CGAP and the Ford Foundation initiated a project in early 2005 to develop social indicators that the industry could use to provide greater transparency on the social performance bottom line – specifically related to the poverty levels of clients who were being reached and the social and economic changes they experience.
Project description
Given the donor and national government consensus around the Millennium Development Goals, the Social Indicators Project was set up to track indicators that conform to several of the MDGs. These include – (1) whether MFIs are reaching the very poor, (2) whether client households are increasing incomes and gaining assets (3) whether greater numbers of children are going to school, (4) whether health conditions are improving, and (5) whether women are becoming more empowered.
The purpose of the Social Indicators Project is to identify a small set of clear, globally comparable, low-cost indicators that would correspond to the five dimensions of the MDGs mentioned above. These “industry indicators” will form a common reporting format that will be used by all MFIs for industry-wide reporting. The common reporting format will enable comparisons between different MFIs across countries. For example, “percentage of client living below the poverty line” is one industry indicator that helps us clearly understand whether an MFI is reaching poor people. It additionally lets us easily compare the depth of outreach between different MFIs globally.
Progress to date
Participant MFIs
Thirty four MFIs are participating in the project. Fifteen are from Asia, seven are from Africa, nine are from Latin America, and three are from Eastern Europe. A first round of survey has been completed. A second round will begin at the end of the year.
Indicators
MFIs were asked to collect data and report on client level indicators that reflected their own mission and their own concerns. Most MFIs reported on economic levels of clients and schooling; very few reported on health indicators. Most MFIs also reported on women’s empowerment but the indicators were wide ranging. Given the experience of the first round the project has determined that MFIs collect data and report on indicators that correlate to three key, globally relevant indicators:
1. Percentage of clients living below the poverty line (or less than a dollar a day)
2. Changes in economic conditions as reflected in changes in (1)
3. Children’s schooling disaggregated by sex
Grameen Foundation, with funding from CGAP and technical work done by Mark Schreiner, has created poverty scorecards for four countries (India, Mexico, Philippines, Pakistan) in which nine participating MFIs are located. These scorecards have been developed through rigorous econometric analysis of national level data of each country. The scorecards include a small set of simple indicators that can be used to predict the probability of MFI clients living below the poverty line.
The project has decided to create such poverty scorecards for different countries. MFIs in these countries will report on these few simple, indicators which will then be used to determine both the percentage of clients living below the poverty line and economic changes that clients experience. For example MFIs in Nicaragua will need to collect information on whether clients own a stove, whether their children attend school, source of drinking water, construction material of walls of house and purchase of milk or dairy product in the last 15 days. All these indicators are simple. But taken together and scored according to weights that the project has created, they provide the most robust indication of the percentage of clients that are below the poverty line in Nicaragua.
Next steps
Scorecards are being created for many countries. The 34 MFIs in the project will collect data from a second round of survey and report according to these scorecards. Other MFIs will be encouraged to use these scorecards and report on the global reporting format listing:
1. Percentage of clients living below the poverty line (or less than a dollar a day)
2. Changes in economic conditions as reflected in changes in (1)
3. Children’s schooling disaggregated by sex
CGAP and Ford will work with the task force and donors and practitioners to ensure that the industry selects this same format for client level social performance reporting.
Contacts
Syed Hashemi, CGAP shashemi@worldbank.org
Tony Sheldon, Ford Foundation
Laura Foose, ACT