFIs, which frequently translates into negligent

evaluations of the repayment capacity and worsening collection practices, possibly even

leading to the default of a MFI.7 With many MFIs dealing for the same customers, there's

moreover the problem of asymmetric information and over-indebtedness, with borrowers

taking loans at several MFIs (McIntosh & Wydick, 2005). As MFIs are working with vulnerable

people, the failure of an MFI can have severe consequences for the area it is operating in.

Increased competition among MFIs also increases the likelihood of a crisis to appear. With

the investors coming increasingly from the capital markets, the microfinance sector is also

becoming more and more disconnected from its funders, the latter being increasingly

mainstream investors from Wall-street, looking for new markets to invest in to diversify their

portfolios. These new developments make the microfinance industry equally subject to

fluctuations in global financial markets as any other industry today. In fact, Deitch and Greer

remark that the causes of the current crisis in microfinance are similar to those experienced in

the sub-prime crisis in the US housing market, at the root of which were far-away speculators

that want to earn the quick buck. According to Deitch and Greer (2008) there is also a big

danger for this to happen in the microfinance sector. In fact, we have seen earlier that this

already occurred in several highly concentrated microfinance markets. Another, perhaps more

known example is that of Andhra Pradesh where MFIs used different, questionable collection

methods to maintain good repayment rates even during high-growth periods and despite

increased difficulties of their clients to pay back the loans. These measures went from the

imposition of fines or public indignation of defaulters up to the usage of physical force.

7 For more information see Reed (2011) or Reiller (2010)

15

Another measure was to simply issue them a new loan. As is well known today, these

measures resulted in client over-indebtedness and finally a range of suicide cases (Augsburg

and Fouillet 2010).

2.4 The role of investors

“According to Sinha, investors want to see high growth rates, profits and the potential for scale; some MFIs respond by stripping down their operations to only one or two credit products and try to grow these products as quickly as possible” (Reed, 2011, p.15).

As can be seen from the citation above, the investors have a big influence on the behaviour of

MFIs, if not the biggest. Adrian Gonzalez, lead researcher at the MIX, found a correlation

between the density of MFIs and the likelihood of failure. One of the main culprits for this

concentration of MFIs are the investors, generating among MFIs a blind focus on growth and

increased operations in easy to reach (urban) areas to minimize costs. This strategy drives

many MFIs to operate in the same profitable areas, and with the same clients, ultimately

offering them multiple loans and driving them into over-indebtedness (Reed, 2011).

Moreover, the focus of investors is especially on a few, profitable Tier-1 institutions. This had

as consequence the over-financing of a few Tier-1 MFIs, resulting in 60% of foreign debt in

microfinance being concentrated in only 10 countries. This concentration also led up to the

events that resulted in the microfinance crisis in Nicaragua and Bosnia-Herzegovina where

foreign debt levels reached 70% of MFIs total liabilities (Reille et al. 2011). On the other hand

Wiesner and Quien (2010:18) note the under-financing for Tier-2 and Tier-3 MFIs. They are

pointing to an unfair competition and uncaring selection of MFIs, despite Tier-2 MFIs

sometimes actually achieving a higher performance than Tier-1 MFIs. The following graph

shows how the top 10 foreign debt recipients also have the greatest level of credit

penetration:

16

Fortunately, there is a strong tendency among social investors to fund the microfinance

sector. In December 2007 there were 91 microfinancefunds, with a total worth of $US 5.5

billion, which represents an increase of 79% compared to the previous year (Reille & Forster,

2008). Many more philanthropists are also willing to invest their money for a good cause.8

Social investors put less emphasis on financial performance and do not favour Tier-1 MFIs.

Quite on the contrary, Oikocredit is actually favouring Tier 2 and 3 MFIs (less than US$ 30

Million). Other social investors like Incofin and Alterfin are also serving smaller MFIs.

2.5 Conclusion

The objective of increasing the outreach of microfinance to ever more clients has led to the

commercialisation of microfinance, which itself led to a shift in focus of the microfinance

industry from poverty lending to a financial system approach, with more and more MFIs

entering the scene and increasing the competition (Hermes et al., 2010). Despite certain

8 Conference by Jonathan Murdoch, 21 February 2011, EMP, Brussels

17

Illustration 4: Unequal fundings and its consequences

benefits of this competition, like a reduction of the interest rates and more efficient MFIs, it

also led to a situation of imbalanced growth where few MFIs are in the position to cherry-pick

their customers, capturing most of the profitable market and investments and leaving the

worse off to Tier 2 and Tier 3 MFIs. The fear is that the 'zeal' of private investors entered the

microfinance industry, with the possibility of leading to the same auto-destruction as in the

normal banking sector (Augsburg&Fouillet, 2010). And even the strongly growing 'cherry-

pickers' face difficulties, often becoming too lax in their analysis and follow-up of projects.

With most of the MFIs being dependent on external funding, investors also play a crucial role

in making microfinance more sustainable and to benefit MFIs more evenly, with a special

focus on small and non-profit MFIs. It is likely that the mainstreaming of microfinance, as

supported by international policy makers, will privilege bigger institutions even more in

accessing funding. Also, more elaborated financial instruments on the capital market - like

securitisations or the access to funding from microfinance Investment Vehicles - are rather

inadequate for small institutions (Morduch&Armendariz, 2010).

The biggest challenge of MFIs lies in reaching the objectives of sustainability and outreach

simultaneously, which would require to overcome what Murdoch called 'The microfinance

Schism'. Not the maximisation of profits but good governance, with strict budget constraints

and appropriate staff incentives, can make a program more efficient and prone to new

innovations (Morduch 2000: 627). According to Rhyne (2010a), the toughest challenge will be

to 'align the personal interests of founders, investors and other stakeholders with the long run

mission to assist low income clients”. Another possibility for the MFI to raise funds would be to

do so internally, collecting savings. Furthermore, despite the advantage for bigger institutions

in accessing foreign capital, it should not be forgotten that the most successful MFIs known

today received substantial donations and continue to do so (Cheng, 2011:11).9

9 There is no evidence that subsidies bring inefficiencies (Cull et al 2008)

18

3 Managing the social performance

3.1 Introduction

In the previous chapter we have seen how the commercialisation in the microfinance sector

distanced MFIs from their social mission and how it created new unforeseen problems like

over-indebtedness and the spread of bad practices. But contrary to commercial banks that

see the result of their negligence and mission drift in the past with the global crisis today, the

microfinance industry has long looked at aspects of social performance and increasingly so

after the recent crises. But it was mainly due to the increased criticism on the sector that

social performance turned into becoming a mainstream development (Copestake, 2007). As a

side product of commercialisation, also the business model of many MFIs has changed, away

from merely offering credit, and more attentive to offering products demanded and needed by

borrowers, like savings, insurance or training. In this way, MFIs are implicitly becoming more

social.

Showing a good social performance in microfinance, is thus not for image or branding

reasons, but simply a better way of showing what the MFI has done and where it has invested

its money in order to receive recognition and visibility. Next to this, more data on social

performance also improves the transparency of the microfinance sector, possibly activating a

process of the promotion of best practices. Better social performance then enhances mutual

trust, client participation and satisfaction, which translates into higher repayment rates and

lower transaction costs (Lapenu, 2007). Engaging into social performance management can

thus contribute to setting up a virtuous circle, that at the end will not only improve social, but

also the financial performance.

First, this chapter looks at the aspects necessary to manage the social performance, starting

by looking at the distortions created by companies following traditional concepts of economic

growth (3.1.1). After defining the social mission and the role of MFIs in distinction to normal

19

business (3.1.2), this chapter will then look at the concept of social performance management

more closely, including the role of the SPI as assessment tool, the role of governance,

stakeholder theory and funding (3.2). Finally, the limits of social performance management

will be assessed (3.3).

3.1.1 What went wrong with capitalism?

The idea of capitalism from their earlier proponents was to follow a free market principle, the

idea that every individual and company would individually strive for what is best for society as

a whole. The famous 'invisible hand' by Adam Smith would ensure that individual outcomes

would be beneficial to everyone. But even if despite other critics (like Marx) this ideal was

already announced as to be the final stage of humanity and thus 'the end of history',10 the fall

of the Berlin wall and the great economic crisis at last should have caused an awakening,

demonstrating that something is wrong with this model. And indeed, despite the enormous

economic growth from which developed countries benefited during the last decades, there are

still billions of people living at the brink of poverty, excluded from access to financial services

and the benefits of globalisation. Most of them in developing countries but also in developed

countries, as the growth was highly unequal.11

In retrospective, one could even argue that it was 'due to' the enormous economic growth,

that there is so much poverty today. Especially the banking sector seems to have suffered a

severe mission drift, away from serving the people, towards serving the interests of their

shareholders and neglecting risks, knowing that they are too big to be allowed to fail (Benston

1994). Despite many of these banks having to be rescued by governments during the

financial crisis, they would still earn profits in the range of fourty percent.12

10 Title of a book by Francis Fukuyama11 In this pyramid of income, the top 1% earn 40 times as much as the bottom 50%, with 40% of the world population still

earning less than US$ 2 per day (Davies et al. 2006: 26; Stiglitz 2010)12 National Income and Product Accounts Table, “Table 6.16D. Corporate Profits by Industry,” available at

http://www.bea.gov/ National/nipaweb/ SelectTable.asp.

20

Actually, this development is not even very surprising with CEO remunerations being based to

more than 50% on stock options (Rappaport, 2005). However, executive remuneration is not

the only governance issue, as often there was a bad risk management and an over-

leveraging of the institutions.13 Finally, the increasing complexity of their products, with over-

securitisations and derivatives, also played a non-negligible role in the creation and the burst

of the bubble (Buchheit, 2008). The blind pursuit on economic growth and shareholder value

is also generated by the focus of macroeconomic policies on GDP growth. GDP is measuring

the total spendings on all goods and services in an economy. However, this does not reflect at

all the utility that people can draw from economic growth, with costs from disasters, pollution

or accidents, actually contributing to a positive GDP. The Easterlin paradox describes this

situation, by demonstrating how despite economic growth life satisfaction remained equal or

even decreased (Jackson, 2009).

"By the curious standard of the GDP, the nation's economic hero is a terminal cancer patient

that is going through a costly divorce. The happiest event is an earthquake or a hurricane. The

most desirable habitat is a multibillion-dollar Superfund site. All these add to GDP, because

they cause money to change hands. It is as if a business kept a balance sheet by merely

adding up all 'transactions", without distinguishing between income and expenses, or between

13 UK financial services Authority “Effective Corporate Governance” January 2010 at para 1.1.

21

Illustration 5: Milanovic (2005) measuring international and global inequality

assets and liabilities."14

According to Jackson, this mis-belief of economic growth is leading to increasing

dissatisfaction of the consumer society today, even posing a threat to prosperity (Jackson,

2009: 38, 88).15. It is thus necessary to move away from the growth paradigm in order to

measure and pursue objectives that are actually highly correlated with utility, such as life-

satisfaction.

3.1.2 MFIs and their social mission

“By its very nature, inclusive finance has a double-bottom line. (…) Those

who ignore the social bottom line not only put their own businesses at risk

but can harm the reputation of financial services providers more broadly.” 16

The social mission is inherent to most MFIs, having been created by donor money in an effort

to use development aid more effectively. For a long time there were different views on what

the social mission really is, and what indicator to use. Being propagated as a tool to help the

poor, microfinance is in fact about the inclusion into the banking system of those that have

been deprived the access to it and thus of the freedom to create their own enterprise. It is the

social mission of microfinance to tackle the multi-dimensionality of poverty, which is not simply

the lack of sufficient resources but more generally the lack of individual freedom as described

by Armataya Sen (Brana&Jégourel, 2007).

As MFIs are dealing with extremely vulnerable clients, negligences concerning their social

performance can have serious consequences and could result in suicide cases among their

clients, as happened in Andhra Pradesh. MFIs thus need to be more responsible, not only

(but to a big part) to save microfinance from a legitimacy crisis. To do so, they need to start to

collect information on their social performance. The eleventh principle from the Consultative

Group to Assist the Poor's (CGAP) Pink Book, 'Donor Guidelines on Good Practice in

14 Cobb et al (1995)15 “Prosperity itself – in any meaningful sense of the word – is under threat. Not from the current economic recession, but

from the continuing surge of materialism, and from the economic model that perpetuates it.” 16 Rhyne (2009)

22

microfinance', also states that 'microfinance works best when it measures and discloses its

performance'. For this to work, MFI managers, investors and policy makers need a better

method for detecting that their efforts are achieving the social mission (Khalily, 2004).

Despite the recent microfinance crises, the majority of MFIs aim to achieve a double-bottom

line (SEEP, 2008). In fact, an empirical study by Mersland and Strøm (2009), conducted over

a period of 11 years using panel data, also did not find any evidence of mission drift of the

microfinance sector as a whole.17

“Providers of inclusive finance that embrace the 'social bottom line' as an

integral element of their strategy, corporate culture, and service delivery

are more likely to succeed and become leaders in their fields.” 18

Some authors claim that social business is inherent to all kind of business. Already Adam

Smith imagined that ethics would come automatically with business as they aim to create trust

and confidence with their clients to gain legitimacy for their business (de Keuleneer 2010). But

he underestimated the role of branding and advertising many companies make use of to claim

this legitimacy. In fact, in the light of globalisation the objectives of serving the social mission

and a profitable business have been separately attributed to NGOs and companies

respectively (Porter & Kramer, 2011). It is thus often the case that firms pursue a good

financial performance alone, certainly one of the reasons why there are many inequalities in

capitalist societies and ultimately for the global economic crisis.

Porter & Kramer argue that there is a mutual dependence between business and society,

such that social responsibility should become part of the business-strategy. Ethical behaviour

can also make business sense, by reducing transaction costs and internalizing negative

externalities, thus improving efficiency (Argandoña 2004: 42). But this does not explain the

recent outbreak of the crises.

Is there a need for regulation then? This is not so clear, as compulsory regulation can also

17 Nevertheless, Campion&White (1999) did find some evidence of mission drift for transformed NGOs, but again Hishigsuren (2006) says that mission drift has not been realised in most of the cases, instead outreach was increased

18 Rhyne (2009)

23

have many negative effects. In India for example, it prevents MFIs from accepting deposits.

Furthermore, an interest rate cap is set at 24% such that many MFIs find difficulties in

operating sustainably, reducing their outreach.

3.2 The role of Social Performance Management

The social performance task force (SPTF) defines social performance as "The effective

translation of an institution's social mission into practice in line with accepted social values

such as serving larger numbers of poor and excluded people, improving the quality and

appropriateness of financial services, creating benefits for clients, and improving social

responsibility of an MFI." (CGAP 2007, SPTF). These 4 dimensions reflect the multi-

dimensionality of poverty and show that microfinance is about more than simply alleviating

poverty, but it is about financial inclusion quite generally. This consensus is shared by the

over 1000 members of the SPTF, among which count MFIs, investors, regional networks,

rating agencies and development organisations. Reflecting the increased interest in social

performance of the MF-industry today, the MIX has recently completed their information on

MFIs with a part on social performance, to which an increasing number of MFIs are reporting

(over 400 in 2010).

According to Argandoña (2004), there are 3 mechanisms to implement more ethical

behaviour: Through regulation, self-regulation or reliance on market incentives. An important

distinction lies between compulsory regulation, which is often very costly and difficult to

monitor, and self-regulation. Self-regulation can be guided by incentives, when based on a

market-based approach, or shift regulation from the regulator to the company, which

implements objectives and sets up mechanisms to monitor their achievements.

Due to the nature of social performance, the self-regulatory approach has several benefits

compared to national regulation. Legal regulation, for instance, may not be suited to the

individual needs and circumstances of the institutions. Furthermore as it is difficult to enforce

ethical behaviour, it is much more productive and motivating if the company is following their

24

own code of ethics, with staff becoming committed to looking for more ethical solutions.

Weaver et al. (1999), note several advantages of such a value based approach that is

supporting the aspirations of the staff, in contrast to the compliance based approach where

the emphasis is on rules, control and the use of sanctions. In microfinance the self-regulatory

approach is referred to as social performance management (SPM). Although being the

counterpart to financial performance management, their approach is quite different.19

Managing the social performance can best be achieved by setting objectives based on the

social mission, monitoring and assessing the progress towards the achievement of these

goals and to use the information from the assessments for strategic decision making, to

improve the overall organisational performance (IMP-ACT). This implies not only looking at

the social performance, but also at the financial performance. SPM also balances internal

demands with that of external stakeholders, focusing simultaneously on the need to improve

practices and on the need to demonstrate impact externally (IFAD, 2006: 11). The value chain

below describes the different steps to follow:

The emerging interest in SPM is thus especially in line with the stakeholder theory of

corporate governance and more specifically with the renewed interest in better understanding

the needs of the clients in the microfinance sector (SEEP, 2008). It is therefore responding to

a shift towards 'demand-led' microfinance following the problems experienced with excessive

competition, as in Andhra Pradesh. Managing its social performance can thus help the MFI to

serve their clients more effectively through constant adaptation of their products according to

the needs of the clients. The success of managing the social performance, however, is highly

dependent on the commitment and the quality of training the staff receives on these issues,

19 See Appendix Figure 3 for a direct comparison

25

Illustration 6: SPM - Value chain

as well as the consultation of all stakeholders to share the responsibility with them

(Argandoña, 2004). It is also important to have an adequate assessment tool: CERISE and

SEEP call for the necessity to combine social audit and SPM, with SPI being the first step by

identifying the drivers of change, the second step being to identify the stakeholders and the

third step to define areas for improvement for the MFI (SEEP, 2009).

3.2.1 Tools for assessing and evaluating the social performance

Despite the social aspects being implicit to microfinance, they have also also been explicitly

promoted for by social investors and the increasing use of social indicators. Both

developments have further gained weight in face of the recent microfinance crisis. A

campaign on client protection principles, the so called smart campaign, is even promoted and

sponsored for by well-known, private institutions (that do not have much in common with

microfinance) such as Deutsche Bank, Credit Suisse or the Mastercard foundation.20 The role

of social investors in microfinance is particularly high, with a more recent survey showing that

only for 11 % of the investors the financial return is their primary objective (Reille et. al., 2011).

One SPA-tool is the SPI-audit tool from CERISE (with over 400 audits by June 2011). Many

MFIs also make use of poverty tools among which the progress out of poverty index (by

Grameen) or the PAT (by USAID). These tools enable the MFI to better understand clients

needs or their progress out of poverty (as measured by a scorecard assessing quality of

housing, access to food and sanitary tools, going beyond the simple loan tracking. Paying

attention to clients' needs, MFIs are more likely to improve their financial performance as well

(SEEP 2008). Social ratings are used for external reporting, whereas the SPI tool can be

conducted as external audit as well as internal assessment. The table below shows the

different tools for assessing social performance, based on the common framework elaborated

by the SPTF.

20 See http://www.smartcampaign.org/about-the-campaign/campaign-sponsors

26

http://www.smartcampaign.org/about-the-campaign/campaign-sponsors

Use / evaluation stage Evaluation of the process (intention-actions)

Measuring of results (effects on clients)

Evaluation for internal use

Social performance assessments: SPI; QAT

Poverty assessment tools: PPI, PAT; Impact evaluation (AIMS-SEEP)

Evaluation for external use

Social rating, GRI. SPI-audit

Use of quantitative and qualitative researches

Table 1: Tools for assessing social performance (adapted from Lapenu 2011)

A distinction has to be made between the evaluation of the process and the measuring of final

results, which is more time consuming and costly, having to establish a valid control group, to

prove the link of causality. SPAs are specifically designed so as to being able to infer the

impact of a MFI from the internal processes, without having to do an impact analysis. As can

be seen in the causal chain below, the link (causality) between intent&design and outputs is

much closer than with impact. It is thus the 'second best' solution to measure the social

impact of a MFI with output serving as a proxy for outcome and impact if information on the

latter is not available. It therefore provides a simplified representation of the social

performance of a MFI (SEEP, 2008).

The audit tools focus specifically on the process management (internal systems/activities) -

the creation of externalities of the MFI - and not on the final result (the impact). They assess

how effectively the MFI reaches its declared objectives (from intent&design to output). A

social audit therefore attempts to create increased transparency by looking at all stakeholders

27

Illustration 7: Source: SEEP 2008

involved. By demonstrating to them its commitments to the social mission, the MFI enhances

its credibility and reputation. In addition to this, assessing the quality of its processes can lead

to better strategic planning, further improving efficiency, profitability and ultimately the

sustainability of the MFI.21 The engagement of the various stakeholders in the audit is key.

Next to integrating a stakeholder view, making the audit multi-perspective, it can be

summarised with the characteristics of being comparative, comprehensive, regular, verified

and disclosed (SEEP 2008).

3.2.2 The SPI-assessment

As mentioned previously, CERISE and SEEP call for the necessity to combine social audit

with SPM (SEEP, 2009). With an increasing number of (social) investors and MFIs, it is

important to have transparent, objective and standardized information about the social

performance of MFIs as MIVs and other investors need objective criteria and easy to collect/

verify indicators (Urgeghe 2010). According to the social performance map (SEEP 2008) the

advantage of the SPI are its degree of standardisation, enabling the MFI to compare

themselves to other institutions, and the relative easiness to collect the necessary data

(SEEP 2008). The SPI is thus best placed to answer to the demands of investors. In addition,

its vast range of indicators help the MFI to receive an extensive overview of how well it

achieves its social objectives.

The four objectives that the SPTF agreed upon as leading to reach the social mission, are

also reflected by the 4 dimensions of the SPI tool developed by CERISE. If the MFI would

continuously measure its performance with this indicator and try to maximize its SPI-score, it

would necessarily also improve its social performance. Thus, by applying the SPI tool and

with help of interviews and focus groups with management and investors, the utility,

acceptability and drawbacks of SPM (thus the continuous measurement of social

performance) will be assessed. It is possible to benchmark the results with that of other MFIs

and the MIX. Though other assessment tools are available like the quality audit tool (QAT),

21 SEEP 2008, Chapter 6

28

SPI is most likely to become a standard, being integrated to the MIX. In addition, many

investors created their own assessment tools, inspired by the SPI (Urgeghe 2010).

The SPI can be very cost-effective when done as self-assessment or accompanied self-

assessment. However, it can also be done more objectively by having an external (certified)

auditor do the assessment. This could cost between 8 to 16 thousand US$ depending

whether a standard or participatory approach (including client surveys) was used. 22 Although

the SPI already includes the client protection principles and almost all (10 out of 11) indicators

on the social performance standards (SPS), the assessment can be enhanced when doing a

poverty assessment tool like the PPI or PAT, or an impact assessment.

3.2.3 Stakeholder theory of governance and financial benefits

Corporate governance is defined as 'the system or set of mechanisms that guides and

controls the organisation in order to reach its mission and objectives.' (Labie&Mersland, 2010)

Governance accordingly plays a crucial role in achieving the social mission, by integrating it

into the strategy and operations of a MFI (SEEP, 2009). However, outside of the microfinance

industry, McGuire et al (2003) found that governance does not have an effect on 'strong'

(positive) social performance and underlines the role of managerial beliefs in shaping the

firm's social agenda.

One of the conclusions from the first part of this literature review was that the importance of

governance cannot be underestimated. Examples for this are the cases of Compartamos

copy and paste strategy as well as that of Finansol in Bolivia. In both cases the need for

adaptation to the local context, the use of appropriate staff incentives and the absorptive

capacity of the business were essential.23 The bankruptcy of Finansol in particular is a

warning to keep self-interested managers from enriching themselves (Steege 1998). The

diagram below, retaken from the article 'Governance: Integrating SPM into microfinance

capacity building', reflects the direct link between governance and mission, as well as its

22 Slides by Lapenu, Microfinance Assessment Class, EMP 2010-201123 Notes from lecture by Labie, Marc: Microfinance: From Conception to Management, 2010-2011

29

immediate connection to performance management in the microfinance sector.

Mersland (2009) sees similarities between non-profit MFIs and savings banks in 19 th century

Europe, both being non-profit and ownerless. He underlines the need to look at stakeholder

theory to gain a better understanding.24 Similarly, Labie and Mersland (2010) also attest that

due to limited influence from 'market discipline' or public regulation, microfinance should be

analysed from the stakeholder view. Stakeholder theory thus places the role of shareholders

as being one of multiple stockholders, requiring the MFI to consider a better part of them in

their decision making as well. The two authors also claim that paying attention to all potential

stakeholders gives a broader vision of what the most efficient governance mechanism could

be. Lapenu (2002) highlights the need to have a clear strategic vision and a high level of

transparency, which would be more easy to realise if all stakeholders are consulted. This can

include workers, elected representatives, clients, communities, fund providers and

shareholders.

Much of this debate is based on the differing views of Freeman (1984), according to whom a

company is accountable to all its stakeholders and Friedman (1970), who claimed that a

company's only goal should be to pursue the maximization of its profits. According to Russo

24 „The findings could prompt a revision in the thought surrounding microfinance governance, which stresses for-profit ownership, regulation, and traditional vertical board control. The lessons from savings banks indicate that a broader and more stakeholder-based understanding of corporate governance is necessary to secure the long-term survival of a pro-poor banking system.“ (Mersland, 2009)

30

Illustration 8: Governance and SPM

and Fouts (1997) this is no longer a contradiction as maximizing stakeholder value also

improves shareholder value. Strictly following the demands of stakeholders would put a firm in

a competitive advantage to develop additional skills, difficult to imitate for the competitors.

Also, transaction costs can be lowered when cooperating with the stakeholders, as compared

to when engaging into formalized contractual agreements. Improved relations with

stakeholders can materialize into improved loyalty and motivation as well as a better

understanding of the value chain, thus greatly improving efficiency (Dentchev, 2007). It is thus

in the interest of the MFI to include the interest of all stakeholders, even if not represented at

the board level. But to ensure that all stakeholders are included, it is important that a broader

definition of governance is embraced (SEEP, 2009). However, Governance is still considered

one of the weakest points in the microfinance industry and at the same time one of the

principal risks to the microfinance sector (CSFI, 2008).

3.2.4 Empirical findings of the correlation between governance and performance

“It is mathematically and logically impossible to maximize two objectives at the same time, so there may

never be a thoroughly satisfactory theory of the double bottom line. But we live in the practical world, where

most of the time we do not need to know which bottom line is more fundamental, since both are deeply

intertwined” (Rhyne 2009: 141).

The importance of finding evidence for a positive correlation between social and financial

performance in this respect cannot be underestimated, especially as the microfinance sector

recently saw itself confronted with bad press. Even Robinson (2001) claimed that to really

achieve the microfinance revolution, the synergies between social and financial performance

have to be found. Several studies found a correlation between governance and performance.

Mersland and Strøm (2009), found empirical evidence that having a female CEO and an

internal auditor reporting to the board is associated with better financial performance, while

international directors on the board increase costs and reduce operational self-sufficiency.

Additionally they found evidence that outreach increases if the CEO is also the chairman,

having better control over the organisation. Morduch and Armendariz (2010) emphasise the

role of motivation and equipment of the staff. Mixed salary incentives between high powered

31

bonuses and low powered wages and career-opportunities should be put in place. Hartarska

(2005) and Mersland&Strøm also found empirical evidence that governance matters, although

not being able to define exactly how governance effects Microfinance. Thomsen (2008)

claims that good corporate governance can improve the performance especially in the long

run.

Whereas some authors make the simple conclusion that there must be a trade off between

social and financial performance, because serving the poor is costly and smaller credits are

more expensive to administer (Hermes et al., 2008 ; Christen, 2001) others found that social

performance actually acts as an accelerator of financial performance (Bédécarrats et al.,

2009; Dewez and Neisa, 2009). The drawback is that both studies are based on very simple

indicators, so that they don't explain that much after all (Urgeghe 2010: 73) . But despite the

absence of evidence in the field of microfinance, there is ample research on the correlation for

the corporate sector (Kapoor & Sandhu 2010; Peloza 2009, Waddock & Graves 1997).

3.2.5 The role of funding

Next to the role of governance, the funding structure is equally important, possibly posing the

risk of mission drift of management to the MFI. But even for larger MFIs, receiving excessive

foreign capital allowing them to grow at great speed, overheating and governance problems

can occur. This could be demonstrated during the current crisis, where 10 out of the top 25

MFI recipients of foreign loans had a PAR 30 combined with write-offs, of over 10 percent in

2009 (Reille, 2011). This is especially troubling, because borrowings constitute 34 percent of

MFI funding, compared to only 13 percent for equity and 26 percent for donations (Cull et. al.,

2009).

In the light of the problems with external financing and with what the microfinance sector

experienced in the times of crisis, several authors recommend to increase the amount of

internal funding and emphasize its role in assuring the social mission (Portocarrero Maisch et

32

al. 2006; Gardiol 2004). Introducing savings can benefit the governance of a MFI in several

ways: (1) By adding a valuable service for the clients (sometimes even more appreciated than

credits (Labie 1999), (2) by giving a greater share of responsibility to the clients, and raising

greater expectations among them (giving them incentives to monitor the behaviour of the MFI,

unless there is deposit insurance), (3) by becoming less dependent on external investors.

Finally, MFIs raising savings are also usually required to be state regulated, obliging them to

be more transparent and to submit standardized financial reports (Urgeghe 2009).

Despite the relevance of the funding structure, Hartarska (2005) and Mersland and Strøm

(2009) do not find that regulation, or a for-profit ownership structure increase a MFIs’

performance. These findings thus prove wrong the call for more for-profit institutions by

multilateral actors like CGAP, in the recent phase of commercialisation. Regulation in

microfinance is often also ineffective as it is not adapted to the MF-industry or is lacking the

capacity for sufficient monitoring.

3.3 Limits of SPM

According to Jacquand, only big institutions can provide information and thus receive funding from

social investors. The necessity for reporting is consequently ´the wrong priority´ as it would only

benefit ever more consultants. Copestake (2007) mentions the risk of MFIs being discouraged by

too stringent regulation.25 SPM redresses these issues by putting m0ore emphasis on internal

evaluation and self-regulation, without the constant need for external reporting and the

corresponding costs.

Copestake, also criticizes the underdevelopments of SPM as compared to financial

performance management. He argues that indicators and strategies supporting social

objectives are very rare, with little consensus on how to monitor clients. Moreover

mechanisms to link assessments to action are not very clear and norms for external review

are lacking (Copestake 2007). Additionally, many investors prefer to use their own

25 “over-zealous imposition of corporate social responsibility norms and consumer protection legislation could also discourage banks from seeking to provide services to poorer clients.”

33

assessment tools increasing the reporting burden to MFIs and not facilitating the emergence

of universal indicators.

Another criticism concerns the current measurements of profitability of social performance

(Cornée, 2006; Gurtierrez-Nieto & al., 2007; Cull et al., 2009; Mersland & Strøm, 2009;

Lensink et al. 2009) have been based on indicators such as portfolio size, average loan size

or the number of female clients to proxy for the depth of outreach of MFIs. Likewise, Power

(1997) argues that SPM should not be based on quantitative indicators, which reflect the real

social performance of a MFI only badly, thus curtailing an organisation's flexibility and

distorting performance incentives. Moreover, these indicators only reflect on 1 out of the 4

dimensions agreed upon by the SPTF.

34

4 Social performance at TYM – Vietnam

4.1 The environment

Despite being considered a lower-middle income economy today, Vietnam receives nearly

US$ 8 billion, which is one of the biggest aid amounts in the world coming from a multitude of

28 bilateral and 23 multilateral donors.

The economic situation in Vietnam improved remarkably after the launching of the Doi Moi

economic reform program and the opening up of the economy to the world markets, with

average growth rates between 7-8 percent per year since the 1990s. The poverty rate

decreased from as high as 75 percent in 1984 to a level around 10 percent today (however,

the Vietnamese poverty line remains below that of international standards). But especially in

the rural areas where 75 percent of the population live, poverty intensity (no access to water

or electricity) remains high.26 Many people live near the poverty line, but are still in a

vulnerable situation. On top of that, Vietnam is among the ASEAN nations that have the

lowest rate of access to banking activities by its population (30 percent). Since 2008 annual

growth has slowed to 5-7 percent, with inflation rates at 23, 7, 9 and 15% from 2008 until

early 2011, threatening to reverse previous advances on poverty alleviation.

In order to understand how the credits are being disseminated it is important to mention the

role of the mass organisations and the administrative organisation in the villages. Mass

organisations have to work as intermediary between the financial institutions and the clients,

charging a commission for each transaction. Among the mass organisations the VWU is the

biggest, with 13.6 million members, followed by the youth union (8 Million) and the farmers

union (2.2 million). The VWU was founded in 1930, having the main role of supporting

vietnamese women and building an organisational structure. Next to their full-time employees,

they have part-time staff in all communes of Vietnam.

26 United Nations 2010; See Appendix Figures 8+9 for the multi-dimensionality of poverty in Vietnam

35

4.2 Competition:

The main provider of credits to the poor in outreach is the Vietnamese Bank for Social

Policies (VBSP) with 64 percent market share. With 8.5 million borrowers (including 2.5

million students), it is even one of the largest institutions worldwide. Operating under a special

law, they receive funding and subsidies from the government and do not have to pay taxes.

Their interest rates are very low, thus benefiting the poor, but at the same time they are not

operationally self-sufficient and also make substantial losses from uncollected loans.27 Due to

the low funding rates for VBSP as well as the low interest rates for their clients, there are little

incentives for savings to be build up and collected nor does it raise incentives for the clients to

be entrepreneurial. Their target group is not always reached. Budgetary pressures are

rendering a transformation of VBSP into a more sustainable institution inevitable.

Other major actors, but not direct competitors because serving the near poor households, are

the Vietnam Bank for Agriculture and Rural Development (VBARD) and the People´s credit

funds (PCF). The VBARD has an average loan size of around 30 million VND and 22 percent

of outreach, thus targeting the better off among the poor and not accessible to all because

collateral is required. They have 4.5 million clients. The PCF has VND 20 million outstanding

per borrower and 8 percent outreach. It offers credits and savings at commercial terms, but

27 Each year the government spends around USD 120-150 million to cover the negative interest income and administrative expenses (Source: Microfinance in Vietnam. SBFIC)

36

Illustration 10: VBARD: 2004-2008Illustration 9: VBSP: 2006-2009

gives preference to their shareholders. The rest of the microfinance landscape is scattered

among a big number of small, international non-governmental organizations (57) that are

forming together the group of MF-organisations with an average loan size of below 3 million

VND. Amongst these, TYM is by far the biggest and the only financially sustainable actor in

northern Vietnam.28

TYM is operating mainly in areas that were previously unserved, or areas already served by

the VBSP. However, there is no real competition as VBSP is state-subsidised and offers

interest rates that TYM cannot compete with. But as the offer of VBSP loans is limited, TYM

can offer complementary services like insurance, savings or training, flexibility in products and

very efficient staff. These features give a competitive advantage to TYM, for which clients are

willing to pay a higher interest rate. Nevertheless, TYM receives pressure from local

authorities and the competition with VBSP, to keep their interest rates low.

4.3 The organisation29

Table 2: TYM Key Data (December 2010):Starting year 1992Legal form NBFIProfit status Non-ProfitActive borrowers 54,903Active savers 55,146Employees 264Target market rural householdsMethodology IndividualAverage loan amount US$ 249.68Portfolio Yield 23.9%

Gross loan portfolio US$ 13,708,048Gross savings US$ 3,560,760Total assets US$ 16,603,960Operational self-sufficiency 133%Return on Assets 4.43%Financial Expense Ratio 3.12 %Operational Expense Ratio 15 %LoanLossProvisionExpenseRatio 0.37%Write-Off Ratio 0%PAR30 / PAR90 0.02% / 0.015%

TYM has a loan portfolio of US$ 16 million and was counted among the top 100 MFIs

worldwide.30 Since the beginning TYMs mission is to improve the quality of life and status of

poor and low income women by providing credit, savings and insurance services. TYM is

operating in peri-urban (12 percent) and mainly rural areas (88 percent), and has more than

62,000 clients, with an outstanding loan portfolio of 16,3 Million USD. With more than 400

clients per loan officer, productivity is very high, despite having experienced a decrease since

28 Only the CEP fund in South Vietnam, is twice as big and also financially sustainable29 See Appendix Figure 11 for organisational chart TYM30 See 2009 MIX Global 100: Ranking of Microfinance Institutions available at

http://www.themix.org/sites/default/files/2009%20MIX%20Global%20100%20Composite.pdf

37

http://www.themix.org/sites/default/files/2009%20MIX%20Global%20100%20Composite.pdf

2008 due to a shift from group to individual loans. Its interest rates charged are slightly higher

than for its competition, reaching an effective annual rate close to 29 percent, without taking

into account compulsory insurance and savings payments.31 Even though this is higher than

the competition, it is the lowest rate possible, in order to maintain financially self-sufficiency.

Moreover, TYM is organizing many social activities, that can be very useful for its clients. After

TYM's transformation in August 2010, its legal status is that of a limited liability company, with

the possibility of having 1-5 shareholders, one of which must be a local mass organisation

(like VWU) or an NGO.

It is the Vision of the TYM to be “A leading provider of financial services to low income women

and their families. Rooted in the Vietnam Women’s Union and combining social responsibility

with professional staff excellence, TYM wants to be a model of best practice for microfinance

institutions in Vietnam.”

TYM has the social mission to “Improve the quality of life and status of poor and low income

women by providing credit and savings to members, creating favourable conditions for their

participation in economic activities and enhancing their role in society."

TYM is working with its owner, the VWU, to set up the first center meetings, but later

organises everything itself, the VWU only giving specific training, like on women

empowerment. The repayments of the loans and interest are collected during the weekly

center meetings. There are on average about 30 clients in one center. Previously there were

5-6 groups (with each 5 women), but since 2008 TYM gradually shifted to individual loans

31 See Appendix Figure 2 for APR example from MF-transparency

38

without joint liability. Nevertheless, all clients have a social collateral, compulsory savings and

need to take a loan-life insurance. TYM's target group are poor and near-poor women,

according to the official poverty line, which is currently set at VND 400.000 (US$19) for rural

and VND 260.000 (US$24) for urban areas. The women must have a permanent residence

and be in the age of 18-55 years.32

4.3.1 The funding structure/ strategy:

Since being regulated, TYM managed to become financially self-sufficient, funding itself

principally with semi-commercial loans, savings and retained earnings. But as TYM's main

competitor is receiving subsidies, offering interest rates between 0 and 7 percent per year,

there is political pressure for TYM to keep their interest rate low, thus effectively implementing

an unofficial interest rate cap. Due to the high inflation rate, most investors would not be

willing to lend in local currency or only at very high rates, that TYM is unable to pay (like from

domestic investors). As of this moment TYM therefore receives its debt funding entirely from

foreign social investors, but these funds are very difficult to access (reporting requirements)

so that TYM needs to collect more savings to improve its internal financing and reduce the

dependence from investors.

Being a transformed MFI, TYM has the possibility to tap commercial borrowings. As can be

seen in the figure below, commercial debt currently takes about 40% of the total sources of

funds, with equity at 30% and savings at around 20%. The leverage ratio remains however at

less than 2, due to the reserves in equity. The funding strategy envisions to increase savings

by 40% annually with the goal of achieving a savings ratio of 50% compared to the loan

portfolio. TYM wants to maintain its relations with existing investors, eventually opening the

possibility for equity funding, but also to take hard currency loans, if inflation and devaluation

of the VND permit.33 As can be observed in the graphs below, TYM could diversify their

funding and decrease the size of paid in equity.

32 TYM operations manual 200833 TYM Development Plan 2011-2015

39

TYM Source of funds (2004)in VND million

17,951

22,218

1,237

7,019

Savings Grants / paid in equity

Retained earnings Others

Illustration 11: TYM Sources of funding 2004-2010

TYM sources of funds (2010)in VND million

70,524

78,931

19,04720,116

125,016

0

Savings Grants / paid in equityRetained earnings ReservesOthers Borrowings

4.3.2 Governance and the relation with stakeholders:

TYM is governed by 3 board members, all women. One of the board members is the CEO of

TYM. The other two board members are both from the Vietnam Women's Union (VWU). The

chairperson is also the vice-president of the latter. All board member are thus coming from

non-profit organisations. They all receive training on social performance management and

have 4 board meetings per year, with full attendance last year. CEO remuneration is openly

discussed at the board meetings and is regulated by the state index for bonuses and

subsidies at managerial level. Furthermore, TYM is considering to enlarge its board of

directors and to invite external experts to serve in an advisory group.34 TYM is also

committed to transparency towards all its members in regularly publishing operational and

financial reports and assures that the interests of its principal stakeholders - including clients,

staff and the VWU (as only shareholder).

For clients it is important to have permanent access to financial and non-financial services

and to be assisted in their daily lives and status. TYM is fulfilling this by giving clients much

influence in its decision making. Recently a member council was set up, where 11 clients are

invited to participate in the governance of TYM. Through TYM's mutual assistance fund,

34 TYM Development Plan 2011 – 2015

40

members will eventually even become co-owners.35 Staff expect an interesting and stable

workplace with fair treatment. This is fully satisfied as they enjoy all legal social rights and

receive many benefits additionally such as uniforms, children's festivals and company trips,

next to including a performance based bonus system.36 The interest of TYM's only

shareholder, the VWU, is to create equal opportunities for vietnamese women and to develop

TYM into a role model for other projects, possibly improving their image in the political

system. Again, TYM is fulfilling this expectation, by continuously thriving to follow the best

practices in financial or performance management.

Other stakeholders include social investors and the government. Social investors and

organisations giving technical assistance attribute financial and social targets to TYM in

exchange for issuing loans at preferential interest rates. Despite charging itself low interest

rates to its clients, TYM manages to fulfil these expectations. To the government, TYM is an

important actor in developing an inclusive financial system in Vietnam in a sustainable way.

As a registered MFI, TYM is under the supervision of the central bank and has to fulfil the

monthly reporting requirements, pay corporate income taxes (25%) and have a legal capital

requirement of VND 5 billion (USD 240,000). Additionally, the MFI has to show safe and

sustainable management (portfolio at risk must be below 5%).37

4.3.3 Social performance at TYM

TYM needed to introduce SPM partly because investors require a proof, and partly to assess

for themselves whether, after their transformation to a regulated financial institution and the

increased outreach, they continue to stay true to their social mission. According to the

Vietnam Women’s Union Charter’s article 1 (“Represent and defend the equal and democratic

rights and the lawful and just interests of women”).

When looking for new clients, TYM conducts market researches - 'family questionnaires' - that

give information on the poverty level of new areas. For new clients in already served areas,

35 The mutual assistance fund, for legal reasons held as a separate business, is covering the insurance part of TYM's clients36 TYM Development Plan 2011 – 2015 37 The State Bank of Vietnam. (2009) Guidelines on implementing Decree 28/2005/ND-CP. Point 9.7 b)

41

information on poverty is gathered during home visits. The Vietnamese Women's Union

(VWU), is also encouraging TYM to operate in poor areas. Furthermore, TYM assures to

follow its social mission, by conducting client drop-out surveys, employee satisfaction surveys

and conducts external impact assessment every 5 years (next in 2012) and a financial and

social rating every 2 years. In addition to this, the business plan also includes social

performance targets, setting the goal to reach 80% of poor or near poor clients.

But TYM does not use specific social objectives and relates them over time in order to identify

the weaknesses and to look for improvements. At the same time, more and more frequently,

their social investors ask for proofs of their social performance before granting a new fund to

TYM. Therefore, the social objectives have to be clearly defined and turned into measurable

objectives, that can be tracked over time, which in turn requires continuous monitoring on

social performance. This can be costly in terms of time and human resources invested, but

may finally lead to more satisfactory results and thus eventually enable TYM to reap monetary

benefits that exceed the initial cost.

4.3.4 A short Impact analysis:

The results of the latest impact assessment certify TYMs sustainable engagement for social

performance. Clients that stayed longer have better food security, including able to buy better

quality food, and better housing (especially for clients between 6 and 9 years of membership.

According to the latest impact assessment (2007) 72% of the clients could escape poverty

after 9 years of membership. After only 6 years of membership half of the clients overcame

poverty, whereas 66% of the clients could improve their housing conditions and buy more

durable assets like TVs and motorbikes, have higher personal savings for emergencies. Next

to this, school attendance and access to health care for clients' children increased.38 These

developments are supported by a multitude of training programs (ranging from education,

over health care to literacy). Specific programs are targeting people infected with HIV or living

in isolated areas. The social rating from PlanetRating in 2010 attributed TYM a '4-', for

convincing.

38 TYM impact assessment 2007

42

4.4 Activities:

4.4.1 Using the SPI 3.3.

As seen in the literature review, the SPI-assessment is a useful tool to better manage the

social performance, covering many different aspects on social performance and reproducing

the results in a diagram that gives a good and holistic overview of the social performance of

an organisation. It examines a MFI’s stated social objectives within a framework of social

performance dimensions and measures how effectively its system achieves them.

The tool is easy to use and can easily be taught to the MFI staff on how to be used. A major

advantage of the new 3.3 version to the previous versions is the possibility to find more

details on each questions on their WIKI, also giving the opportunity to ask questions, make

comments (or see those of other participants) and of course to see the answers of the SPI

creators and administrators. There are also many hints as to how to enhance the

assessment, using a participative approach with the stakeholders.

For the purpose of this assessment, interviews were conducted with the director, operational

management, branch managers, loan officers, clients and other microfinance practitioners.

The analysis is designed to reveal where a MFI has the means to achieve its social goals and

where there is room for improvement. The results of each dimension are concluded with a

small recommendation, in addition to the general conclusion and recommendations.39

4.4.2 SPI summary- Results

The following graphs illustrate the results according to the SPI 3.3. application in June 2011.

The left-hand diagram shows the results per dimension, while the other one gives a more

detailed view on results per criteria. The maximum score per category is 100 percent. More

detailed scores can be found in the appendix.

39 An overview of the proposed objectives can be found in Appendix, Document 2

43

Results by dimension

Targeting the poor and excluded

Adaptation of services

Benefits for clients

Social responsibility 0%

50%

100%

Results by criteria

The results show that TYM performs best in the adaptation of services and on social

responsibility. More specifically TYM even shows a perfect score on the social responsibility

towards staff and clients, the quality and range of services and the empowerment of clients

(all 100%). On a first view, TYM could try to strengthen their performance regarding the

economic benefits to the clients and the pro-poor methodology.

44

Geographic Targeti ngIndividual targeti ng

Pro-poor methodology

Range of traditi onal services

Quality of services

Innovati ve and non fi nancial servicesEconomic benefi ts

Client parti cipati on

Empowerment

SR towards staff

SR towards clients

RS towards comunity and environment

0%

50%

100%

Illustration 12: SPI results by dimension

1st Dimension: Targeting and outreach to the poor**** 40 (88%)

This first dimension looks on the specific processes and tools implemented by TYM in order

to reach the poor and excluded. Despite the relatively lower score for this dimension from the

SPI-audit, TYMs actual performance in reaching the poor is still quite considerable. TYM is

strongest in geographic targeting, with more than half of the clients coming from rural areas.

For individual targeting TYM scores slightly less well as the socially marginalized groups and

ethnic minorities represent less than 30% of the active borrowers (about 13%), and loan

officers are not given monetary incentives to target excluded or poor clients. Loan evaluation-

forms test the level of poverty of the clients and their repayment capacity (according to an

interview in a branch in Ninh Giang, for around 10 percent of the clients the loan amount

needed to be reduced, while for 5 percent the loan amount was rejected after looking at the

repayment capacity of the clients). To better serve the poor and excluded, loan officers could

be given more incentives to specifically target this group, even if generally already served by

the VBSP. The pro-poor methodology benefits from small loan sizes and solidarity between

branches. TYM is only missing a top score due to having 10 percent compulsory savings.41

2nd Dimension: Services and products**** (92%)

Clients' needs are diverse and their geographic location can further increase their demand for

diversified product-designs. Extensive market research studies and effective client complaint

mechanisms enable TYM to offer their clients products and services that are well adopted to

their needs and flexible if new products are demanded. Next to the general loan TYM also

offers specific loan products for their clients: Long term loans are intended for productive

activities like handicraft-trading or husbandry, the multi-purpose loan with a duration of 20-25

weeks, can be used as an emergency loan or for general consumption purposes.42 The

disbursement of first loans only takes around 1 week and the effective interest rate (29

percent p.a.) is comparatively low, even if higher in comparison to TYMs competition, who is

40 The stars indicate the priority score for the MFI with * being lowest and **** the highest priority. For an explanation of the categorization, see Appendix, Figure 5

41 Seen as collateral and thus as obstacle to client access42 See appendix for a list of different loan products and maturities

45

receiving subsidies. Loan officers pay regular personal visits to the clients during one day of

the week, checking the ongoing or new loan projects. Next to offering loans, TYM also gives

enterprise training and offers basic educational training. The number of innovative products is

limited to the insurance products, but this includes life-, loan- and health insurance. Other

services like remittances, or mobile banking are currently not offered and could be envisaged

as new services for the near future. TYM might still improve their services by giving their

branches more autonomy in adopting the products to specific local circumstances (urban/

rural context). In the context of global warming and increasing weather extremes, it could be

worth considering the set up of a special fund in case of collective disaster.

3rd Dimension: Benefits to clients*** (88 %)

MFIs need to ensure that clients benefit from their services. Whereas economic benefits are

an important factor, MFIs may also seek to strengthen social networks, build client capacity or

involve clients in governance. At TYM, clients interest is well-represented, due to efficient

complaint mechanisms and a member council composed of 11 elected client representatives.

Representatives regularly receive training on leadership and clients are well aware of policy

changes and the introduction of new products, as they are regularly informed via the loan

officers during the weekly center meetings. The costs of services are tried to be kept as low

as possible, all while increasing efficiency and the range of services provided. Local centre

meetings take place weekly for repayment of loans in proximity to the clients, and branches

are located within maximum distance of 15 km, preventing them from incurring excessive

transaction costs. Loan evaluation forms give information about the socioeconomic situation

of the clients when they take a new loan. As of this moment there is no systematic monitoring

of the client's changes in economic status, but the PPI is about to be introduced in the

management information system.

4th Dimension: Social Responsibility*** (96%)

Whereas social performance is about MFIs 'doing good', social responsibility is about 'not

46

doing harm'. This dimension thus evaluates the efforts a MFI undertakes to ensure its

activities do not have negative effects on either employees, clients, the community and the

environment. As reflected by the SPI diagram, TYM demonstrates great social responsibility

towards their employees and clients with full transparency on salaries, good training

opportunities and provision of medical insurance. More than 90 percent of the contracts are

permanent and the staff turnover ratio is only two percent. Employee satisfaction is monitored

and staff satisfaction surveys are conducted. Social responsibility to the environment and

community is also very high, but due to financial restraints, no concrete pro-environmental

actions could be realised thus far.

Strengths Weaknesses

Targeting and Outreach**** (84%)

Outreach to the poor: 100% of clients are women, over half of clients live in rural areas

Small instalments and savings are possible

No incentives for loan officers to target poor households

Adaptation of services**** (92%)

Products are well adapted to clients needs (see below)

Innovative products are limited to insurance, no use of technologies (mobile banking, ATMs, cards) and no remittances services offered

Benefits for clients*** (88%)

Good complaint procedures and client representativeness at the managerial level

No systematic monitoring of client economic status

Social Responsibility*** (96%)

Low drop-outs and employee-turnover Formal policies on social responsibility to

community and environment

No concrete pro-environmental actions put in place so far

Table 3: SPI-TYM: Strengths and Weaknesses

Conclusion and Recommendations

According to an interview with the managing director, TYMs two main priorities are the

targeting of poor clients (dimension 1, at least 80 percent of clients shall be below or close to

the poverty line) and the adaptation of services (dimension 2).43 As the quality of TYM

43 See Appendix Figure 5 for priorities set according to 4 Dimensions

47

services is already very developed, emphasis should be given to looking at the level of

poverty of clients more rigorously (dimension 1), and continue to focus on serving poor clients

when doing market research. Expecting high client growth in the future, closer monitoring of

the socioeconomic situation of clients might also become necessary. TYM is already currently

implementing the use of the PPI, but existing loan evaluation forms could also be compared

over time for a sample of clients.

In order to further improve their products and services (dimension 2), technologies like ATMs,

mobile phones, point of sales terminals, etc could be introduced. This might lead to a

reduction of costs in the long term and reduce the necessity of having centre meetings, which

are perceived as burdensome by some of the long term clients and even considered as a

reason to leave TYM entirely (TYM impact assessment 2007). Nevertheless, cashless

transactions are still rare in Vietnam, despite otherwise favourable conditions like a very high

population and mobile phone density. The increasingly visible effects of climate change will

make it necessary for TYM to take ex-post (collective disaster fund) as well as ex-ante

measures (promote the use of alternative energies, recycling) to better protect its clients.

In order to better follow up on its social performance in the future, TYM has designated a

staff-member to continuously monitor and assess the social performance with help of the SPI

tool. To further improve its transparency, TYM is engaged to sign up to the MF-Transparency

initiative.

4.5 Evaluation and Analysis of SPM at TYM

4.5.1 The opinion of the investors on SPI44

In order to find out about the usefulness of a SPI-assessment and whether it could replace a

rating, TYMs investors were surveyed. TYMs investors consider the SPI audit as useful and

even necessary (Cordaid). Underlining the importance of conducting the audit well. The main

strength of the SPI is being able to discover the weaknesses of an MFI. Conducting the SPI

44 See Appendix, document 3

48

as self-assessment over time can give relevant information to the management of the MFI

and enable it to monitor progress toward self-set objectives and improve weaknesses in its

governance and human resource policy. The credibility of a self-assessment depends on its

transparency and the number of stakeholders that were involved (Oikocredit).

Investors generally prefer the assessment to be conducted by a third party, though it is

mentioned that close cooperation with the MFI is desirable. As such the SPI can even serve

to replace an external rating, enabling the MFI to save money but also to get involved and

receive a better understanding of their own processes, rather than receiving a rating without

understanding the processes behind it. However, the focus of a rating can be different and

more in-depth, with the SPI only being able to reduce reporting costs. Some investors also

prefer to use their own tools for assessing the social performance (Triodos, Oikocredit),

though admitting that there are only minor differences among the different tools (Cordaid).

When asking the investors why they chose to invest in TYM in local currency, and thus

accepting to incur losses45, the most common response was the desire to invest into the

Vietnamese microfinance market that is generally under-served, and where TYM is the only

viable institution serving the poor, demonstrating staff professionalism and with operational

self-sufficiency. Another factor was to show other investors that it was possible for TYM to

fully repay its loans (MCE) and to further build TYMs capacities (SBFIC, Oikocredit). While all

investors gave local currency loans, MCE found a third party that was willing to cover all the

exchange risk, Oikocredit has an internal fund and others simply take all losses. This reflects

the 'socialness' of the investors, that do not expect a monetary benefit in the future and even

accept to make a loss. Nevertheless, due to legal constraints, or a phasing out of the

Vietnamese market, currently only one investor would be interested in becoming a

shareholder of TYM.

As social investors, TYMs partner would not pay for obtaining social information and are

interested in the social performance irrelevant from the fact of being able to make a profit with

the information or not. Nevertheless, it is in their interest that TYM maintains a good balance

45 The Vietnamese dong is depreciating at a rate of more than 10% per year

49

between social and financial performance. However, they are more critical with investors in

general, privileging all too often the Tier-1 MFIs or asking for elevated rates of return (at 25-

30%). In their opinion, the growing competition in microfinance will only lead to a greater

emphasis on financial performance, and the bad publicity of microfinance with regard to

suicide-cases leads to a decrease in social investments. Whatsoever, the opinion on the

future of microfinance is positive, MFIs continuing to be able to stick to their mission thanks to

strongly socially oriented people.

4.5.2 The board of directors on social performance

According to the board, it is TYMs mission of helping poor and low-income women, that leads

to a good social performance. This mission was at the base of the creation of TYM by the

VWU in 1992 and remaining since then unchanged at the core of TYMs operations. A second

factor for good social performance is TYMs focus on the demands of the clients and the

continual adjustment of their products to the client's needs.

TYM also maintains good relations with their investors, which give support and new ideas on

how to improve the social performance. In addition to their support, investors also give certain

requirements on social and financial performance that TYM has to fulfil. More generally this

reflects the strong and positive involvement of all stakeholders in the implementation of new

policies, contributing to the good results in the social performance of TYM.

Finally, TYM has a clever remuneration policy which gives a mix of short term and long term

incentives, and a human resource policy that gives incentives to staff to stay for a long time,

like career paths. Whereas there are no long term incentives for social performance at the

CEO level, there are at the local level of area and branch managers.

4.5.3 Evaluation of the utility of the SPI 3.3

Filling in the SPI questionnaire, mainly with help of operational staff, it

50

quickly turned out that the truthful responses were not always so evident to

be found, reflecting the differences between a social and a financial

performance assessment. Although, the entire questionnaire could be filled

in with help from the staff (sometimes after checking corresponding

documents for verification), it was also necessary to cross check with field

staff if the policies fixed at the headquarters are also applied correctly. It was

also useful in order to receive a second opinion from TYM clients, loan

officers and branch managers. Finally, after making a few corrections and

additions, the complete SPI questionnaire could be presented to the director.

The biggest advantage when using the SPI is for the MFI to see directly

where they could make improvements, rather than just seeing an evaluation

of their current performance as the end result as in a rating. The MFI could

then try to change their operations so that they would receive a higher score

for the next assessment (the total benchmark being 100 percent). It was very

interesting to see how serious this assessment was taken and it was

sometimes difficult to explain why TYM would not get a point for some

question.

In retrospective, some questions seem to be somewhat too general,

disregarding the good intentions of the MFI, with arbitrary benchmarks (e.g.

10 % compulsory savings are considered as taking a collateral giving a

score of 0; this is ignoring the positive effects of compulsory savings, i.e. to

create a savings discipline). Blindly trying to achieve 100% performance,

might introduce new products that might not be suitable in the operating

environment of the MFI or ignore other important issues. For example, an

alternative proposal not considered by the SPI would be to increase the

clients income by engaging in value chain development of the clients

products. Also, a change in one question, can sometimes change the score

by more than 10 percent (thus despite the ample choice of questions, the

51

survey could be even more detailed, to be more precise). Finally, despite

collecting financial data, a more detailed analysis of the financial

performance is missing as well.

But on the whole, the assessment gives a good and holistic overview of

many different aspects of the MFI's policies and governance. The latest

version SPI 3.3 also gave the opportunity to ask further questions or make

comments via a blog, further enhancing the possibility and quality of a self-

assessment.

4.5.4 Small analysis on TYM's financial performance

TYM has not only a good social performance but is also financial wise well-positioned. The

focus of this paper being on social performance, an econometric analysis of our findings lies

outside of the scope of this report. However, we will quickly review the financial indicators that

appear to have a strong impact on social performance.

Item/ Benchmark TYM Vietnam East Asia & Pacific

Debt to equity ratio 1,64 1,37 3,44%

Percent of women borrower

100,00% 99.86% 76,00%

GLP 9,8 Million 0,8 Million 3,8 Million

Profit margin 38,91% 26,24% 11,15%

ROA 7,95% 5,04% 2,19%

ROE 22,70% 10,54% 11,22%

Total expenses/ assets

12,48% 12,97% 21,45%

Borrowers/ Loan officer

288 304 233

PAR 30 0.02% 0.26% 4.08%

Table 4: TYM-financial benchmarking Vietnam/EA&Pacific (data for 2009, the MIX)

52

TYM is a highly profitable institution (profit margin 39%, ROE 23%, ROA 8%), despite the

majority of their clients coming from rural areas and their target group being women living at

or below the national poverty line. It is also due to the low ratio of total expenses/assets

(12.5%). This can be attributed partly to the low cost of funds, possible to semi-commercial

rates and the high proportion of savings and retained earnings, next to the high productivity

(more than 400 borrowers per loan officer). Another explanation is the excellent repayment

discipline of their clients, the PAR 30 being at only 0.02 percent, much lower than that of its

peers in Vietnam (0.26%) or in the entire East Asia & pacific region (4.08%). This allows them

equally to have a low loan loss provision expense ratio (0.37%) without having to make write

offs. But being a non-profit institution, all profits are reinvested, further improving the equity

base. Looking at the financial performance over time, TYM has consistently achieved a profit

over the last 10 years and is in a healthy financial condition.46.

The sustainable growth rate is constantly increasing because the earnings are always

reinvested. A big increase can be observed from 2007 to 2008, due to high increase in the

profit margin (also higher ROE) and a higher leverage ratio. Now having a high sustainable

growth rate, TYM can more easily follow a stable growth path, without putting at risk its social

performance.

46 TYM Development Plan 2011 – 2015

53

Illustration 13: Sustainable growth rate TYM, 2006-2009

4.6 Personal remarks on the assessment and the internship in general

Despite the good social ratings of TYM, it is only after having conducted the

SPI assessment that many characteristics of good social performance

became more evident. Despite the elaborative catalogue of questions

astonishingly, TYM could answer positive to almost all of the criteria, as if

they have previously used it as a benchmark. If TYM received a lower score

(as in pro-poor methodology) it is rather due to arguable benchmarking of the

SPI concerning the collateral.

The internship gave a great opportunity to being able to see first hand how a

MFI is run. Staff in the headquarter was very professional, with several

receiving training abroad and going to conferences. Except for the colourful

pictures on the wall, few things distinguished the offices from that of other

organisations. But the good working atmosphere maybe reflects that the

people do their work with a lot of joy and ambition and it certainly reflects the

good social performance. The positive attitude can be felt not only with staff,

but also with clients and investors.

During visits of the branches and interviews with clients, these also seemed

to be very positive towards the MFI, but it is difficult to assess objectively

what they really think about the MFI, with the branch-manager, and other

TYM staff being around. In order to have a truthful assessment, it is probably

necessary to be able to count on the willingness of the MFI to improve their

performance. Though the assessments of the interviewed clients often

seemed too good to be true, it was nevertheless possible to perceive the

willingness of TYM to have an objective assessment.

54

4.7 Lessons learned and own observations on the social performance in Vietnam:

Next to seeing how an institution can do a profitable business with poor

people, it was also very interesting to attempt to assess the social

performance of the institution. It was astonishing to see how serious the

assessment was being taken and it was promising to see that the SPI-results

were taken like a benchmark to further increase the score. It clearly

demonstrated that even without state regulation a commercial institution can

be very motivated to reach for a good social performance and to have a

positive impact on the environment. Eventually this leads to the tempting

question whether self-regulation might not even be more effective than state

regulation in obtaining a better social performance and in fostering

harmonised and sustainable development.

Living in the city of Hanoi, it was evident that there is a big gap between the

few very rich and many poor people that live from day to day, selling their

products on the streets. What is more, the rich do not seem to care much

about the poor. In fact it almost seems like they are enjoying to show how

much money they have and to show their superiority by buying big and

expensive cars, even rare to be sighted in Europe. This situation seems

absurd as a microfinance student, coming to Vietnam, dedicated to contribute

to improving the life of the poor. Outside the office, however, there is not

much hope of seeing the poor in a better situation one day- at least in the

city. The policy of regularly devaluating the currency from the Vietnamese

government in order to produce cheaper export, will even further perpetuate

the status of poverty.

55

5 Analysis of research questions

In this chapter we will analyse the subquestions individually before answering to the main

question in the conclusion.

5.1 “How did commercialisation influence the achievement of MFIs' social mission ?”

As we have seen, the social mission of a MFI has to look at several dimensions, due to the

multidimensionality of poverty (Sen). The SPTF has thus agreed upon 4 dimensions, which

are also reflected in the SPI-tool.

The first part of the literature review described how during the commercialisation of the

microfinance sector, many MFIs were transforming to become regulated in order to have

access to more financial resources, like foreign capital but also to collect savings. Many MFIs

increased their share in foreign capital, making them more vulnerable to international financial

markets, rather than to collect more internal sources of funding from savings or insurance

services. Access to foreign debt was also facilitated due to an oversupply of investor money,

which passed on a profit-seeking attitude to the management of several MFIs, leading to the

occurrence of crises, as shown in Chapter 2. These consequences could however be

curtailed by applying good governance like strict budget constraints, appropriate staff

incentives (Morduch 2000: 627)) and the application of stakeholder theory in governance

(Rhyne (2010a)47 in MFIs.

So far the over-financing has mainly occurred with Tier-1 MFIs, and as a result of influential

public policy actors pushing for rapid self-sufficiency among MFIs. But if investments were

made more equitably involving especially Tier-2 and 3 institutions, risks of over-funding could

47 the toughest challenge will be to 'align the personal interests of founders, investors and other stakeholders with the long run mission to assist low income clients”; Rhyne (2010a)

56

be mitigated. Social investors like Oikocredit play a pivotal role in this respect.

“Perhaps the most important target is the public sector policy environment that has treated microfinance

institutions as orphan children of the financial sector rather than helping them to build solid foundations.” 48

The second part of the literature review emphasised the positive influences of

commercialisation. By evoking the transformation of MFI-NGOs into deposit taking

institutions, commercialisation improves the efficiency of MFIs and makes them more

transparent, allowing for benchmarking on the MIX for financial as well as social performance.

The need for external reporting also requires MFIs to standardise their data, a precondition for

benchmarking and the exchange of best practices. Finally, it was shown that introducing

savings and insurance services, would not only procure the MFI with more funding, but also

improve their services towards customers, ultimately leading to less default payments. It could

be argued that the commercialisation requires MFIs to improve their risk management, but at

the same time enables them to improve their social performance implicitly by introducing new

products. Finally, the microfinance crises from Andhra Pradesh to Nicaragua, also did their

part to increase the pressure for MFIs to improve and demonstrate their social performance.

5.2 “How can social performance best be managed ?”

Managing the social performance can best be achieved by setting objectives based on the

social mission, monitoring and assessing the progress towards the achievement of these

goals and to use the information from the assessments to improve the overall organisational

performance.49 As a self-regulatory mechanism, SPM is better suited than compulsory

government regulation in motivating companies to improve and monitor their social mission.

48 Rhyne (2010b)49 See IMP-ACT. Social performance management principles available at

http://www2.ids.ac.uk/impact/SPM_Principles.pdf

57


The assessment is probably the most crucial part of SPM. In contrast to an impact

assessment that is time consuming and costly, SPAs are specifically designed so as to being

able to infer the impact of a MFI from the internal processes, without having to do an impact

analysis. It is thus the 'second best' solution to measure the social impact of a MFI with output

serving as a proxy for outcome and impact if information on the latter is not available.

The SPI tool developed by CERISE was particularly useful for the assessment part, seen that

it can be conducted as a self-assessment, even for the first time, enabling the MFI to see

where they could make improvements and to self-assess their progress towards it. It looks at

the 4 dimensions defined by the SPTF individually, with a multitude of questions and a sub-

score for each dimension, giving also a final score in order for the MFI to evaluate itself. It is

mixing quantitative with qualitative data, with many questions being able to serve as

benchmark (i.e. by looking at the suggested answers).50 It also gives many hints as to where

it would be useful to collect more data. The finding from the SPI assessment gave many

inside views into TYMs operations that otherwise would have been difficult to explore, giving

an excellent opportunity to test the theories from the literature review on social performance

management and to explore other important findings.

However, despite being pretty elaborative, some questions are still too general, using rather

arbitrary benchmarks for giving points. This is especially sensible as a difference in 1 point

can change the score by more than 10 percent for one subcategory. Next to this, the

assessment does not always suit well to represent the performance of a MFI in a specific

environment. Despite being very elaborative and informative, especially when consulting

different stakeholders and interviewing clients, the questionnaire naturally cannot evaluate

everything, and less so concerning a specific, local context. Finally, despite general

acceptance of the SPI among investors, some would prefer an external audit and a few

would always refer to their own assessment tools. Nevertheless, this does not minder its

strength as an internal assessment tool, which is more relevant for SPM.

50 For a summary of the suggestions relevant for TYM see Appendix, Document 2

58

5.3 “Why is TYM so successful?”

To overcome problems of moral hazard and asymmetric information, TYM makes use of the

classical innovations in microfinance that led to good repayment rates. Next to lending to

women only, they use dynamic incentives, with the general loan increasing gradually from the

first to the last cycle (minimum after 3 years). Additionally, TYM could underline the

importance of the factors mentioned earlier in the literature review.

5.3.1 Stakeholder governance at TYM:

TYM has an effective governance, mainly thanks to the stakeholder involvement. TYMs client

focus is benefiting TYM in many ways. Communication links between clients and

management are very strong with a member council participating in the decision-making of

TYM, and other client grievance mechanisms or the conduct of client-exit surveys. Putting

much emphasis on the repayment capacity of its clients, TYM is benefiting both its clients -

that are less inclined to become over-indebted – and itself, by receiving less default

payments. The loan evaluation that is conducted before giving out a new loan, includes an

assessment of the income and expenses of a potential client as well as loans taken with other

institutions, to determine the repayment capacity of the client. If the capacity to repay is lower

than 1,2 times their net income, the loan size has to be adjusted downwards.

TYM's focus on the clients is also central, when developing their products. Market research is

conducted to find out the product requirements for clients. In order to suit the individual needs

of the clients, three different loan products are offered, with the possibility of choosing

different durations. When client feedback or an exit survey reveal that a product is not

adequate or that collection practices are too burdensome, new products will be launched and

services improved. It is like this that the duration of loans changed with a high frequency and

that pilots are conducted to explore the possibility of replacing the weekly centre meetings

with monthly meetings.51 The compulsory savings and insurance schemes also helps clients

to level their income fluctuations, to better deal with life's uncertainties and to become more

51 Own observations during the internship

59

self-reliant.52 This diversity and adaptability of products and services to the needs of the

clients, certainly is also a main factor that ensures the good PAR30 of only 0.02%.53

TYM's staff is also benefiting from the stakeholder governance. Regular staff satisfaction

surveys monitor that staff expectations (an interesting and stable workplace with fair

treatment) continue to be met. In addition, staff enjoys all legal social rights and receive many

benefits additionally such as uniforms, children's festivals and company trips, next to including

a performance based bonus system.54 TYM also has a clever remuneration policy that gives

incentives to staff to stay for a long time, using a mix of short term and long term incentives.

At the same time, TYM can also expect for a high productivity of its staff. While already being

as high as 400 borrowers per loan officer,55 TYM wants to attempt reaching 500 borrowers per

loan officer in the near future (enabled by a new update to the MIS that was recently

installed).56 But next to the productivity of its staff, it is also the introduction of the new

management information system (MIS) in 2008 that to the productivity increase.57

As confirmed by interviewing the board members, TYM is regularly consulting all of its

stakeholders and treats them well, trying to maintain a long term relationship. This positively

translates into a long membership of clients. Their great degree of participation even

resembles much the concept of a member-owned cooperative. Finally, it is advantageous that

TYM's only shareholder, is thus avoiding a conflict of interest between the board and

management of TYM. VWU's mission is to create equal opportunities for vietnamese women

and to develop TYM into a role model for other projects.

5.3.2 The role of funding at TYM:

TYM could diversify its funding by being able to tap semi-commercial funds from social

investors. Next to those borrowings, constituting the largest part of funding liabilities (about a

52 See 'Portfolios of the poor' by Collins et al. (2009) Princeton University Press, to see the importance of these issues53 In fact only about 20 loans are not repaid pear year, mainly due to a death. 54 TYM Development Plan 2011 – 2015 55 See Appendix, Figure 1156 TYM development plan 2011-201557 See Appendix Figure 11; The decrease in the productivity in the following years must be attributed to the

transition from the group loan methodology to individual loans.

60

third), TYM finances its operations with internal sources, mainly consisting of paid in equity

and savings (together almost half of the funding sources). Consequently the leverage ratio,

remains rather low. The external pressure on the interest rate (by local authorities) imposes

on TYM to be working cost-efficient. TYM is helped by receiving funding at semi-commercial

rates from several social investors, and technical assistance in the form of donations. In

addition, TYM would from time to time receive equity contributions from its only shareholder. It

also receives cheap sources of funding from the collection of savings, which is targeted to be

increased further through voluntary savings. But at the same time the loans are conditional on

the financial performance of TYM, with investors requiring TYM to be financially self-sufficient

(external pressure from investors).

5.3.3 TYM 's comparison to previous empirical findings:

Showing a good financial and social performance over several years, the case of TYM also

does not give any evidence for the existence of a trade-off. With the financial performance

and sustainability constantly, the assumption might be rather the contrary, with social

performance being an accelerator of financial performance proving positive the results from

Bédécarrats et al. (2009) and Dewez&Neisa (2009). The concern for social performance at

TYM is also reflected by their interest in introducing a regular social performance

management. On the MIX TYM receives 5 diamonds for maximum transparency. The case of

TYM also highlights the 'non-findings' from Hartarska (2005) and Merlsand & Strom (2009),

that do not find a positive effect of regulation or for-profit ownership, being non-profit and with

regulation only putting a greater financial burden upon them, obliging them to restructure their

branches and to report (submit financial audits) monthly.

61

6 Conclusion

Due to a blind focus on simply maximizing shareholder value and a corporate governance

based on the conflict between the board of directors and the managers only, developments of

the corporate sector were rather unsustainable. Recently, in the surge of transformation,

several MFIs have taken the same direction, due to bad risk management and an over-

leveraging of the institutions. This might not have happened if all stakeholders were

consulted. Today, increasingly the viewpoint emerges that multiple, if not all stakeholders

should be involved in corporate governance to be sustainable. Having to uphold the

reputation of alleviating poverty and having been heavily criticised recently for the for-profit

approach of several MFIs, the microfinance industry has already included the concept of

stakeholder governance in a broader approach to managing their social performance, that is

rapidly rising in interest and participation. The alignment of stakeholder interests, the role of

funding and financial viability have emerged as being vital elements for maintaining the social

mission. Other important factors include efficiency, transparency and the adaptability to adapt

to a legal framework (Lapenu&Pierret, 2005).

Comparing TYMs performance to factors that contributed to the financial crisis in the

commercial sector like an excessive CEO remuneration, the priority for shareholder interests,

an over leveraging and an excessive focus on GDP growth, TYM clearly performs well having

a transparent CEO remuneration, no over-leveraging occurs and the focus is clearly on

achieving the social mission. But despite good results from social ratings and impact analysis,

TYM wanted to ensure that it is following its social mission while increasingly expanding its

outreach. Regular monitoring is possible with help of the SPI tool, without having to constantly

refer to the services of external consultants. The SPI audit also permits to have a better

overall view of their situation and can also serve for external reporting. Furthermore, as a self-

assessment, costs for the SPI-assessment are negligent. The disadvantage is that the

assessment does not always suit well to represent the performance of a MFI in a specific

62

environment. Despite being very elaborative and informative, especially when consulting

different stakeholders and interviewing clients, the questionnaire naturally cannot evaluate

everything, and less so concerning a specific, local context.

“Can introducing social performance management help the MFI to better achieve its

social mission?“

On the one hand, as a self-regulatory mechanism, SPM is better suited than compulsory

government regulation in motivating companies to improve and monitor their social mission.

Moreover, by managing the social performance itself, the MFI obtains a firm hold on their

governance through regular monitoring and assessments. Even before a negative impact

appears, the MFI would be able to adjust its processes accordingly. Especially the

assessment part, can show the strengths and weaknesses of an MFIs internal processes and

governance, without having to do an impact analysis. The SPI tool in particular is apt to

assess the performance of a MFI in a multi-dimensional representation, giving a separate

score to each dimension and subcategory, especially useful in a multi-dimensional

environment like that of the poor in Vietnam.

From the present assessment, it is also clear to see the reasons for TYM's good social

performance. As already mentioned, the main success factor is certainly TYM's stakeholder

governance. Especially their focus on client relationships can be underlined, leading to high

client retention rates. But TYM is not only consulting all its relevant stakeholders, but also has

a preference for maintaining long-term relationships, be it with investors, clients, staff or other

stakeholders. This point is especially interesting as next to increasing the efficiency of

operations, with staff knowing each other and the clients better, these relationships are

creating a condition of trust, the importance of which should not be underestimated (Reed

2011), and contribute to the alignment of stakeholder interest. TYM also benefited from

building up its assets gradually since the beginning; gradually shifting from group to individual

lending methodology, and gradually increasing its internal fundings and dependence from

donors.58 The most crucial factor for TYM in achieving its social mission, however, is likely to

58 See Appendix Figures 6+7

63

be the stakeholder approach to governance.

On the other hand, the SPI assessment is not apt for taking into account specific local

contexts and may thus give wrong incentives. Applying common sense continues to be

necessary to avoid certain pitfalls. Furthermore, when trying to generalize these results as

TYM benefits from several features that are rather untypical for a transformed MFI. For

instance, TYM is currently in the fortunate situation of not having to work in a highly regulated

environment, with interest rate caps or the prohibition of collecting savings for MFIs, as is the

case in more competitive markets like India. Additionally, as of this moment, TYM's board is

still unusually small, allowing for communication and decision-making to be particularly

smooth. However, this might change when new board members are assigned, possibly

increasing the tensions among the board. In fact, one of the main advantages at TYM is the

quasi-absence of a conflict of interest. The reasons for this are multiple: TYM's founder and

only shareholder is the Vietnam Women's Union, which itself is a political organisation with

the social mission of creating equal opportunities among women close to or below the

national poverty line – which is identical to the social mission by TYM. The fact that the

founder is still the only shareholder, avoids to have conflict between management and the

board. With borrowings coming from social investors only, basically all stakeholders are

embracing the same objective of achieving a social mission.

In a nutshell, it is possible to conclude affirmatively that SPM helps the MFI to better achieve

its social mission (without having to refer to external parties), especially by including all

stakeholders in the governance. However, there are other 'facilitating' factors as well,

including a sustainable and gradual development of the MFI, the use of internal fundings, the

lack of regulation and the alignment of stakeholder interests. Finally, in a country with high

inflation like Vietnam, the general macroeconomic situation has to be taken into account as

well.

64

7 Bibliography

Argandoña, A. (2004). On ethical, social and environmental management systems. Journal of business ethics 51:41-52. Kluwer Academic Publishers.

Augsburg, B. Fouillet, C. (2010). Profit Empowerment: The microfinance Institution’s Mission Drift. / PGDT 9 (2010) 327-355

Bédécarrats, F. Angora, R.W. Lapenu, C. (2009) Is Social Performance Profitable? The relationship between social and financial performance in microfinance. Feature Articles-Microbanking Bulletin, Issue 19, December 2009.

Benston, George J. (1994) Universal Banking. Journal of Economic Perspectives. Volume 8, Number 3-Summer 1994-Pages 121-143

Brana S., Jegourel Y. (2007), Breadth and depth of French microfinance outreach: an evaluation, mimeo.

Buchheit, L. (2008) Did we make things too complicated? 27 (3) International Financial Law Review 24.

Calderón, T. B. (2006). Micro-bubble or Macro-immunity? Risk and Return in Microfinance: Lessons from Recent Crises in Latin America in Microfinance Investment Funds- Leveraging Private capital for economic growth and poverty reduction by Matthäus-Maier Ingrid, von Pischke, J.D., 2006

Campion, A., & White, V. (1999). Institutional metamorphosis: Transformation of microfinance NGOs into regulated financial institutions. Washington, DC: MFN Occasional paper, 4.

CGAP (2007). Au-delà des bonnes intentions : évaluation de la performance sociale des institutions de microfinance. CGAP, Note Focus, n° 41, 16 p.

CGAP (2008). Responsible Finance. http://www.cgap.org/p/site/c/template.rc/1.26.2902

Chen, G, Rasmussen, S. and Reille, X. (2010) Growth and Vulnerabilities in Microfinance. CGAP Focus Note No. 61. Washington, DC: CGAP.

Cheng, P. (2011). The impact of investor's handbook- Lessons from the world of microfinance. Charities Aid Foundation Venturesome

Cobb, Clifford, Halstead, Ted and Rowe, Jonathan (1995). If the GDP is Up, Why is America Down?, The Atlantic Online, Reprinted from The Atlantic 276 (4), p. 59-78.

Copestake, J. (2007) Mainstreaming Microfinance: Social Performance Management or Mission Drift? World Development Vol. 35, No. 10, pp. 1721–1738, Elsevier Ltd.

65

http://www.cgap.org/p/site/c/template.rc/1.26.2902

CSFI (2008) Microfinance Banana Skins – Risks in a Booming Industry. Centre for the Study of Financial Innovation, London, 52 p.

Deitch, Jim & Greer, Peter (2008) Is Microfinance Destined to be the next Subprime Mortgage Mess?

Dentchev, N. A. (2007). Corporate Social Performance: Business Rationale, Competitiveness Threats, and Management Challenges. Ghent University, Ghent, Belgium. Business & Society Volume 46 Number 1 March 2007 104-116. Sage Publications

Dewez, D. & Neisa, S. (2009). MFI's social performance mapping and the relationship between financial and social performance – Evidences against the trade-off theory.

Dieckmann, R. (2007). Microfinance: An emerging investment opportunity, Current Issues, Deutsche Bank Research

Ekka, R.& Lapenu,C. (2010) Governance: Integrating SPM into microfinance capacity building. Guidance Note. Imp-Act and Microsave

Funk, S. (2007). Remarks by Steven Funk, founder and member of the Dignity FundBoard. Microcredit Summit E-News 5(1) (July).

Galema R., Lensink R., Mersland R. (forthcoming) Governance and Microfinance Institutions. In Barth J.R., Lin C., & Wihlborg C. (Ed), Research Handbook for Banking and Governance. Edward Elgar, New York.

Gutiérrez-Nieto Begoña, Serrano-Cinca Carlos, Mar Molinero Cecilio (2007) Microfinance Institutions and Efficiency. Omega, 35, 04 2007, pp. 131-142.

Hartarska, V. (2005). Governance and performance of microfinance institutions in central and Eastern Europe and the newly independent states. World Development, 33(10), 1627-1643.

Hermes, N., Lensink, R. & Meesters, A. (2009) Financial Development and the Efficiency of Microfinance Institutions (March 2009). Available at SSRN: http://ssrn.com/abstract=1396202

Hermes, N., Assefa, E.& Meesters, A. (2010). Competition and Performance of Microfinance Institutions August 2010. University of Groningen

Hishigsuren, G. (2006). Transformation of Micro-finance Operations from NGO to Regulated MFI. IDEAS. USA

Hulme, D., & Mosley, P. (1996). Finance against poverty. London: Routledge.

IFAD (2006). Assessing and managing social performance in microfinance.

66

http://ssrn.com/abstract=1396202

Jackson, T. (2009) Prosperity without growth? The transition to a sustainable economy Sustainable Development Commission, UK, March 2009

Jacquand, M (2005). The Wrong Priority. UNCDF, Issue 15 / August 2005 retrieved 1.03.2011http://www.uncdf.org/english/microfinance/pubs/newsletter/pages/2005_08/news_measuring.php

De Keuleneer, E. (2010) L’investissement socialement responsable : insuffisance et potentiel. INAISE Forum de la Finance Sociale, Brussels, 2-4 Juin 2010, available at http://www.inaise.org/fr/conference-seminaires-ateliers

Khalily, M. A. B. (2004). Quantitative approach to impact analysis of microfinance programmes in Bangladesh; What have we learned?. Journal of international development, 16(3), 331 – 353

Kirk, Michael & Tuan, Nguyen Do Anh (2009). Land tenure policy reforms-Decollectizationand the Doi Moi system in Viêt Nam. International Food Policy Research Institute

Labie, M. (1999), La microfinance en questions. Limites et choix organisationnels,Bruxelles, Luc Pire, 116 p

Labie, M. & Mersland, R. (2010), Corporate Governance Challenges in Microfinance. In Armendariz B. & Labie, M. (Eds.) The Handbook of Microfinance. World Scientific Publishing.

Lapenu C. & Pierret D. (2005) Handbook for the analysis of governance of MFIs. CERISE-IRAM, August 2005

Lapenu C. (2007). Performance sociale versus performance financière : peut-on être rentable en s’adressant à des populations pauvres ? in La microfinance au carrefour du social et de la finance, Horizons Bancaires n° 334, décembre 2007, pp. 45-54.

Lapenu C. (Juin 2010). Investissement socialement responsable en microfinance - avancées et perspectives available at http://www.lamicrofinance.org/content/article/detail/26464

Lapenu, C. (2011). Evaluation de la performance sociale - Les enjeux d'une microfinance responsable. Variances 40. February 2011.

McGuire J., Dow S. and Argheyd K. (2003). CEO incentives and social performance. Journal of Business Ethics 45: 341–359, 2003. Kluwer Academic Publishers.

McIntosh, C. And Wydick, B. (2005) Competition and xmicrofinance. Journal of Development Economics, 78, 271–298.

Mersland, R. (2009), The Governance of Non-Profit Micro Finance Institutions: Lessons From History. Journal of Management and Governance.

67

http://www.lamicrofinance.org/content/article/detail/26464

http://www.inaise.org/fr/conference-seminaires-ateliers

http://www.uncdf.org/english/microfinance/pubs/newsletter/pages/2005_08/news_measuring.php

http://www.uncdf.org/english/microfinance/pubs/newsletter/pages/2005_08/news_measuring.php

Mersland, R. & Strøm R. O. (2009). Microfinance mission drift? World Development. Vol. 38(1), pp. 28-36.

MicroCapital (2007). Microfinance Funds Universe. available at http://www.microcapital.org/ microfinance-funds-universe/

Milanovic, B (2005). Worlds apart: Measuring international and global inequality (Princeton: Princeton University Press, 2005), pp. 39 and 181; available at http://hhrjournal.org/blog/wp-content/uploads/2010/07/ooms-figure-1-7-13-10.jpg

Morduch, J. (2000). The Microfinance Schism. World Development, 28 (2), pp. 617–29

Morduch, J.& Armendariz, B. (2010). The economics of microfinance. Massachusetts Institute of Technology

Motta, M. (2004), Competition Policy: Theory and Practice, Cambridge: CambridgeUniversity Press.

Portocarrero Maisch, Felipe ; Tarazona Soria, Alvaro ; Westley, Glenn D. (2006). How should microfinance institutions best fund themselves?”. Inter-American Development Bank. Sustainable Development Department, Best Practices Series, Washington D.C.

Porter, M. E. & Kramer, M.R. (January-February 2011) Creating shared value- How to reinvent capitalism and unleash a wave of innovation and growth. Harvard business review

Power, M. (1997). The audit society: Rituals of verification. Oxford: Oxford University Press.

Prahalad, C.K. & Hart, Stuart L. (2002). The fortune at the bottom of the pyramid. Strategy and business issue 26, 1st quarter.

Rappaport, A. The Economics of Short-term performance obsession (2005) 61(3) Financial Analysts Journal 65 p. 72.

Reed, Larry R. (2011). State of the Microcredit Summit Campaign Report 2011. Microcredit Summit Campaign

Reille X., Forster S. (2008). Foreign Capital Investment in Microfinance: Balancing Social and Financial Returns, CGAP Focus Note No. 44, USA, 24 p.

Reille, X. (2010), “The dark side of competition: credit risk and market penetration”, Microfinance Gateway, 2/25/10, available at http://microfinance.cgap.org/2010/02/25/the-dark-side-of-competition-credit-risk-and-market-penetration/.

Reille, X., Forster, S., Rozas D. (2011). Foreign Capital Investment in Microfinance: Reassessing Financial and Social Returns. CGAP focus Paper no. 71., May 2011

68

http://microfinance.cgap.org/2010/02/25/the-dark-side-of-competition-credit-risk-and-market-penetration/

http://microfinance.cgap.org/2010/02/25/the-dark-side-of-competition-credit-risk-and-market-penetration/

http://hhrjournal.org/blog/wp-content/uploads/2010/07/ooms-figure-1-7-13-10.jpg

http://hhrjournal.org/blog/wp-content/uploads/2010/07/ooms-figure-1-7-13-10.jpg

http://www.microcapital.org/microfinance-funds-universe/

Rhyne, E. (2009) Microfinance for Bankers and Investors-Understanding the Opportunities and Challenges of the Market at the Bottom of the Pyramid. McGraw-Hill

Rhyne, E. (2010a) Microfinance: Keeping the Mission When Non-Profits Become For Profits. Huffington Post 9/08/2010 available at http://www.huffingtonpost.com/elisabeth-rhyne/microfinance-keeping-the_b_675813.html

Rhyne, E. (2010b) On Microfinance: Who’s to Blame for the Crisis in Andhra Pradesh? Huffington Post, 11/2/2010. available at http://www.huffingtonpost.com/elisabeth-rhyne/on-microfinance-whos-to-b_b_777911.html.

Rhyne, E. (2011) Is client retention always a good thing? Center for Financial Inclusion Blog. August 30, 2011

Robinson, Marguerite. 2001. The Microfinance Revolution: Sustainable Banking for the Poor. Washington, DC: The World Bank.

Rodriguez J., Santiso J. (2007). Banking on Development: Private Banks and Aid Donors in Developing Countries. OECD Development Center, Working Paper n°263, November, 51 p.

Schramm, W. (1971). Notes on a case studies of instructional media projects. Working paper for the Academy for Educational development, Washington, DC.

SEEP (2008). Social Performance Map. The SEEP Network: Washington, D.C.

SEEP (2009). Social Performance Governance. Social Performance Progress Brief February 2009. Vol. 1, No. 5

Stake, R.E. (1995). The Art of Case Study Research: Perspective in Practice. London: Sage

Steege, J. 1998. The rise and fall of Corposol: lessons learned from the challenges of managing growth, USAID Microfinance Best Practice, Washington, DC.

Tellis, W. (1997). Introduction to Case Study. The Qualitative Report, Volume 3

The social performance Map, Seep network available at http://www.seepnetwork.org/Resources/6034_file_SPMap_01_Corporate_Social_Responsibility.pdf; Number 2, July. (http://www.nova.edu/ssss/QR/QR3-2/tellis1.html).

Thomsen, S. (2008) An Introduction to Corporate Governance - Mechanisms and Systems. Copenhagen: DJØF Publishing.

United Nations Vietnam: http://www.un.org.vn (accessed on 27 November, 2010)

Urgeghe L. (2009). Commercialisation et financement de la microfinance : quels enjeux de gouvernance ?. Reflets et perspectives de la vie économique, 2009/3 Tome XLVIII, p. 39-50.

69

http://www.nova.edu/ssss/QR/QR3-2/tellis1.html

http://www.seepnetwork.org/Resources/6034_file_SPMap_01_Corporate_Social_Responsibility.pdf

http://www.seepnetwork.org/Resources/6034_file_SPMap_01_Corporate_Social_Responsibility.pdf

http://www.huffingtonpost.com/elisabeth-rhyne/on-microfinance-whos-to-b_b_777911.html

http://www.huffingtonpost.com/elisabeth-rhyne/on-microfinance-whos-to-b_b_777911.html

http://www.huffingtonpost.com/elisabeth-rhyne/microfinance-keeping-the_b_675813.html

http://www.huffingtonpost.com/elisabeth-rhyne/microfinance-keeping-the_b_675813.html

DOI : 10.3917/rpve.483.0039

Urgeghe L. (2010). Les véhicules d'investissement en microfinance et le défi de la performance sociale. Mondes en développement, 2010/4 n° 152, p. 69-82. DOI : 10.3917/med.152.0069

Weaver, G. R., Treviño, L. K. & Cochran, P. L. (1999). Integrated and decoupled corporate social performance: Management values, external pressures, and corporate ethics practices. Academy of Management Journal 42(5): 539-552.

Wiesner, S., Quien, (2010). Can “Bad” Microfinance practices be the consequence of too much funding chasing too few microfinance institutions ?. ADA Discussion paper No. 2

Yin, Robert K. (2003). Case Study Research. Design and Methods 2003, Third edition. Thousand Oaks: Sage

Zainal, Z. (2007). Case study as a research method Jurnal Kemanusiaan bil.9, Jun 2007 accessed on 04.03.2011 at http://www.fppsm.utm.my/download/doc_view/48-case-study-as-a-research-method.html

Weblinks:

IMP-ACT. Social performance management principles; Available at http://www2.ids.ac.uk/impact/SPM_Principles.pdf

Microfinance focus. Commercialization distorted microfinance: Prof Yunus; Available at http://www.microfinancefocus.com/content/commercialisation-distorted-microfinance-prof-yunus

SPTF. What is social performance? Available at http://sptf.info/what-is-social-performance/faqs#1

70

http://sptf.info/what-is-social-performance/faqs#1

http://sptf.info/what-is-social-performance/faqs#1




http://www.fppsm.utm.my/download/doc_view/48-case-study-as-a-research-method.html

http://www.fppsm.utm.my/download/doc_view/48-case-study-as-a-research-method.html

Table of figures:

Illustration1: Value chain and SPA, Seep 2008.

Illustration 2: Outstanding amounts of the 7 top MIVs from 2007 to 2009 by groups of MFIs Wiesner&Quien (2010), p. 14.

Illustration 3: Growth and internationalisation of MFIs, CGAP and MIX.

Illustration 4: Unequal fundings and its consequences

Illustration 5: International and global inequality, Adapted from Milanovic (2005)

Illustration 6: SPM - Value chain (made with pages)

Illustration 7:Value chain and SPA (Seep 2008)

Illustration 8: Governance and SPM, Ekka&Lapenu (2010)

Illustration 9: VBSP: 2006-2009, with data from MIX

Illustration 10: VBARD: 2004-2008 with data from http://finance.vietstock.vn/StockDetail.aspx?scode=Agribank&q=Agribank&language=en

Illustration 11: TYM Sources of funding 2004-2010, TYM Development Plan 2011-2015

Illustration12: SPI results by dimension, p.46

Illustration 12: Sustainable growth rate TYM, 2006-2009 (made with googledocs), p.55

Table 1: Tools for assessing social performance, adapted from Lapenu (2011)

Table 2: TYM Key Data (December 2010)

Table 3: SPI-TYM: Summary of Strengths and Weaknesses, p.49

Table 4: TYM-financial benchmarking Vietnam/EA&Pacific, data from the MIX, p. 54

71

http://finance.vietstock.vn/StockDetail.aspx?scode=Agribank&q=Agribank&language=en

Acknowledgements:

I would like to thank Jörg Teumer from the German savings bank foundation, as

well as the entire TYM headquarter for accompanying and facilitating my intern-

ship at TYM. Next I would like to thank Cécile Lapenu for spending her time and

valuable ideas for useful comments on the report and the SPI-assessment, as well

as other EMP teachers that made the past year a valuable and enriching exper-

ience. I also would like to thank TYMs investors and board for taking time to ans-

wer the survey. Finally, my appreciation goes to UMM-Planetfinance for their finan-

cial support, as well as to those close to me for supporting me in difficult moments.

Thank you!

72

Elements for Appendix (pp. 74-99):

Figures:

1. TYM loan products

2. MF-transparency- Annual percentage rate

3. Comparison financial performance management-social performance managemetn

4. SPI-scores TYM

5. Priorities for dimensions TYM

6. Developments TYM 1998-2010

7. Developments TYM 1998-2010

8. Multi-dimensionality of poverty in Vietnam

9. Multi-dimensionality of poverty in Vietnam

10. BRS-Factsheet-TYM

11. Organisational chart TYM

Documents:

1. Interview with the board

2. Potential Objectives for TYM, deduced from SPI-questionnaire

3. Survey to Investors

4. Client Satisfaction Survey

73

8 Appendix:Products Amount

(VND)Interest rate Conditions Term

1. General loan

1st cycle

2nd cycle

3nr cycle

4th cycle

1 - 7 m

1 - 9 m

1 - 12 m

1 - 25 m

1.2% / month flat, weekly payment of capital and interest

available 2 weeks after becoming a member

50 weeks

2. Long term loan

2nd cycle

3rd cycle

3 – 4 m

3 – 6 m

1.2% / month flat, weekly payment of capital and interest

available after 1st

cycle of GL

100 weeks

3. Multi-purpose loan

0.5 – 2 million

0.3% / week, interest paid upfront, capital weekly

After 3 months of membership

10,15,20, 25, 30 weeks

Figure 1: Loan Products of TYM

74

Figure 2: APR with MF-transparency tool

75

Figure 3 Differences between social and financial performance management

SPI Results TYM - Viet Nam 91 / 100Targeting the poor and excluded 25 22 Adaptation of services 25 23 Benefits to clients 25 22 Social responsibility 25 24

Geographic Targeting 9 8 Range of traditional services 7 7 Economic benefits 8 6 SR to employees 9 91.1 Areas of intervention 2 1 2.1 # of loan products 1 1 3.1 Tracking changes in client status 1 0 4.1 Salary scale 1 11.2 % of branches from underdeveloped areas 2 2 2.2 Emergency loans 1 1 3.2 Staff training in social performance mngt 1 1 4.2 Permanent contract 2 21.3 Verification of poverty level 2 2 2.3 Loan tailored to social needs 1 1 3.3 Social performance appraisals 1 1 4.3 Access to training 1 11.4 % of clients in rural areas 1 1 2.4 Loans tailored to develop production 1 1 3.4 Corrective measures 1 1 4.4 Participation to decision making 1 11.5 Service in areas with no other MFIs 2 2 2.5 Local adequation of services 1 1 3.5 Reducing costs strategy 1 1 4.5 Health coverage 1 1

2.6 Saving products 1 1 3.6 Formal benefits policy 2 2 4.6 Specific policy for woman staff 1 12.7 Saving tailored to social needs 1 1 3.7 Measure in case of collective disaster 1 0 4.7 Staff rotation 2 2

Individual targeting 10 8 Quality of services 9 9 Client participation 9 8 SR to clients 9 91.6 Tool for targeting of poor clients 1 1 2.8 Decentralization 1 1 3.8.a decision making at the client level 1 0 4.8 Avoiding over-indebtedness 2 21.7 Ensuring adequate use of targeting tool 1 1 2.9 Timely delivery 1 1 3.8.b decision making at the management level 1 1 4.9 Cost transparency 2 21.8 Targeting incentives 2 1 2.10 Interest rate 2 2 3.9 Representation of clients in committees 1 1 4.10 Credit conditions and collection practices 2 21.9 % of poverty of new clients 2 2 2.11 Feedbacks from clients 2 2 3.10 Involvement of clients at the management level 1 1 4.11 Code of conduct 1 11.10 % of woman clients 2 2 2.12 Client retention rate 2 2 3.11 Women representation 1 1 4.12 Grievance procedures 1 11.11 % marginated clients 2 1 2.13 Study on drop out reasons 1 1 3.12 Training of representatives 2 2 4.13 Client confidentiality 1 1

3.13 Effectivity of participatory bodies 2 2

Pro-poor methodology 9 6 Innovative and non financial services 9 7 Empowerment 8 8 SR to community and environment 7 61.12 Unsecured loans 2 0 2.14 Innovative services 2 1 3.14 Problem solving beyond financial services 2 2 4.14 Social responsibilities to the community 2 21.13 Altenative collateral for productive loans 1 0 2.15 Mobile services 2 1 3.15 Woman empowerment 2 2 4.15 Local social and economic development 1 11.14 Small loans 2 2 2.16 Strategic alliances 1 1 3.16 Transparency to clients/members 2 2 4.16 Environment policy/financed activities 2 11.15 Small installments 1 1 2.17 Management NFS 1 1 3.17 Support for client influence 2 2 4.17 Environment policy/MFI activities 2 21.16 Small saving amounts 1 1 2.18 Social NFS 1 1

Main Page

Figure 4: SPI-Overview of scores

76

Figure 5: Snapshot from SPI, Part 1, Importance of priorities according to CEO (upper points are erroneous)

TYM Branches, Staff and Members

0

50

100

150

200

250

300

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

branches / staff

0

10,000

20,000

30,000

40,000

50,000

60,000

members

Branches

Staff

Members

Figure 6+7: TYM developments from 1998-2010

TYM Members, Savings and loans

0

50,000

100,000

150,000

200,000

250,000

300,000

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

loan portfolio / savings

0

10,000

20,000

30,000

40,000

50,000

60,000

members

Loan portfolio (VND million)

Savings (VND million)

Members

77

78

Figures 8+9: Multidimensional poverty in Vietnam; Sources:OPHI country briefing 2010: Vietnam; University of Oxford;Available at http://www.ophi.org.uk/wp-content/uploads/Viet-Nam.pdf (accessed on 25November, 2010)

07/20/111. Interview with board members of TYM

1 What is TYMs secret for having a good social performance? (proximity to the clients, internal policies, role of investors /technical assistance, because majority of staff are women, because of the good board/management, good incentive schemes (short term, long term), due to its social responsibility, little competition, careful selection of clients, the accountability to all stakeholders, the good financial performance, donations, others?). Please Explain:

TYM was established with the social mission of helping the poor and low-income women, since then, TYM has been following its pathway to head for the poor. Thanks to such motivation, TYM can achieve its good social performance.Moreover, to bring such ideas into practice, TYM has focused on some certain criteria, especially the demands of the clients. We are always considering and adjusting the current products to ensure that they meet the requirements of our clients. Furthermore, thanks to the dynamic donors that TYM has good relations with, we are also initialized with new ideas for social performance and can get support from them during the implementation.

2 Is the good social performance mainly a result of internal or external pressure?

Mainly, it is the result of internal pressure to motivate ourselves heading for good social performance.

3 Are the incentive schemes /bonus payments for employees, based on short or long term performance?

Both short-term and long-term. For long-term, we are always welcome staff staying with us long and introduce the incentive in the regular salary as well as career paths for some. For short-term, we have the semi-annual subsidies for all working staff.

4 How do you explain the careful implementation of your business (and thus an excellent social performance) in absence of government regulation? (What is the role of investors /VWU?)

Financially speaking, I have to mention that the SBV also has some requirements on some prudential ratios for an MFI, which also have effects on TYM. These requirements have helped us a lot with running the business. However, in general, there are still lacked with many guidelines from the management.

Regarding the social aspects, there have been no regulations so far, however, rooted from the social missions of VWU and of TYM, we have always been trying to do as much as possible for this goal. VWU continuously supported TYM with such activities, donors and investors help us with human resources (TA) and financial aids, while local authorities support with the implementation. 5 Who decided to reach 80% of poor or near poor clients?

79

The Board of Directors

6 Who is responsible for the choice of your products and services?

The clients – they choose the products offered in line with the demands, thus, TYM can recognize and adjust the services to meet their requirements

7 Who had the idea for your policies towards employees (to implement incentive schemes and long term contracts with staff) ?

The employees are always the ones to decide TYM staff policies. Because we base on the feedback of staff and their performance as well to design the incentive schemes.

8 Who is responsible for looking at a good social responsibility (towards the communities, environment ?

The clients and field staff

9 Does the CEO pay structure give incentives to reach a good social performance? Is it focused on long term success?

Yes, we pay incentives for staff so as to encourage them to conduct the social performance. As explained before, this is focused both on long term and short term success.

10 What is the importance of donations?

The donors bring to TYM new ideas for the social performance (new methods; new projects; ways to evaluate, and so on.) Furthermore, the donations also support TYM with human sources and financial aids to implement the social oriented projects. Afterwards, TYM will know how to widen the activities to other places.

11 What is your personal opinion on TYMs business model/performance?The model of MFI like TYM is very good and beneficial for the poor. TYM expects to have enough

resources to widen its network to other region to get access to more and more poor people.

80

2. Potential objectives for TYM:

1. Tell clients to use the credits environmentally friendly, offer lending lines linked to alternative

energies or include a specific clause in the loan contract to mitigate environmental risks (SPI 4.16)→

create synergies with other companies to make more use of alternative energies (e.g. biogas,

windenergy) and implement concrete actions (SPI 4.16)

2. Target socially marginalized women and monitor the number for each category (as seen in SPI 1.11)

3. Establish a fund for collective disaster (SPI 3.7)

4. Focus more on rural areas and report the percentage of borrowers from that areas (SPI, 1.4)

5. Give incentives for Technical officers to reach poor or excluded clients

6. Provide unsecured loans (SPI 1.12)

7. Provide more specific voluntary savings products (e.g. for housing, education, retirement), (SPI 2.7)

8. Provide more innovative services (e.g. house, agricultural, work insurance; remittance services,

microleasing), (SPI 2.14)

9. Provide child and youth education, basic medical services, ... (SPI 2.18)

10. Provide staff incentives based on quality of interaction with clients and client feedback

mechanisms, quality of social data collected (Spi 3.3)

11. Let clients take part in decision making (SPI 3.8)

12. Disclose EIR to customers (SPI 4.9)

13. Link CEO payment to long term /social-performance (not in SPI)

Procedure for effective SPM:

1. Set objectives (see examples above) on how to improve relationship with stakeholders (e.g. clients,

employees, investors,...); publish a code of conduct to show your intentions to the public.

2. Turn objectives into actions.

3. Monitor the actions and progress towards achievement of the objectives.

4. Measure the results (e.g. impact on the environment).

5. Make regular audits (e.g. with the SPI-tool).

6. Inform stakeholders of the results.

→ The success depends crucially on the seriousness and the involvement of the management!

81

3. Survey to investors on the SPI:

1 In your opinion, in how far SPI is a useful tool to assess social performance?

MCE I don’t have extensive experience with SPI, but as far as I can tell it’s a well-designed, in-depth tool to study social performance. Thus far it seems to be the most comprehensive tool being offered for social performance measurement.

Rabobank In our view, SPI is a useful tool to assess social performance as long as it can be integrated in the overall performance management of the institute.

Cordaid It is a necessary tool, but too comprehensive. Better to it simple and focus on a few key indicators.

Oikocredit If the SPI audit is conducted well, it will scope the weak areas or gaps that need to be addressed and monitored.

SBFIC SPI can further translate an MFI’s mission into practice and highlight the customer satisfaction. Moreover, without a profound mission and without satisfied clients an SPI can identify this weakness and therefore, help to improve. Therefore, it’s a useful tool for both stand points.

Triodos We use our own Sustainable Banking tool assessing social performance. In our opinion it is good to monitor the progress of clients.

SUMMARY + well-designed, indepth/comprehensive; - too comprehensive, needs to be conducted well !

2 In your opinion, in how far SPI can be a useful tool to manage social performance if measured continuously?

MCE As long as the same party is conducting the assessment, the SPI tool could be very useful in comparing year on year data.

Rabobank I have no insight into the time needed to use the tool continuously. If time requested is acceptable, SPI can be a useful tool to manage the social performance.

Cordaid It gives a lot (relevant) of information and can provide the MFI with an adequate instrument to monitor social impact.

Oikocredit Policy reform aimed at improving financial products and services; institute measures to improve discipline in terms of client protection, improve HR development to include and reflect SP as staff agenda, designing staff incentives systems based on strengths and weaknesses in SP; improve weak areas of governance; sharpen polices for client outreach among poorer segments.

SBFIC Sometimes achieving the social goals of an MFI is assumed to be an automatic process as part of the daily operations. However, to measure, assess and manage the consequences afterwards with a tool like SPI helps to successfully achieve the social

82

goals continuously.

Triodos Useful as progress can be monitored

SUMMARY + very informative, helps to achieve/monitor social impact, good to compare year on year data

3 Is the SPI-assessment credible to you if done as self-assessment?

MCE Not as credible as when done by a trained third party.

Rabobank Yes.

Cordaid Yes, but like a financial assessment an external opinion (audit) is needed as well.

Oikocredit The credibility will depend on a number of factors: credible data and information used; who among the stakeholders in the MFI was involved, transparency of the process, validation process employed, etc.

SBFIC In general, also a self-assessment is helpful. Nevertheless, an SPI-assessment done by a third-party definitely pretends an objective assessment.

Triodos Possibly, but we would always have our own investment officers assess this on an annual basis.

SUMMARY Yes, but third party assessments are more credible...

4 Would you prefer an assessment done by an external auditor/ SPI-certified personnel ?

MCE Yes.

Rabobank No.

Cordaid Yes, at least occasionally.

Oikocredit It depends. If an external SPI-certified person will do it, it is still best that it is done in tandem or with a counterpart from the MFI, unless the situation is extraordinary that it dictates a completely independent opinion.

SBFIC The credibility of an SPI-assessment done by a third-party depends on the reputation of the third-party. However, it definitely pretends an objective assessment.

Triodos Not necessarily as our own investment officers perform the assessment on an annual basis as well.

SUMMARY Diverse opinions, external assessment would still have to be performed in cooperation with MFI staff; 3-rd party assessor should have enough credibility

5 Can the SPI-assessment substitute a rating or help an MFI to reduce their reporting costs ?

83

MCE Yes, but again, if done by a third party

Rabobank Partly for the social or narrative part of the reporting requirement.

Cordaid Yes, at least occasionally.

Oikocredit It depends on the purpose for which the results will be used. SPI is a good substitute for preliminarily establishing the profile the SP of an MFI. However, for a more in-depth, evaluative studies, social rating may still be required.

SBFIC A continuous SPI-assessment can help an MFI to stay focused on its mission and maximize social and financial performance. Depending on the complexity of the SPI-assessment it therefore might reduce the reporting costs. However, an SPI-assessment might not substitute a rating because of the different focus areas.

Triodos No, it does not substitute a rating

SUMMARY Yes, but better if done by 3rd party (MCE, Rabo, Cordaid); rating with different focus area so no substitute (Oikocredit, SBFIC, Triodos)

6 What other Assessment/management tools would you recommend?

MCE Grameen Foundation’s Progress out of Poverty tool

Rabobank No suggestions.

Cordaid The MIS is crucial; a good MIS will provide all the data needed (financial & social)

Oikocredit ESG scorecard

SBFIC SPI is on the top priority list. In addition, a personal meeting with the management and a field visit should complement the quantitative and qualitative analysis.

Triodos

SUMMARY PPI, a good MIS, ESG scorecard, SPI is the best

7 Do you have a personal tool to assess TYM's social performance? Why is it preferable?

MCE No

Rabobank No, and we do not see this as preferable since it will indirectly increase the costs for TYM. We prefer to work with our partners in the most efficient way.

Cordaid Yes, but to be honest all SP tools are more of the same and differ only in detail, depending on priorities of (donor) organizations.

Oikocredit ESG scorecard with 8 core criteria, can be used as first step in a social audit process; it enables us to profile and compare the performance of partners within our portfolio and to recognise those who by their practice lead in social performance management and incentivize these partners where appropriate.

SBFIC N/a

84

Triodos Yes, because it was developed internally and fulfills our requirements

SUMMARY No, or only similar or serving as a complement to SPI (ESG), Yes (Triodos)

Questions on your role as (TYM)-investor:

1 Why did you decide to lend money to TYM (without making a profit or eventually occurring losses on the interest rate due to the inflation in Vietnam)?

MCE Vietnam was a market we were generally interested in, given the lack of financial services to the vast majority of the population. TYM was the only viable MFI that would allow us to impact the Vietnamese population in a meaningful way. TYM’s operational self sufficiency (operational metrics and financial performance) were also key reasons we chose to work with them, in addition to their strong social mission.

Rabobank The objective of Rabobank Foundation is to support the economic poor to improve their living conditions in a sustainable way. We believe that TYM is supporting this target group with a set of services that serves their needs.

Cordaid It’s our objective to support microfinance sector-development in Vietnam in general and facilitate access to financial services for Cordaid target group (poor households).

Oikocredit Oikocredit is a social investor that seeks to empower the poor and create a more just society. We support microfinance and other social enterprises which aim to and with proven capacity to reach the poor and positively transform their lives.

Along this a partnership with TYM was developed for the following reasons:4. Proven outreach to poor rural women5. Good financial performance, sustainable6. Solid social mission of VWU and TYM7. Exemplary staff commitment, dedication and discipline8. Professional staff9. Institutional track record – innovate and take extra measures in servicing clients

SBFIC We pursue the objective to enhance the professionalism of its partner institutions, thus enabling them to offer their customers permanent access to financial products. In particular small and medium-sized enterprises (SME) essentially contribute to the economic development and the creation of new jobs. But also small and medium income earners, poor people and social fringe groups are targeted by Sparkassenstiftung’s partner institutions. Thus, microfinance is an essential pillar of a country’s economic development and stability. Therefore, TYM qualified as a partner institution. An efficient organisation and professionalism are the central factors of success Sparkassenstiftung is imparting to its project partners.

Triodos We believe we can support TYM in their growth and receive interest on our loan against a commercial rate. We often lend in local currency and inflation/currency risk is always present if not hedged.

SUMMARY Wanted to invest in Vietnam, TYM only viable MFI (good OSS, professionalism, social

85

mission; to affect the poor,

2 Apart from supporting a sustainable development of the MFI, what is your interest in investing in TYM? Are you expecting monetary benefits in the long term?

MCE See above. Also, MicroCredit Enterprises wanted to demonstrate to other funders that a loan to TYM was viable, and that TYM was capable of repaying a loan to an international investor – hopefully paving the way for other funders to enter as well.

Rabobank No

Cordaid TYM as a MFI fits our partner profile: financially sustainable with a strong social mission.

Oikocredit Extend our assistance, if needed, in building its capacities as a lending MFI and in SP.

SBFIC We do not expect monetary benefits in the long term as our objective is to enhance the professionalism of TYM for the well-being of its customers and therefore, the population of Vietnam, funded by the German Federal Ministry for Economic Cooperation and Development.

Triodos To enable TYM to expand its operations/to support the microfinance sector in Vietnam. We always lend/invest on commercial terms as we believe an institution needs to be sustainable.

SUMMARY Demonstrate to other funders that a loan to TYM is viable, give support in capacity (professionalism) and SP-building ; no expectations of monetary benefits

3 How do you secure your investments against foreign exchange risk ?

MCE MCE’s loan to TYM was hedged in a very unusual way. MCE had a third party that was interested in underwriting the full cost of the foreign exchange losses. MCE made a VND equivalent loan of $1mm at 8%. TYM paid 8% (in local currency) and was not impacted by currency movements at all – from TYM’s perspective, the loan was in VND. However, on our end, MCE received 8% as though the loan were made in USD (as though there was no exchange rate movements to deal with). The third party I mentioned above then made MCE whole based on any VND depreciation (which was significant throughout the course of the 3 year loan life). Without this setup, MCE’s losses would have been just over $100,000 on the principal of the loan alone.

Rabobank As a Foundation we take the exchange rate risk and we do not hedge these risks.

Cordaid For the time being, Cordaid takes the loss; in the future loans in local currency will replaced by loans in hard currency (USD, EUR).

Oikocredit We have an internal fund - the Oikocredit Local Currency Risk Fund.

SBFIC There is no instrument to secure the investment against foreign exchange risk in place. However, as Sparkassenstiftung is carrying out mainly technical assistance this is not

86

applicable. The Rotating Credit Fund (RCF) which was given as part of the project partnership, funded by the German Ministry for Economic Cooperation and Development, was transferred into local currency directly and transferred into equity of TYM after many years of a successful disbursement and extension of the RCF. The inflation adjustment was taken over by TYM.

Triodos NA in this case but otherwise via MFX.

SUMMARY No hedging, Internal currency risk fund, 3rd party hedge, Triodos normally via MFX

4 Do you hope to become a shareholder of TYM one day?

MCE MCE does not make equity investments, nor do we expect to in the near future.

Rabobank No.

Cordaid No, as Cordaid will phase out its programs in Vietnam

Oikocredit It is option that we will consider, in principle if we can be relevant to TYM in its further development.

SBFIC It would be an honor to become a shareholder of TYM one day. However, based on legal requirements this is not possible

Triodos Since TYM is a new client this is too early to comment on this topic. We can however state that we hope to be able to build a long term relationship with TYM.

SUMMARY Only Oikocredit would consider it, others are not interested or not capable to do so

5 Please comment on the following citation: “It makes good business sense to purchase information about a firm's ESG action that eventually feeds back to the firms' financial performance.”59 In your opinion, does it also make good business sense to collect social information related to a performance that does not impact the book value of the firm?

MCE Yes – as a socially oriented funder, social performance, with or without impact on the book value of a firm, is important to collect and track, as it shapes the way the business operates from a social perspective.

Rabobank Yes, there are investors that are not only interested in financial performance, but also social performance.

Cordaid Absolutely; Cordaid considers itself as a social investor.

Oikocredit First of all, if we are talking about not just a generic “business firm” but of a social enterprise aiming for at least the double bottom line –financial and social -- such as TYM, then yes, it is not only a matter of good business sense but a matter of good governance and social responsibility. For Oikocredit, this is critical to attaining or striving for the balance between the social and financial performance of an

59 Prady (2010). Why investors value information on firms' social performance

87

organization.

SBFIC Social performance has a huge impact on the MFI as a whole and therefore, also on the book value. However, as we do not expect a monetary benefit but delivering technical assistance we would not pay for social information.

Triodos Yes, it does. Please also see Triodos Bank’s business model and different aspects on which we report in our Annual report.

SUMMARY Yes, in order to maintain good governance and social responsibility

6 Sustainable actions are usually only possible with investors that want to invest their money in the long run. Are there trends that show an increasing demand for long term investments? (from where?)

MCE In some regions, where microfinance is more mature (such as in Latin America) there is growing demand for subordinated debt at a tenor of 5+ years.

Rabobank Not known to us.

Cordaid Well, a lot of our partners are interested in equity investments (=long term, I would say).

Oikocredit -

SBFIC Most investments should be done in the long-run, especially those which like to achieve sustainability in the long-run.

Triodos -

SUMMARY More demand in equity investments, or subordinated debt

7 In your opinion, is the current volume of social investments enough to benefit the majority of Microfinance Institutions and to prevent the much discussed mission drift of the microfinance sector, that started with the commercialization of the sector? What other factors are important?

MCE Given the amount of debt financing available and the number of operationally self- sufficient MFIs in the world, there seems to be enough debt money to cover the MFIs’ financing needs. However, if we open up the universe of MFIs to institutions that are not financially self sufficient, then there does not appear to be enough money out there (the common 1st tier vs 2nd/3rd tier argument – there appears to be enough funding out there in senior debt for 1st tier MFIs, but this dramatically reduces when talking about 2nd and 3rd tier institutions). Funders must continue to push themselves to fund smaller, more risky MFIs in more risky countries, rather than continuing to serve only the top 50 MFIs around the world.

Rabobank The so called social investors are not so social in practice, requesting rates of return of around 25 – 30%. I would say that more “real” social investment is needed in the sector.

88

Cordaid No; worse, there is still a growing competition from the commercial sector to invest in microfinance – that will only result in more focus on financial performance and less focus on social performance. For emerging MFI’s in marginalized and hard to reach areas it will become more difficult to have access to funds.

Oikocredit -

SBFIC Without researching the exact volume of social investments at the moment there might be a trend to decrease social investments based on bad publicity of microfinance with regard to suicides, especially in the north-east of India.

Triodos 1. Current volume: yes certainly sufficient volume to benefit MFIs. 2. Prevent the mission drift- we do not believe commercialization is bad- please see Business model Triodos Bank. We believe in commercially sustainable business, therefore commercial rates are necessary after a certain point in time. 3. Other important factors such as the fact that the social mission should remain intact, product diversity to enhance services, client protection principles.

SUMMARY Enough debt-capital available; Social investors are not really social, demanding high rates of return, and investing in Tier 1 MFIs only; Worse: there is a trend to decrease social investments and there is still growing competition from the commercial sector, increasing the mission drift

8 Do you think that the microfinance-sector in general can maintain or even improve its social mission despite/due to the commercialization?

MCE Yes – while there will be a role for commercialization in the future of microfinance, this does not exclude the simultaneous evolution of social performance metrics and importance. Socially oriented people throughout the microfinance sector (practitioners, funders, etc) will continue to force the microfinance sector to push further into understanding social performance and better serving the needs of the world’s poor.

Rabobank Yes.

Cordaid It will depend on the MFI’s themselves. Are they strong enough to stick to their mission and resist the pressure from other stakeholders, like commercial investors?

Oikocredit

SBFIC The social mission of an MFI should be profound and followed intensively regardless of a commercialization.

Triodos Yes

SUMMARY (Yes) with help of socially oriented people and MFIs that are strong enough to stick to their mission and resist pressure from commercial investors

89

Portfolio size

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

16,000,000

2007 2008 2009 2010 2011-3

001

EU

R

0

10000

20000

30000

40000

50000

60000

70000

Gross Loan Portfolio Number of borrowers

MFI Factsheet

Portfolio quality evolution

0.0%

0.0%

0.0%

0.0%

0.0%0

2,000,0004,000,000

6,000,000

8,000,000

10,000,00012,000,000

14,000,000

16,000,000

2007 2008 2009 2010 2011-3

001

EU

R

0.0%0.0%0.0%0.0%0.0%0.0%0.0%0.0%0.0%0.0%

Gross Loan Portfolio PAR30

MFI Factsheet

Portfolio Yield & Operating expense ratio

22.8% 23.0% 23.8%22.5%

9.3% 8.3%

11.4%10.4%

2008 2009 2010 2011-3

Portfolio Yield

Operatingexpense ratio

MFI Factsheet

90

Operational self-sufficiency

178.6%

216.2%

248.4%

197.7%

143.1%

2007 2008 2009 2010 2011-3

MFI Factsheet

PAR 30 and risk coverage

0.0%

0.0%0.0%

0.0%

0.0%0.0%

0.0%

0.0%

0.0%

0.0%0.0%

0.0%

0.0%

0.0%

0.0%

0.1%

2007 2008 2009 2010 2011-3

0%

1000%

2000%

3000%

4000%

5000%

PAR30 Write-Off Ratio Risk coverage of PAR30

MFI Factsheet

91

Savings evolution

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

2007 2008 2009 2010 2011-3

001

EU

R

0

10000

20000

30000

40000

50000

60000

70000

Total savings Total active clients

MFI Factsheet

Productivity of staff

311

525

389451

415

165

288 257 273 253

2007 2008 2009 2010 2011-3Number of loans per loan officer

Number of loans per staff member

MFI Factsheet

92

93

Funding Structure

51.2%33.3% 31.3% 28.3% 35.5%

12.4% 46.8% 44.9% 48.0% 38.8%

36.4%19.9% 23.8% 23.8% 25.7%

2007 2008 2009 2010 2011-3

Savings

Borrowings

Equity

MFI Factsheet

Break-Down of Portfolio Yield

9.3% 8.3%11.4% 10.4%

1.3% 1.4%

0.6%5.6%

0.2%

-0.2%

0.3%

0.0%12.0% 13.4%11.5%

6.5%

2008 2009 2010 2011-3

Yield Margin

Provisionexpense ratio

Fundingexpense ratio

Operatingexpense ratio

MFI Factsheet

Average disbursed loan size (EURO)

0

00

0

0

0

0

0

0

0

0

2007 2008 2009 2010 2011-3

MFI Factsheet

4. Client Satisfaction Survey

Interview number: I__II__II__I Interviewer: Martin Schellhorn Branch number: I__I Date (mm/year): 15-06-2011

INT.: READ OUT: „Good morning. My name is Martin and I would like to ask you several questions on your opinion on TYM. All the gathered information is very helpful in meeting Clients’ demands and improving the level of services provided. Please remember your answers are confidential and are used in the statistical tables. Please also remember there are no right or wrong answers and only your honest opinions are important for us.”

1. What type of loan did you take last time? (INT. READ POSSIBLE ANSWERS)

ONLY ONE ANSWER POSSIBLE

2. What is your overall opinion on TYM as an institution? (INT. READ POSSIBLE ANSWERS)

1 – definitely bad 2 – rather bad 3 – neither good nor bad 4 – rather good 5 – definitely good 99 – hard to say (do not read)

1 Now let’s talk about TYM and its services in details. What is your opinion on … (READ THE FIRST ONE)? ROTATE THE ORDER OF READING. MARK THE FIRST READ. ASK FOR ALL

Issues Definitely bad

Rather bad

Neither good nor bad

Rather good

Definitely good

Hard to say (do not read)

1. Product design of financial services

1 2 3 4 5 99

2. Products design of non-financial product

1 2 3 4 5 99

3. Contact with the staff

1 2 3 4 5 99

4. Convenience (visits to clients, time constraints)

1 2 3 4 5 99

5. Helpfulness of staff

1 2 3 4 5 99

Issues Definitely bad

Rather bad

Neither good nor bad

Rather good

Definitely good

Hard to say (do not read)

to resolve other problems

6. Process of obtaining the loan

1 2 3 4 5 99

7. Prices (all financial costs to clients; transparency)

1 2 3 4 5 99

8. Diversity of loans offered

1 2 3 4 5 99

9. Access to loans (eligibility)

1 2 3 4 5 99

10. Communication of policy decisions to members

1 2 3 4 5 99

11. Enterprise training

1 2 3 4 5 99

12. Environmental protection

1 2 3 4 5 99

9 Now think about the detailed products and services offered by TYM. What is your opinion on …. (READ THE FIRST ONE)? ROTATE THE ORDER OF READING. ASK FOR ALL.

Ask about the following issues Definitely bad

Rather bad Neither good nor bad

Rather good Definitely good Hard to say (do not read)

3) Repayment period 1 2 3 4 5 99

4) Repayment frequency 1 2 3 4 5 99

5) Loan size 1 2 3 4 5 99

6) Collateral demanded 1 2 3 4 5 99

7) Incentives to repeat loan taking 1 2 3 4 5 99

8) Interest rate 1 2 3 4 5 99

9) Penalties for non-repayment 1 2 3 4 5 99

10) Staff professionalism 1 2 3 4 5 99

11) Staff politeness 1 2 3 4 5 99

12) Reactions to your suggestions and complaints

1 2 3 4 5 99

13) Clarity of requirements 1 2 3 4 5 99

14) Simplicity and clarity of application forms 1 2 3 4 5 99

15) Time of waiting to approve an application for a loan

1 2 3 4 5 99

10 Would you recommend taking a loan from TYM to your colleagues, friends or any other people? 1 – definitely no 2 – rather no 3 – rather yes 4 – definitely yes 99 – hard to say

11 Have you recommended taking a loan from TYM to anybody during the past 12 months? 1 – yes 2 – no → GO TO QUESTION 11 99 – hard to say

12 How many people have you recommended TYM to during the past 12 months? I__I people 99 – hard to say, do not remember (do not read)

13 How many people that you recommended TYM to during the past 12 months (question 9) actually received a loan from TYM?

I__I people 99 – hard to say, do not remember

14 Would you probably take a loan next year? 1 – definitely no 2 – rather no 3 – rather yes4 – definitely yes 99 – hard to say (do not read)

15 What percentage of your loan needs is TYM satisfying? I____I % of my loan needs ; 99 – hard to say (do not read)

16 What is the second most important source of loans after TYM for you? READ POSSIBLE ANSWERS. ONLY ONE ANSWER POSSIBLE

1 – other than TYM MFI 2 – a bank 3 – family / friends 4 – private lenders 5 – other. What? _________________ 6 –TYM is my only source (do not read) 99 – do not know (do not read)

17 Is taking a loan from TYM less advantageous, the same or more advantageous in comparison to taking a loan from … (ASK FOR ALL)?

I__I bank I__I family/friends I__I private lenders I__I other MFI

LEGEND OF CODES: 1 – worse ; 2 – the same ; 3 – better ; 99 – hard to say (do not read)

Figure 11: TYM Organization Chart 2011

Audit DepartmentHanh - HeadPham, Hieu,

Tai

Board of DirectorsKim Thuy - Chair

Quy, Hien

Control CommitteeBac - HeadN.N., Hanh

Management BoardQuy - General Director

Ngoc Linh, Thuong, Thuy Linh

Operations-Training Dep. Nhung - Head

Trang (training), He, Van, Kien (Research), Tram

Accounting- Finance Dep. Huong - Head

Nhung, Thuy Anh, Thuan, Trang

Admin-Organiz. Dep.Ngoc Ha - Head

Dai, Hung (IT), V.Ha, Phuong (Perso), Trang

(Int'l), Luong, Quan

Branch(18 Branches)

Transaction Office

Transaction Office

Center Center Center Center Center Center