mix microcredit summit campaign presentation
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MIX's Presentation "Balancing the Double Bottom Line" from the 2014 Microcredit Summit Campaign.TRANSCRIPT
The Premier Source for Microfinance Data and Analysis
This presentation is the proprietary and/or confidential information of MIX, and all rights are reserved by MIX. Any dissemination, distribution or copying of this presentation without MIX’s prior written permission is strictly prohibited.
Microfinance Information Exchange
Balancing the Double Bottom LineSynergies and Trade-offs Between Performance Types
17th Microcredit Summit Mérida, Mexico September 5, 2014
This presentation is the proprietary and/or confidential information of MIX, and all rights are reserved by MIX. Any dissemination, distribution or copying of this presentation without MIX’s prior written permission is strictly prohibited.
2
Goals of MIX’s study
Test industry consensus about the value of social performance management (SPM) and its interaction with financial performance
Continue to build business case for robust SPM
Explore MIX’s combined data set and identify areas for deeper analysis
Follow up to a 2010 MIX study* (“Synergies and Trade-offs”) because MIX’s SP dataset has grown significantly
* Based on 2008 data
This presentation is the proprietary and/or confidential information of MIX, and all rights are reserved by MIX. Any dissemination, distribution or copying of this presentation without MIX’s prior written permission is strictly prohibited.
3
MIX/SPTF SP indicator categories
INDICATOR CATEGORY WHAT THE INDICATORS MEASURE
Mission and social goals The MFI’s stated commitment to its social mission, its target market, and development objectives
Governance The board of directors’ (BoD) level of engagement with SPM
Range of products and services Financial and nonfinancial products and services offered by the MFI
Client outreach by lending methodology Number of active borrowers by lending methodologyBorrower retention The MFI’s borrower retention rate
Social responsibility to clients MFI implementation of the Smart Campaign Client Protection Principles
Transparency of costs of services to clients How the MFI states its lending interest rate(s)
Human resources and staff incentivesThe MFI's policies regarding social responsibility to staff, staff gender composition, staff turnover rate, and staff incentives linked to social performance goals
Employment creation and enterprises financed Business development and job creation outcomes
Social responsibility to the environmentMFI policies and initiatives in place to promote environmentally friendly practices and mitigate environmental impacts of financed enterprises
Poverty outreach Client poverty level outcomes
This presentation is the proprietary and/or confidential information of MIX, and all rights are reserved by MIX. Any dissemination, distribution or copying of this presentation without MIX’s prior written permission is strictly prohibited.
4
Current goals versus outcome reporting
0%20%40%60%80%
100%
Percent of MFIs citing goal Percent of MFIs citing goal and reporting outcomes
* Proxy outcome indicators
Outcome data is FY12 except poverty data which is FY10–12; n = 965
This presentation is the proprietary and/or confidential information of MIX, and all rights are reserved by MIX. Any dissemination, distribution or copying of this presentation without MIX’s prior written permission is strictly prohibited.
5
Study methodology
Overall sample of 974 MFIs but no. of obs. varies by indicator Quantitative data mostly FY11 but occasionally
supplemented with prior years where no. of obs. was too small (e.g. client poverty data)
Quantitative data from FY12 was also used in a very small number of instances
13 social performance and 12 financial performance variables were analyzed Various correlation methods used due to
heterogeneity of data and type of relationship observed
This presentation is the proprietary and/or confidential information of MIX, and all rights are reserved by MIX. Any dissemination, distribution or copying of this presentation without MIX’s prior written permission is strictly prohibited.
6
MFI sample characteristics
38%
33%
17%
7%
3% 3%
NGONBFICredit Union / Co-operativeBankRural BankOther
29%
20%
20%
19%
10% 3%
Latin America and The CaribbeanEastern Europe and Central AsiaSouth AsiaAfricaEast Asia and the PacificMiddle East and North Africa
MFI SAMPLE BY LEGAL STATUS
• Mostly NGOs and NBFIs (70%)• Banks and rural banks make up around 10% total
MFI SAMPLE BY REGION
• LAC slightly overrepresented• EAP slightly underrepresented• MENA very underrepresented
This presentation is the proprietary and/or confidential information of MIX, and all rights are reserved by MIX. Any dissemination, distribution or copying of this presentation without MIX’s prior written permission is strictly prohibited.
7
Select findings: staff incentives
Research question:Is there a correlation between the existence of specific HR
staff incentives and other process or performance indicators?
Hypothesis:MFIs with staff incentives tied to specific performance areas
will show better performance in these areas relative to MFIs without such incentives
This presentation is the proprietary and/or confidential information of MIX, and all rights are reserved by MIX. Any dissemination, distribution or copying of this presentation without MIX’s prior written permission is strictly prohibited.
8
Summary of SP-FP correlations
Staff incentives
Staff turnover
Borrower retention
rate
Poverty targeting
SP committee
(SP champion)
Productivity (borrowers per loan officer)
Portfolio quality (PAR30 and PAR90)
Efficiency (operating cost as % of portfolio)
Synergy Trade-off Inconclusive
?
This presentation is the proprietary and/or confidential information of MIX, and all rights are reserved by MIX. Any dissemination, distribution or copying of this presentation without MIX’s prior written permission is strictly prohibited.
9
Select findings: staff incentives
Research question:Is there a correlation between the existence of specific HR
staff incentives and other process or performance indicators?
Synergies:• Portfolio quality incentives correlated with lower PAR30 (average 3.2% lower)• Client retention incentives correlated with better client retention (average 4.3% higher)
Trade-offs:• Growth incentives (“attract new clients from target market”) correlated with fewer borrowers per loan officer (average 66 fewer borrowers per loan officer)
Hypothesis:MFIs with staff incentives tied to specific performance areas
will show better performance in these areas relative to MFIs without such incentives
This presentation is the proprietary and/or confidential information of MIX, and all rights are reserved by MIX. Any dissemination, distribution or copying of this presentation without MIX’s prior written permission is strictly prohibited.
10
Summary of SP-FP correlations
Staff incentives
Staff turnover
Borrower retention
rate
Poverty targeting
SP committee
(SP champion)
Productivity (borrowers per loan officer)
-
Portfolio quality (PAR30 and PAR90)
+
Efficiency (operating cost as % of portfolio)
Synergy Trade-off Inconclusive
This presentation is the proprietary and/or confidential information of MIX, and all rights are reserved by MIX. Any dissemination, distribution or copying of this presentation without MIX’s prior written permission is strictly prohibited.
11
Select findings: staff turnover
Research question:Is staff turnover correlated with efficiency indicators?
Hypothesis:MFIs with higher rates of staff turnover will show higher
operating expense ratios and lower borrower retention (previous MIX finding)
This presentation is the proprietary and/or confidential information of MIX, and all rights are reserved by MIX. Any dissemination, distribution or copying of this presentation without MIX’s prior written permission is strictly prohibited.
12
Summary of SP-FP correlations
Staff incentives
Staff turnover
Borrower retention
rate
Poverty targeting
SP committee
(SP champion)
Productivity (borrowers per loan officer)
-
Portfolio quality (PAR30 and PAR90)
+
Efficiency (operating cost as % of portfolio)
Synergy Trade-off Inconclusive
?
This presentation is the proprietary and/or confidential information of MIX, and all rights are reserved by MIX. Any dissemination, distribution or copying of this presentation without MIX’s prior written permission is strictly prohibited.
13
Select findings: staff turnover
Research question:Is staff turnover correlated with efficiency indicators?
Synergies:• Staff turnover negatively correlated with borrower retention• Staff turnover positively correlated with PAR30 and PAR90
Trade-offs:• Staff turnover negatively correlated with average staff salary
Hypothesis:MFIs with higher rates of staff turnover will show higher
operating expense ratios and lower borrower retention (previous MIX finding)
This presentation is the proprietary and/or confidential information of MIX, and all rights are reserved by MIX. Any dissemination, distribution or copying of this presentation without MIX’s prior written permission is strictly prohibited.
14
Summary of SP-FP correlations
Staff incentives
Staff turnover
Borrower retention
rate
Poverty targeting
SP committee
(SP champion)
Productivity (borrowers per loan officer)
-
Portfolio quality (PAR30 and PAR90)
+ +
Efficiency (operating cost as % of portfolio)
-*
Synergy Trade-off Inconclusive
* Staff turnover rate is negatively correlated with average salary.
This presentation is the proprietary and/or confidential information of MIX, and all rights are reserved by MIX. Any dissemination, distribution or copying of this presentation without MIX’s prior written permission is strictly prohibited.
15
Select findings: borrower retention
Research question:Is borrower retention correlated with efficiency or risk
indicators?
Hypothesis:MFIs with higher borrower retention will have lower risk
profiles and have lower rates of staff turnover (previous MIX finding)
This presentation is the proprietary and/or confidential information of MIX, and all rights are reserved by MIX. Any dissemination, distribution or copying of this presentation without MIX’s prior written permission is strictly prohibited.
16
Summary of SP-FP correlations
Staff incentives
Staff turnover
Borrower retention
rate
Poverty targeting
SP committee
(SP champion)
Productivity (borrowers per loan officer)
-
Portfolio quality (PAR30 and PAR90)
+ +
Efficiency (operating cost as % of portfolio)
-*
Synergy Trade-off Inconclusive
* Staff turnover rate is negatively correlated with average salary.
?
This presentation is the proprietary and/or confidential information of MIX, and all rights are reserved by MIX. Any dissemination, distribution or copying of this presentation without MIX’s prior written permission is strictly prohibited.
17
Select findings: borrower retention
Research question:Is borrower retention correlated with efficiency or risk
indicators?
Synergies:• Borrower retention negatively correlated with staff turnover• No significant relationship found between borrower retention and PAR30 or PAR90
Trade-offs:• Borrower retention positively correlated with average staff salary (likely via staff turnover)
Hypothesis:MFIs with higher borrower retention will have lower risk
profiles and have lower rates of staff turnover (previous MIX finding)
This presentation is the proprietary and/or confidential information of MIX, and all rights are reserved by MIX. Any dissemination, distribution or copying of this presentation without MIX’s prior written permission is strictly prohibited.
18
Summary of SP-FP correlations
Staff incentives
Staff turnover
Borrower retention
rate
Poverty targeting
SP committee
(SP champion)
Productivity (borrowers per loan officer)
-
Portfolio quality (PAR30 and PAR90)
+ +
Efficiency (operating cost as % of portfolio)
-* +*
Synergy Trade-off Inconclusive
* Staff turnover rate is negatively correlated with average salary and borrower retention rate is positively correlated with average salary.
This presentation is the proprietary and/or confidential information of MIX, and all rights are reserved by MIX. Any dissemination, distribution or copying of this presentation without MIX’s prior written permission is strictly prohibited.
19
Select findings: gender balance of management/board
Research question:Do equality HR policies promote gender balance within an
organization? (Are higher proportions of female board/staff correlated with gender differences in social or financial performance?)
Hypothesis:MFIs with equality HR policies will have greater proportions of
female board/staff. MFIs with more female board/staff will show better gender performance.
This presentation is the proprietary and/or confidential information of MIX, and all rights are reserved by MIX. Any dissemination, distribution or copying of this presentation without MIX’s prior written permission is strictly prohibited.
20
Summary of SP-SP correlations
Staff incentives Staff turnover Presence of
female staff
Borrower retention rate + -
Equality in HR policy
Women’s outreach
Synergy Trade-off Inconclusive
?
This presentation is the proprietary and/or confidential information of MIX, and all rights are reserved by MIX. Any dissemination, distribution or copying of this presentation without MIX’s prior written permission is strictly prohibited.
21
Select findings: gender balance of management/board
Research question:Do equality HR policies promote gender balance within an
organization? (Are higher proportions of female board/staff correlated with gender differences in social or financial performance?)
Synergies:• No significant relationship found between equality HR policies and gender balance• Weak positive correlation between female staff and women borrower outreach (LAC only)
Trade-offs:[none]
Hypothesis:MFIs with equality HR policies will have greater proportions of
female board/staff. MFIs with more female board/staff will show better gender performance.
This presentation is the proprietary and/or confidential information of MIX, and all rights are reserved by MIX. Any dissemination, distribution or copying of this presentation without MIX’s prior written permission is strictly prohibited.
22
Summary of SP-SP correlations
Staff incentives Staff turnover Presence of
female staff
Borrower retention rate + -
Equality in HR policy
Women’s outreach +*
* Weak positive correlation between presence of women in staff/board and higher women borrower outreach for LAC dataset only. We are currently performing this analysis for the global dataset.
Synergy Trade-off Inconclusive
This presentation is the proprietary and/or confidential information of MIX, and all rights are reserved by MIX. Any dissemination, distribution or copying of this presentation without MIX’s prior written permission is strictly prohibited.
23
Select findings: poverty targeting
Research question: Is there a correlation between (1) poverty reduction as a goal,
(2) MFIs offering products designed specifically for the poor, (3) ability to report poverty data, (4) number of clients below poverty, and (5) provision of consumption loans? (What about with other financial/operational indicators?)
Hypothesis: (1), (2), (3), and (4) will be positively correlated with each
other and negatively correlated with (5).
This presentation is the proprietary and/or confidential information of MIX, and all rights are reserved by MIX. Any dissemination, distribution or copying of this presentation without MIX’s prior written permission is strictly prohibited.
24
Summary of SP-FP correlations
Staff incentives
Staff turnover
Borrower retention
rate
Poverty targeting
SP committee
(SP champion)
Productivity (borrowers per loan officer)
-
Portfolio quality (PAR30 and PAR90)
+ +
Efficiency (operating cost as % of portfolio)
-* +*
Synergy Trade-off Inconclusive
* Staff turnover rate is negatively correlated with average salary and borrower retention rate is positively correlated with average salary.
?
This presentation is the proprietary and/or confidential information of MIX, and all rights are reserved by MIX. Any dissemination, distribution or copying of this presentation without MIX’s prior written permission is strictly prohibited.
25
Select findings: poverty targeting
Research question: Is there a correlation between (1) poverty reduction as a goal,
(2) MFIs offering products designed specifically for the poor, (3) ability to report poverty data, (4) number of clients below poverty, and (5) provision of consumption loans? (What about with other financial/operational indicators?)
Synergies:• MFIs with a specific poverty target have lower PAR30 (average 2.5% lower)
Trade-offs:• Reporting poverty levels negatively correlated with consumption loans• MFIs without a specific poverty focus are more efficient (average operating expenses/GLP 7% lower) and higher ROA (average 2.2% higher)
Hypothesis: (1), (2), (3), and (4) will be positively correlated with each
other and negatively correlated with (5).
This presentation is the proprietary and/or confidential information of MIX, and all rights are reserved by MIX. Any dissemination, distribution or copying of this presentation without MIX’s prior written permission is strictly prohibited.
26
Summary of SP-FP correlations
Staff incentives
Staff turnover
Borrower retention
rate
Poverty targeting
SP committee
(SP champion)
Productivity (borrowers per loan officer)
-
Portfolio quality (PAR30 and PAR90)
+ + -
Efficiency (operating cost as % of portfolio)
-* +* +**
Synergy Trade-off Inconclusive
* Staff turnover rate is negatively correlated with average salary and borrower retention rate is positively correlated with average salary.
** MFIs without a specific poverty focus exhibit a higher level of efficiency.
This presentation is the proprietary and/or confidential information of MIX, and all rights are reserved by MIX. Any dissemination, distribution or copying of this presentation without MIX’s prior written permission is strictly prohibited.
27
Select findings: governance
Research question:Do MFIs with a stronger level of board commitment to SPM
demonstrate differences in process or performance indicators?
Hypothesis:MFIs with standing SP committees on their board will show
higher levels of SP outcome reporting.
This presentation is the proprietary and/or confidential information of MIX, and all rights are reserved by MIX. Any dissemination, distribution or copying of this presentation without MIX’s prior written permission is strictly prohibited.
28
Summary of SP-FP correlations
Staff incentives
Staff turnover
Borrower retention
rate
Poverty targeting
SP committee
(SP champion)
Productivity (borrowers per loan officer)
-
Portfolio quality (PAR30 and PAR90)
+ + -
Efficiency (operating cost as % of portfolio)
-* +* +**
Synergy Trade-off Inconclusive
* Staff turnover rate is negatively correlated with average salary and borrower retention rate is positively correlated with average salary.
** MFIs without a specific poverty focus exhibit a higher level of efficiency.
?
This presentation is the proprietary and/or confidential information of MIX, and all rights are reserved by MIX. Any dissemination, distribution or copying of this presentation without MIX’s prior written permission is strictly prohibited.
29
Select findings: governance
Research question:Do MFIs with a stronger level of board commitment to SPM
demonstrate differences in process or performance indicators?
Synergies:• Standing SP committees are positively correlated with borrowers per loan officer (average of 75 more clients)*
Trade-offs:[none]
* MIX’s desk review experience leads us to think that this difference is probably due more to the presence of an SP champion at the board level.
Hypothesis:MFIs with standing SP committees on their board will show
higher levels of SP outcome reporting.
This presentation is the proprietary and/or confidential information of MIX, and all rights are reserved by MIX. Any dissemination, distribution or copying of this presentation without MIX’s prior written permission is strictly prohibited.
30
Summary of SP-FP correlations
Staff incentives
Staff turnover
Borrower retention
rate
Poverty targeting
SP committee
(SP champion)
Productivity (borrowers per loan officer)
- +
Portfolio quality (PAR30 and PAR90)
+ + -
Efficiency (operating cost as % of portfolio)
-* +* +**
Synergy Trade-off Inconclusive
* Staff turnover rate is negatively correlated with average salary and borrower retention rate is positively correlated with average salary.
** MFIs without a specific poverty focus exhibit a higher level of efficiency.
This presentation is the proprietary and/or confidential information of MIX, and all rights are reserved by MIX. Any dissemination, distribution or copying of this presentation without MIX’s prior written permission is strictly prohibited.
31
Key findings
Human resources:• Staff incentives linked to portfolio quality and borrower retention
associated with better outcomes in those areas• Higher staff turnover associated with higher risk (PAR30 and
PAR90), with lower borrower retention, and with higher operating expense (average salary)
Poverty targeting:• Poverty targeting associated with lower risk (PAR30)• Poverty targeting associated with lower efficiency/ROA• Client poverty reporting associated with not providing consumer
loans
Governance:• Strong board commitment to SP associated with better
productivity (borrowers per loan officer)
This presentation is the proprietary and/or confidential information of MIX, and all rights are reserved by MIX. Any dissemination, distribution or copying of this presentation without MIX’s prior written permission is strictly prohibited.
32
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MIX Global and Project Partners
This presentation is the proprietary and/or confidential information of MIX, and all rights are reserved by MIX. Any dissemination, distribution or copying of this presentation without MIX’s prior written permission is strictly prohibited.
33
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