Social Performance FAQs
- What is social performance?
- Why is it important?
- What is the difference between social performance and impact assessment?
- What role do consumer protection and customer service play in social performance?
- Can social performance measurement be affordable?
- Our clients keep coming back. Doesn’t that tell us enough about our social performance?
- Is social performance just another way for donors to make burdensome demands?
- If investors are already interested in microfinance, why do we need to track social performance to attract investors?
- How do I get started managing social performance?
- Are there common social performance indicators?
- How can I get involved?
1. What is social performance?
Social performance, or the social bottom line, is about making an organization's social mission a reality. The Social Performance Task Force 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."
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2. Why is it important?
Social performance measures are necessary to determine whether microfinance institutions are meeting the social goals set out in their missions. While financial measures - the most common performance indicators for microfinance – are necessary, they say little about whether social goals are being met. For example, an institution could be financially sustainable and considered extremely successful in financial terms, but charge very high interest rates and push its clients into over-indebtedness. Though this problem would not be revealed by financial indicators, it could ultimately create an institutional crisis and prevent the MFI from fulfilling its mission.
On the other hand, tracking social performance, and using that information to tailor services to improve client conditions, not only assists clients but also brings in better business for institutions. MFI managers need social performance data to meet both financial and social goals.
Further, simple social performance indicators are powerful marketing tools. They provide tangible indicators of achievement and attract funding from donors and social investors.
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3. What is the difference between social performance and impact assessment?
The concepts of "social performance" and "impact assessment" are often confused and used interchangeably. But there is an important distinction. Impacts refer to outcomes or changes that can be directly attributed to programs. Impact assessment is just one element of social performance. Social performance encompasses the entire process by which impact is created. It includes analysis of an institution’s declared objectives, the effectiveness of its systems and services in meeting these objectives, related outputs (such as reaching larger numbers of very poor households) and success in effecting positive changes in the lives of clients (impact).
Since proving impact is difficult and costly, it doesn’t make sense for every MFI to conduct an impact assessment. There are simpler ways to demonstrate if client conditions are improving, without attributing a causal linkage between such improvements and program participation. Social performance management encourages MFIs to create systems and practices to guarantee that they are in the best position to have impact. Social performance not only tracks impact, but also whether the poor are being served, the quality of services, and MFI relationships with clients and the community.
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4. What role do client protection and customer service play in social performance?
Client protection is a body of norms, standards, rules, laws that guide and govern the market conduct of firms with respect to their customers. Client protection encompasses measures to prevent illegal activities, such as laws against bribes or fraud, as well as fair treatment policies, such as fair pricing, and proactive initiatives, such as financial education. Client protection does not, however, ensure achievement of social goals. A financial institution can be honest and transparent with its customers without having or achieving a social mission.
Customer service is a concept related to customer satisfaction, and is not necessarily tied to client protection. Clients can receive fair and legal treatment and still be dissatisfied with an organization’s unfriendly service or limited product offerings.
Social performance is the effective translation of an institution's social mission into practice in line with accepted social values. An institution with good social performance offers products and/or services that ultimately have a positive impact on customers’ well-being.
For more information, please see the Smart Campaign.
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5. Can social performance measurement be affordable?
Social performance measurement and management can be cost-effective and does not have to come at a price of reduced long-term sustainability. SPM will facilitate:
- Higher retention of clients through monitoring and responding to their satisfaction with your program. Higher retention rates translate into lower costs and higher profits.
- Lower operational costs as you begin to use resources more effectively based on better understanding of your best investments.
- Demonstration of social performance to stakeholders, thus improving your position in a competitive funding market.
In the long term, these benefits could cover the cost of implementing a social performance management system.
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6. Our clients keep coming back. Doesn’t that tell us enough about our social performance?
While returning clients may indicate a strong demand for services, this does not mean that people’s conditions are improving. In fact, spiraling indebtedness (where clients borrow to pay back other debts) can be one reason why clients keep coming back. Social performance measurement provides a complete picture of an institution’s ability to fulfill its social goals, which for most microfinance providers go beyond mere provision of financial services. These goals must therefore be measured by other indicators beyond simple demand for services.
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7. Is social performance just another way for donors to make burdensome demands?
The social performance movement seeks to put “truth in advertising.” If an MFI says that it is reaching the poorest, then it should have the evidence to back it up. Many individuals, donors, foundations, and governments put money in microfinance with the belief that microfinance helps poor people. To be accountable to these tax-payers, philanthropists, and donors, MFIs must be able to report on how (or whether) microfinance helps poor people.
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8. If investors are already interested in microfinance, why do we need to track social performance to attract investors?
Investors use easily available information to decide where to invest their money. Currently, this information is limited to financial indicators. Programs with excellent social outcomes, but with only moderate financial returns, tend not to receive the recognition or investments they may merit. Social performance measures can balance out this information disparity so that programs with excellent social benefits receive support while they achieve sustainability at a more gradual rate.
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9. How do I get started managing social performance?
The first step is getting buy-in from management and staff. Without this, even the most sophisticated social performance management system will not work. Next, there should be some detailed exercises to determine the social goals (derived from the mission) of the institution, followed by setting clear and realistic social performance objectives and performance targets. Following that, information systems must be developed to easily track performance objectives. Institutions should be very clear on developing a "feedback loop" so that all information is processed and used to both assess performance as well as make operational changes to more effectively address institutional goals. Sharing and learning with other practitioners will heighten the effectiveness of the social performance management system.
See the Imp-Act Consortium Guidelines for more details.
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10. Are there common social performance indicators?
Yes. The MIX and the Social Performance Task Force (SPTF) have developed a standardized set of 11 social performance indicators to measure MFIs’ social performance. These indicators enable institutions to monitor and report the social outcomes of their operations and have now been integrated into the MIX’s MFI reporting database.
The 11 social performance indicators can be divided into the following broad sub-categories:
- Intent and design
- Internal systems / activities
- Outputs
- Outcomes
For more information on social indicators, visit the MIX Social Performance Resource Center or the SPTF page on the MIX Social Performance Indicators and Companion Resource Guide.
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11. How can I get involved?
Contact the Social Performance Task Force (SPTF) here if you are interested in joining. The SPTF is a working group that was created in 2005 after leaders from various social performance initiatives in the microfinance industry came together to agree on a common social performance framework, to address questions related to social performance measurement and management, and to develop an action plan to move social performance forward.
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