- What is social performance?
- Why is it important for financial institutions to assess social performance?
- Isn't social performance essentially impact assessment?
- What is the difference between financial performance management (FPM) and social performance management (SPM)?
- What initiatives exist to help organizations measure social performance?
- What is the difference between the social performance framework, the definition, and the tools and methodologies in the resource center?
- What do I have to do to develop a social performance system?
- How do you measure social performance?
- Has the industry come out with any social performance guidelines and standards?
- Of what value is social performance data to donors and investors?
- What is Social Return on Investment?
- How can I get involved?
What is social performance?
Social performance, or the social bottom line, is about making an organization's social mission a reality. This may include 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. Click here for a more comprehensive definition.
Why is it important for financial institutions to assess social performance?
Social performance measures are necessary to determine whether institutions are meeting the social goals set out in their missions. Currently, common performance measures for microfinance focus almost exclusively on an institution's financial performance. While this is necessary it says little about whether social goals are being met. A financially sustainable and profitable institution deemed extremely successful in financial terms could theoretically charge very high interest rates and push its clients into greater indebtedness, thereby creating a long run institutional crisis. Conversely, tracking social performance and using the information to tailor services to improve client conditions not only assist clients but also bring 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.
Isn't social performance essentially impact assessment?
The concepts of "social performance" and "impact assessment" are often confused and used interchangeably. There is a distinction. Impacts refer to outcomes
(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 therefore includes analysis of the declared objectives of institutions, the effectiveness of their systems and services in meeting these objectives, related outputs (such as reaching larger numbers of very poor households) and indeed success in effecting positive changes in the lives of clients (impact).
What is the difference between financial performance management (FPM) and social performance management (SPM)?
FPM focuses on the solvency of financial institutions, their financial health, and is measured through systematic book-keeping and accounting. SPM measures benefits for clients, their families, and the wider community and is measured through the routine monitoring of services, outreach, client satisfaction, and changes in client and community level indicators. Both FPM and SPM can be used to influence decisions about prices, products, service delivery systems and strategies. In general, FPM is validated through internal and external audits, while SPM is validated through internal cross-checks, external reviews and social audits.
Financial performance and social performance are compared and contrasted in the chart below from Imp-Act's "Introduction to Social Performance Management":
| Financial Performance Management (FPM) | Social Performance Management (SPM) | |
| Main goal | Solvency of the financial institution | Benefits for clients, their families and the wider community |
| How is it assessed? | Systematic book-keeping and accounting | Routine monitoring of scope, outreach of services and changes in client conditions, plus periodic more in-depth understanding of the reasons behind patterns and trends observed through monitoring |
| How is it used? | To influence decisions about prices, products, service delivery systems & strategies | |
| How is it validated? | Internal and external audits | Internal cross-checks and external reviews |
Source: Imp-Act Introcution to Social Performance Management.
What initiatives exist to help organizations measure social performance?
Within the microfinance community, organizations such as the Imp-Act Consortium, CGAP, The Ford Foundation, CERISE, M-CRIL and others are social performance tools and methodologies. . Click here to learn more.
Outside of the microfinance community, initiatives such as the Global Reporting Initiative and Accountability are working on this issue. Click here to learn more.
What is the difference between the social performance framework, the definition, and the tools and methodologies in the resource center?
The definition has been agreed upon by multiple stakeholders and sets a clear exposition of what we mean by social performance. The framework essentially outlines the scope of social performance. It identifies the different dimensions of social performance (mission and intent, activities, systems and outputs, and outcomes and impact) to better understand what aspect of social performance each financial institution is more interested in and also to help institutions to determine what tools they need to use. The tools help assess social performance. Some tools are more directly targeted to answer queries regarding internal systems and operations, others on client level changes, and yet others try to provide a holistic appraisal of the social performance of institutions.
What do I have to do to develop a social performance system?
The first thing one must do is get 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 up by setting clear and realistic social performance objectives and performance targets. Developing relevant information systems to easily track performance objectives come next. 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. Click here for more information.
Is it expensive to measure social performance?
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 of, and responsiveness 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, this might arguably cover the cost of implementing a social performance management system. For more on developing a social performance management system, click here.
Has the industry come out with any social performance guidelines and standards?
The Social Performance Task Force is currently working to create a common reporting framework for MFIs which would include standardized social performance indicators. The Imp-Act Consortium developed Social Performance Management Guidelines which can be found www.imp-act.org. The CGAP Donor Working Group has commissioned the development of social performance measurement guidelines as part of its 2007 workplan.
Of what value is social performance data to donors and investors?
Social performance information is valuable to donors and investors when:
- MFIs claim social impact and solicit funding and investment based on this. This entails a responsibility for MFIs to account realistically for their social performance to donors, investors, and other stakeholder groups.
- MFIs want to compare social performance between institutions, contexts, and countries. This in turn makes it necessary to establish social performance standards and benchmarks.
- MFIs can demonstrate "blended returns" – in other words, an organization's financial and social returns combined to arrive at a more holistic picture of the organization's total return. In the absence of widely accepted social performance measures, donors and socially responsible investors typically base funding decisions on financial performance alone. Social performance information allows MFIs to demonstrate social changes that are occurring in the lives of their clients and/or the communities they live in, leading some donors and investors to reallocate a portion of funding toward socially-oriented MFIs offering higher or more competitive blended returns.
What is Social Return on Investment (SROI)?
SROI incorporates principles from return on investment and cost-benefit analysis to derive an estimate of net social benefit. Net social benefit is typically expressed as a dollar value of social benefits minus social costs or as a ratio of social benefits to social costs.
SROI has not yet been calculated in the microfinance industry.
How can I get involved?
For starters why don't you read the task force statement on social performance? Sign it if you agree, join the task force and contact us for more information? Also please do share information on any social performance initiative that you or any organization you know have started. Please do send us any impact studies that have been conducted on your organization. We will put these up on our resource center and share it widely.