Title: Pitchbook US template
1Microfinance with a Mission Learning Together
Meeting the Challenge of Assessing Social
Performance of MFIs
2JUNE 2 0 0 6
INDEPENDENCE OBJECTIVITY - EXCELLENCE
Presented by Minh Huy LAI, Managing Director,
Planet Rating
Social Performance Rating Planet Ratings
Experience
3Planet Rating SAS The Global Microfinance Rating
Agency
Created in 1999 and became a private independent
rating firm in June 2005
- Planet Rating has the most extensive global
coverage - Paris HQ covering Eastern Europe Asia
- Lima Office covering Latin America the
Caribbean - Dakar Office covering West Central Africa
- Kampala Office covering East Southern Africa
- Beirut Office covering the Middle East
- Most diversified rating team in the industry
- Multicultural American, Canadian, Colombian,
French, Lebanese, Senegalese, Spanish, Ugandan,
Peruvian, Vietnamese citizens - Multilingual Arabic, Italian, English, French,
Spanish, Portuguese, Vietnamese, Wolof speakers - Qualified experienced team
- Planet Ratings Managing Director is the only
head of rating agencies that has operational
microfinance experience he was former General
Manager of SPBD Samoas largest MFI - Each senior analyst has conducted at least 12
rating missions on 3 different continents - Analyst backgrounds investment banking,
management consulting, non-profit, microfinance
4Overview of the CERISE Tool
Planet Rating is a technical partner of CERISE
tool
- CERISE is a consortium which groups 4 French
microfinance support organizations IRAM, CIDR,
GRET and CIRAD. - Objective share information on microfinance
experiences in order to improve the practices in
this sector. - The SPI Social Performance Indicator- Initiative
was launched in 2001 this tool is articulated
around a comprehensive questionnaire that
evaluates the social performance of the MFI
according to its social mission and objectives. - MFI's social mission and social strategy
- SPI Tool analyzes in 4 dimensions
- Outreach to the poor and the excluded
- Adaptation of the services and products to the
target clients - Improving clients' social and political capital
- Social responsibility of the MFI.
- Brief presentation of the MFI's financial
performance.
5Overview of the AMAP Tool
Planet Rating is a technical partner of
Chemonics AMAP social rating tool
- The AMAP tool (called SPSA) was developed by
Chemonics (Dr. Gary Woller) with USAID funding
under the AMAP project - A simple and low cost tool to measure social
performance for microfinance institutions - The SPSA tool includes two components
- A social performance scorecard which assesses
social performance using a set of simple
indicators falling under one of seven dimensions
of outreach. It assigns a social performance
score in each of the seven dimensions as well as
an overall score. - A social audit which assesses an MFIs internal
processes and the extent to which they align its
performance with its social mission. -
- The scorecard and audit results are combined to
assign the MFI an overall social rating using a
standardized rating scale.
6Planet Rating Social Performance Rating Experience
Tests of two social performance assessment tools
have been conducted
- Test Rating reports based on CERISE Social
Performance Indicators - ENDA (Tunisia), PRIZMA (Bosnia), EDPYME
Alternativa (Peru), FINADEV (Benin), DESPENO
(Mexico), DIACONIA (Bolivia) - Test Rating reports based on AMAP Social
Performance Scorecard and Audit developed by
Chemonics with USAID funding - A joint rating mission conducted in ANED
(Bolivia) with Gary Woller (Chemonics) - Tool to be used in at least two other missions
(CEADE Brasil and ECLOF Philippines) - Main differences
- AMAP is a quantitative-oriented tool measured by
a scorecard leading to quick comparable rating,
but needs more qualitative assessments to be
complete - CERISE covers the same areas, but is a more
process-oriented tool aimed at internal
improvements
7Our Rating Will Be Aligned With The Common
Framework
Outreach
Social Performance Management
Outputs
Mission definition
Processes
Changes
Adaptation of services
- Social responsibility
- to clients
- to community
- to staff
8Planet Ratings Approach to Social Rating Tools
- Outreach Base our analysis on existing
information or create information ? - We will stick to information available in the MFI
- Creating information is not the role of raters
who will check the validity of the data we might
produce ? - Verify the reliability of the information
- One to two additional days of branch visits
depending on the volume of client data
available - During social rating missions, we will promote /
bring the word about tools available to increase
MFI knowledge - Any multilingual presentation, leaflet website of
existing tools will be very useful to us - We will try client surveys
- In order to understand the tools and technical
constraints and limitations so that we can be
better assessors of their reliability when we
find them in the MFIs
9Planet Ratings Approach to Social Rating Tools
- Outreach Provide a grade on this dimension ?
- Does a MFI that targets the poorest have a higher
social impact than a MFI targeting SMEs (both of
them being excluded from the classic financial
services) ? - Impact studies do not provide strong evidence of
that fact - We will remain neutral on that aspect
- Provide information on the outreach to usually
targeted populations (poor, women, vulnerable,
rural, SME ?), but no grade - We will provide a grade on the outreach to the
target clientele of the MFI (if it has a specific
one) when the necessary information will be
available.
10Institutional Social Ratings What are the
relationships?
- Items assessed in institutional rating are
important components of social performance
(Governance, MIS reliability, Internal controls,
Financial performance) - Social performance ratings should be done in
combination with an institutional rating or
incorporate an institutional assessment - Poor institutional performance (for instance a
rating of D or E, meaning that the future of the
institution is at high risk) is a strong
limitation to social performance - Social ratings is likely to be capped by our
institutional ratings for bad performers - Social ratings and institutional ratings to be
performed during the same mission - Synergies between the two processes are important
11Efforts Needed for Social Ratings
Preparation of documents
On-site mission
Debriefing session
Interviews HQ management team (specifically ED,
marketing/ research manager, and operations
manager) Two to three branches loan officers,
branch managers, clients Board of directors
members Information verification Clients surveys
data, loan database Impact studies, surveys,
research Loan documentation
Rating Committee
Report dissemination
Institutional rating
2 days
1014 man-days
610 man-days (spread over 4weeks)
½ man-day
2 to 4 man-days
3 man-days
Social rating
Price range 2,500 USD to 4,000 EUR
12Remaining Work
- Next Development Steps
- Define the stakes and the ideal situations, in
qualitative terms - Determine which indicators (one or two) can be
sufficiently robust to be used a quantitative
indicators (while other indicators can be used to
support the analysis but not necessarily be rated
as such) - Define the weighing of each factor / indicator
- Reduce the number of quantitative Indicators
- First ratings will come out without an overall
grade - Next Field Tests
- Six social ratings in Mali for medium sized
institutions - First update of a social rating (enda-inter
arabe, Tunisia) - Inclusion of client friendliness section in our
Mini-Ratings in Uganda - Social responsibility to the client
- Adaptation of services to clients needs
13Remaining Work An Example
- Cost of the service will be rated direct costs
as well as other transaction and opportunity
costs - Test of the AMAP approach
- The Zakoura Foundation and Al Amana are given the
same grade on that dimension - But Al Amana has lower interest rates that the
Zakoura Foundation - Repayment and disbursement procedures are more
efficient at Al Amana - Keep first two ones (interest rate) as a
quantitative indicator - Optimization of other transaction / opportunity
costs as a qualitative indicator
Real portfolio yield
Yield / prime lending rate
Days to disburse a loan
loans with social collateral
transactions at clients home