grameen foundation: a vision for social performance

A Vision for Social Performance Management

July 2008

A Vision for

Social Performance Management

July 2008

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Acknowledgments

We would like to thank Deborah Burand and the Social Performance Advisory Commmittee for their contributions to this paper.

Thanks also to Jennifer Meehan, Director, Strategic Planning Center, Nigel Biggar, Director, Social Performance Management Center,

Jeff Toohig, Program Officer, Social Performance Management Center,and the Grameen Foundation Marketing and Communications Department

for their editorial direction and technical contributions.

This paper was produced by the Grameen Foundation Social Performance Management Center.

Photo on cover by Grameen Foundation. Photos inside by Grameen Foundation and Nigel Biggar.

Contact Information

Grameen FoundationSocial Performance Management Center

50 F Street NW, 8th FloorWashington, DC 20001

(202) 628-3560www.grameenfoundation.org

© 2008 Grameen® Foundation USA, All Rights Reserved

Except for use in a review, the reproduction or utilization of this work or part of it in any form or by electronics, or other means now known or hereafter invented, including

xerography, photocopying, recording, and in any information storage, transmission or retrieval system, including CD ROM, online or via the Internet, is forbidden without the

written permission of Grameen Foundation.

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Executive Summary

When the Nobel Peace Prize was awarded to Mohammed Yunus and the Grameen Bank in October 2006, it was a seminal moment for the microfinance industry. The award has given global recognition to microfinance as an effective and sustainable tool for poverty reduction. The enthusiasm generated by the award also has drawn increased attention, and scrutiny, to the work of microfinance institutions (MFIs), networks and other stakeholders involved in microfinance.

While the microfinance industry is ready to respond to rigorous evaluation of financial and operational results of MFIs, it is not equally capable of answering thorough questions related to social performance. The majority of MFIs lack the systems to obtain consistent, measurable and reliable social performance results and the ability to use those results to improve their services to the poor.

In 2005, Grameen Foundation—with the support of the Consultative Group to Assist the Poor (CGAP) and the Ford Foundation—commissioned the development of a poverty assessment tool designed to address these challenges. The Progress out of Poverty Index™ (PPI™) is a statistically accurate, effective and low-cost social performance measurement and management tool. The PPI 1) identifies clients’ poverty levels based on national and international poverty lines, 2) tracks clients’ progress out of poverty over time, and 3) provides data that can assist MFIs improve their products and services.

To date, nine PPIs have been developed. Grameen Foundation, CGAP and the Ford Foundation are currently developing additional PPIs and expect that a total of 36 PPIs will be in use by June 2009. In a short period of time, Grameen Foundation has made enormous strides in social performance through the development and early roll-out of the PPI. Yet there is more important work to be done before the microfinance industry can truly say that its results demonstrate a viable double bottom line. This paper highlights four areas where Grameen Foundation plans to pursue its social performance agenda:

• Knowing your clients

• Serving your clients

• Growing poverty-focused microfinance

• Understanding the impact upon your clients

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The Vision

Grameen Foundation envisions a day when social performance results are measured by and used to manage poverty-focused MFIs’ activities as readily as financial and operational data are used today. More broadly, Grameen Foundation imagines social performance results being reported alongside financial and operational data to provide investors, particularly social investors, raters and other third parties the information required to make a holistic evaluation of poverty-focused MFI performance.

If microfinance is going to live up to its billing as a double bottom-line business—that is, a business that charts both financial and social returns—MFIs must develop and agree upon statistically rigorous and transparent measures of, and standards for, their social outcomes. These holistic performance standards will enhance MFI accountability. They will bolster MFIs’ financial bottom line by assuring that clients and their businesses are healthy in every sense of the term. And regularly measuring client progress will help MFIs focus and drive innovation that serves all groups and regions. 1

A new tool for measuring these outcomes is the Progress out of Poverty IndexTM (PPI)TM2, endorsed by the Consultative Group to Assist the Poor (CGAP), Grameen Foundation and the Ford Foundation. This index has the advantage of lending itself to performance benchmarking at the national and international levels.

Grameen Foundation has played a critical role in the development and implementation of the PPI. As a catalyst for the tool, it seeks to inspire MFIs to be on the cutting edge of service to their clientele, and inspire investors and donors to want to contribute to institutions that document a measurable difference in the lives of poor people.

1 Counts, Alex. Small Loans, Big Dreams. New Jersey: John Wiley & Sons, 2008 2 The Progress out of Poverty Index (PPI) is built by Mark Schreiner for CGAP, Grameen Foundation and the Ford Foundation. The PPI is a practitioner friendly, easy-to-use poverty assessment tool. It estimates the probable percentage of clients who fall below the national poverty line or the $1/Day/PPP and $2/Day/PPP international poverty lines. Each PPI is specific to its particular country characteristics as each is based on its country level income and expenditure household survey.

“The Microcredit Summit Campaign has set a goal for 2015 to reach 175 million poor families and to ensure that 100 million of them are free from poverty. This will require an all-out effort. Impact measurement approaches such as Grameen Bank’s 10 indicators of poverty, and Grameen Foundation’s Progress out of Poverty Index that was modeled on our 10 indicators, will be needed to ensure we reach both goals.1”

Muhammad Yunus, Managing Director, Grameen Bank (Bangladesh)

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By employing and promoting the PPI, Grameen Foundation invokes the following beliefs central to its mission:

• The poor and poorest are the primary focus of microfinance products and services.• Social performance management is integral to achieving an organization’s social objectives effectively; it should be accepted as the companion measure to financial performance, providing a double bottom line by which to judge operational success. • The progress of those served can be measured by a proven social performance measurement tool that can help shape social performance management.• Socially responsible investors will invest in organizations demonstrating movement of the poor and poorest out of poverty.• Increased support to MFIs employing social performance management tools will increase the number of poor and poorest moving out of poverty.

In this document, Grameen Foundation describes how social performance management tools can be a positive force for changing the profile of poverty throughout the world. By tracking their progress out of poverty, MFIs can create more value for clients and demonstrate to investors the long-term business viability of microfinance.

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Child of Fonkoze client (Haiti)


Introduction to Social Performance Management

What is social performance management? How does it relate to microfinance? How can social performance management help MFIs better achieve their mission to move the poor and poorest out of poverty?

During the decades-long growth of MFIs throughout the developing world, managers have measured MFI performance with financial yardsticks. They asked: What were the pay-back rates of their clients? How many loan cycles did clients go through? What percentage dropped out and why? The most common poverty measurement tool was a means test, mainly used for targeting clients at entry level. Some MFIs tried tracking poverty byusing proxy measurements, like average loan size3 or the percentage of women in a loan group. These proxies are inaccurate and not informative; they are not comparable across MFIs, countries and regions; and they don’t track changes in client poverty levels, critical to assessing social results.

What were these social results, the changes in clients’ actual living conditions and future economic opportunities? If their mission was to address poverty, MFIs needed to be asking: Were they reaching the poorest segment of their populations? Were the poorest staying in the program through enough loan cycles to make a difference in their lives? Were they actually moving out of poverty? Were there indicators that could track this kind of progress? In short, were MFIs accomplishing their social mission to serve the poor in the ways that would improve their lives?

Until recently the microfinance industry as a whole was not equipped to answer these questions. Academic studies of the problem were not suitable guides for MFIs faced with these challenges; these studies took too long to be useful. Even if the industry recognized that reaching and serving very poor clients was fundamental to its mission, it still lacked a practical and systematic way to accurately assess the results and the benefits of microfinance products and services socially as well as financially.

3 See “What’s Wrong with Loan Size”, written by Chris Dunford, President of Freedom from Hunger, for a more detailed and technical discussion of the limits of using loan size as a proxy measure for poverty outreach.

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“If reduction of poverty is the bottom line of microfinance, as it is for the Grameen Foundation, then we need to ensure that most of the people who access microfinance are able to improve their socio-economic well-being within a reasonable time frame.”

Alex Counts, President and CEO, Grameen Foundation


Why Social Performance Management Is Fundamental

If the goal of an MFI is to improve the lives of the poor and poorest of the population it serves, it must be able to:

• Identify and select the poor and poorest for its services.• Understand what products and services best meet the needs of its target population.• Recognize how best to deliver those products and services.• Assess over time if it is performing these tasks effectively.• Alter its products, services and delivery as needed.

In other words, the MFI must incorporate social outcome data into its management systems. Inspired by its Grameen Bank heritage, social performance management is at the heart of Grameen Foundation’s work; the foundation has long recognized that if MFIs are to deliver on their poverty alleviation goals, they will have to collect and analyze social data on the types of clients they serve and how client poverty status changes over time.

This is why the Grameen Foundation early on recognized the need to develop a practical, accurate and transparent tool to measure social performance just as financial tools measure financial performance. Grameen Foundation sought an innovative way to achieve a double bottom line —both social and financial—in assessing the results of microfinance programs, and in using those results to improve program performance. Furthermore, Grameen Foundation saw an opportunity to lead the development and implementation of an assessment tool that could become the industry standard.

“We always have these twin goals in mind, to be a sound, sustainable business and also provide a means of enabling people to lift themselves out of poverty...In order to do both of those things, you ultimately have to measure both. We can’t just go on telling stories about this. We have to be able to measure and demonstrate that we’re having both, a financial return and a social return.”

Paul Maritz, Chairman, Board of Directors, Grameen Foundation

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The Role of the Progress out of Poverty Index

In 2005 Grameen Foundation, CGAP, and the Ford Foundation introduced the PPITM. Developed by Mark Schreiner of Microfinance Risk Management, L.L.C., the PPI resonated well with Grameen Foundation because of the characteristics it shares with the Grameen Bank’s 10-Point System, a set of ten easily observable indicators of poverty.�

The PPI uses ten statistically relevant poverty indicators, localized by country. This accurate, effective and low-cost tool can help an MFI accomplish these key tasks:

• Identify the likely poverty level of an MFI’s clients relative to a national poverty line at a given point in time,• Track client progress out of poverty over time, and• Provide consumer/market data enabling MFI managers to serve clients more effectively.

PPIs are developed at the national level and results are linked to national and international poverty lines through country-level household surveys. This allows for relative comparisons of likely poverty levels of clients both within country as well as globally. Although created for use by MFIs, the PPI can be used effectively by any organization interested in segmenting clients or customers by poverty level, including commercial businesses providing products and services at the base of the pyramid of poverty.

The PPI provides better information to MFI managers, at lower cost than other tools available on the market. In addition, the microfinance industry has begun to recognize the need for social performance data. To date, Grameen Foundation has sponsored the development of PPIs with Grameen partner MFIs in nine countries.5

� The Grameen Bank 10-Point System includes indicators such as type of housing, availability of pure water, physical and mental health of children, school attendance of children, access to hygienic latrines, sufficient clothing for the family, and ability to provide three meals a day throughout the year and ability to pay for medical care. 5 PPIs developed with Grameen partners to date include NWTF, CARD, CCT and TSPI in the Philippines, AlSol in Mexico, Kashf and UPAP in Pakistan, Grameen Koota in India, FONDEP and Zakoura in Morocco, Pro Mujer in Bolivia and Peru, and Fonkoze in Haiti

2005

Grameen Foundation, CGAP and the Ford Foundation introduce a new poverty assessment tool, the Progress Out of Poverty Index™ (PPI™).

Grameen Foundation trains early adopters of the PPI in the Philippines.

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In a short period of time, Grameen Foundation has made its mark in social performance management through the development and roll-out of the PPI. It has developed an actual pipeline for PPI deployment, advancing the use of the PPI through the foundation’s expertise in training, technical support and advocacy.

This work has been spearheaded by Grameen Foundation’s Social Performance Management Center (SPMC). Since 2005, the SPMC has been providing industry leadership geared toward the need for and development of practical, accurate, and low-cost tools and systems to help MFIs monitor social performance and better manage programs based on those results.

The SPMC has also provided leadership through its participa-tion on the Social Performance Task Force and the MIX Working Group for Developing Social Performance Indicators. This leadership is now bearing fruit. In June 2007, the MIX determined to pilot social performance reporting with more than 50 MFIs that will report on their social performance management systems and social performance outputs, such as reporting on PPI data. The SPMC is working on the committee that is steering this social performance reporting pilot.

Also in June 2007, CGAP completed its Strategic Directions for 2008-2013. These directions state that CGAP plans to “advocate for improved social performance management and better social performance measurement, for instance with the CGAP-supported Progress out of Poverty Index.” CGAP goes on to say that the PPI “will be a cornerstone of CGAP’s social performance work….”

Despite these efforts, the widespread use of the PPI alone is not sufficient to achieve Grameen Foundation’s broad social performance vision. Its vision, and its goals, are deeper.

Grameen Foundation seeks to advance a social performance management agenda related to these four basic elements:

• Knowing Your Clients• Serving Your Clients• Growing Poverty-focused Microfinance• Understanding the Impact upon Your Clients

2007

Grameen Foundation forms an internal Social Performance Advisory Council to guide foundation policy.

The MIX determines to pilot social performance reporting with more than 50 MFIs. SPMC helps to steer this effort.

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Grameen Foundation sees these collective elements as a blueprint for innovation in social performance management. Each element builds on the previous one. Each element is crucial to expanding the kind of reach and service to the poor that will enable faster movement out of poverty.

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SHARE client weaving baskets (India)


Social Performance: The Critical Elements

1 Knowing Your Clients:Poverty Profiles

Questions for MFIs to Ask:

• Are you reaching the poor and poorest in large numbers?• Are they moving out of poverty in large numbers within a reasonable timeframe (and staying out)?

Knowing your clients is the first principle in any business. Given the mission of poverty-focused microfinance, it is even more important. Yet the reality is that most MFIs do not truly “know” their clients. In spite of their social missions, the majority is not able to provide updated, accurate, and objective classifications of the likely poverty level of borrowers. Just as for-profit marketers want to identify high-income customers for marketing purposes, social-oriented MFIs need to know how poor their clients are so they can serve them better. For many institutions, after all, microfinance is a means to an end—widespread reduction of poverty—not an end in itself. MFIs must measure not only financial and operational performance, but also social performance to assess if they are making progress toward their double bottom line objectives.

The PPI represents a breakthrough tool for knowing one’s clients—on a low-cost, accurate, regularly updated basis. As desired, results can be measured based on a sample or census of clients. Critically, the PPI links client poverty levels to national and international poverty lines and tracks changes in likely poverty levels, essential to providing an objective measure to compare MFI social performance results at the national and international level.

The PPI is a composite of ten easy-to-collect, country-specific, non-financial indicators such as family size, the number of children attending school and the type of housing they live in. In each country, the PPI draws information from that country’s national household survey or the relevant World Bank Living Standards Measurement Survey. Based on this survey, the PPI estimates the likelihood that a household is below the poverty line.

“The results of the PPI confirmed for us that we were reaching the rural poor women we wanted to serve. And the tool also identified ways we could shape our program to meet their specific needs—such as literacy training and nutrition services.”

Pilar Garcia Quintana, President, Board of Directors, AlSol (Mexico)

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This information then serves as a baseline from which client progress is measured. By using benchmarks and standards of measurement that produce reliable information, managers can build client profiles and track how they change over time. In many respects, the PPI is at its core a consumer research tool for MFIs analogous to the type of consumer marketing research conducted by many retail businesses. The PPI results provide information the management team needs to serve its clients better.

In recent years, new low-cost management tools that seek to use objective methods for assessing the poverty levels of clients have become available on a limited basis. In addition to the PPI, the primary tools include the USAID Poverty Assessment Tool (PAT) developed by the IRIS Center at the University of Maryland and funded by USAID.

Some in the industry may question the validity of the PPI and other similar tools. One limitation is that the PPI considers only the economic dimensions of poverty, rather than factoring in other elements of vulnerability. Moreover, it is not appropriate for those MFIs who are very socially motivated—such as including job creation—but who are not poverty-focused.

Knowing Your Clients

Over the next three years, Grameen Foundation expects that the majority of its partners will fully integrate the PPI into their Management Information Systems (MIS) and organizational planning and management systems. Grameen Foundation has developed a pipeline to facilitate PPI deployment and implementation.

Grameen Foundation will:• Pilot-test and integrate the PPI with MFIs in countries where the tool has already been built.• Ensure the development of practical, user-friendly training and support materials for MFIs.• Integrate the PPI into Mifos™, its open-source Management Information System solution, by building a PPI module. • Manage a PPI website to educate and support MFIs seeking to learn about and implement the PPI. • Build a cadre of PPI trainers who will support and train others to train MFIs in the use of the PPI curriculum.

2007

Grameen Foundation works with United States Agency for International Development (USAID) as it develops its legislatively-required poverty measurement tools. Several of these tools were developed by USAID in consultation with Grameen Foundation.

2008

Grameen Foundation launches www.progressoutofpoverty.org, a website designed to educate and support MFIs seeking to learn about and implement the PPI.

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But the PPI allows for a new level of accountability for MFIs that opt to use it or a comparable tool. CGAP endorsement, USAID use of the PPI, the adoption of the PPI by leading specialized microfinance rating agencies, and championing of the PPI by socially responsible investors like Oikocredit and Grassroots Capital, should continue to raise the tool’s profile and credibility as the premier tool for social performance measurement available in the industry.

2 Serving Your Clients:Social Performance Management

Question for MFIs to Ask:

• Are you serving your clients effectively now and how can you serve them better?

Knowing your clients is about targeting; serving your clients is about tracking—and effecting—change. While measuring social performance results is an essential starting point, how MFIs respond to those results--both “good” and “unexpected”− is even more important. With the power of social data, MFIs can reach more poor clients, understand the characteristics of those clients and improve products and services to serve them better. The analysis of this information will ensure that MFIs are more effective at:

• Reaching the poor with appropriate financial and non-financial products and services.• Refining products and services to meet the evolving needs of clients better.• Making credible, data-supported assertions of MFIs’ success at delivering double bottom line returns, including social returns (poverty alleviation) as well as financial returns.• Understanding their successes and challenges in measuring and managing social performance and documenting this information in stories for donors, investors and other practitioners.

An example of this is the experience of one of the first MFIs to adopt the PPI, the Negros Women for Tomorrow Foundation (NWTF) in the Philippines. NWTF discovered through its PPI

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Gomby Maramba, Manager of the Research and Development Department at NWTF, calculates the poverty levels of NWTF’s clients.


analysis that it was reaching fewer poor clients than intended. NWTF used these findings to make operational changes.

Looking ahead, the use of social performance measurement results to improve MFI decision-making is key to serving the poor more effectively. MFIs and Grameen Foundation can determine how to translate the consumer market research coming out of the PPI into changes and improvements in both the distribution channels and the design of products and services being offered to MFI clients. Grameen Foundation has an opportunity, given its leadership in advancing the PPI, to add significant value to MFIs individually, and to the microfinance industry as a whole, by providing re-sources to assist MFIs in analyzing and responding to PPI data. This includes deploying on-the-ground resources as well as sharing experiences through a social performance peer learning network.

These kinds of resources are key to building the operational expertise MFIs require to manage social performance results. Grameen Foundation and other organizations may partner to promote social performance management in microfinance. Additional support could be provided by corporations with proven track records of excellence in translating consumer marketing data into product design and improved distribution channels.

Managing with Social Performance Results

Negros Women for Tomorrow Foundation (NWTF) in the Philip-pines was one of the first MFIs to pilot, test and adopt the PPI. As NWTF analyzed the results, it discovered that 40 percent of new clients were likely to be above the poverty line, a figure much higher than it had anticipated given its explicit mission to reduce poverty. In response, NWTF set a target that only 10 percent of new clients should be above the poverty line. In order to ensure that its goal would be achieved, it is now using the PPI—rather than a means test or other proxy measures—to determine eligibility for potential new clients.

“In the past two years, the PPI has been one of the major forces in helping NWTF achieve its mission to target the poorest clients and serve them better. This easy yet reliable tool showed us how to find the clients who needed our help the most. It has changed our entire approach to targeting.”

Cecile del Castillo, Executive Director, Negros Women for Tomorrow Foundation (Philippines)

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3 Growing Poverty-Focused Microfinance: Catalyzing Increased Investment


• How do you use successful social performance measurement and management to attract increased investment, fuel growth and increase depth of outreach?

In order to grow poverty-focused microfinance, it is not enough to measure and manage social performance. The next, critical step is to ensure that MFIs—and organizations like Grameen Foundation—use existing and improving social performance data to carry out two tasks: 1) continue to grow and provide key support to strong, poverty-focused MFIs, and 2) educate key

Serving Your Clients

Managing social performance results—finding more effective ways for MFIs to move their clients out of poverty and equip them to stay out of poverty—gets to the heart of why Grameen Foundation is involved in social performance work.

Grameen Foundation will:

• Support the writing and publication of a Social Performance Management Handbook to provide case studies of MFIs using PPI data and help MFIs integrate social performance management and measurement systems into their operations: governance, management, marketing/branding, capital structure, IT strategy, product development, and more.• Lead training-of-trainer sessions and work with contract organizations supporting social performance management to develop core training capacity to serve Latin America, Asia, the Middle East and Africa.• Carry out industry market research based on social performance data.• Develop a virtual warehouse of PPI data gathered from all PPI users—microfinance and others—to inform a deep research agenda into poverty levels around the globe. Such a database could be of interest to universities and other research institutions.• Develop case studies that analyze PPI data and demonstrate the integration of the PPI into overall management systems in order to achieve social objectives.

2007

M-CRIL/Microrate, Planet Rating and Microfinanza begin incorporating PPI data where available and all have publicly stated their interest in including PPI data in social ratings.

2008

Grameen Foundation carries out training-of-trainers (TOT) workshops to build training capacity of partners.

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donors, investors and raters in order to attract more funding and resources to poverty-focused microfinance.

The second task is key; at the heart of growing poverty-focused microfinance is ensuring that holistic evaluations of MFI performance—financial, operational and social—are carried out by social investors, rating agencies and traditional donors. This is a challenge. While many Microfinance Investment Vehicles (MIVs) are seeking to invest in MFIs that are sustainable, those MFIs may not target the poor solely, resulting in a mixed clientele. Added to this challenge is the growing influx of new investors in microfinance who do not necessarily focus on the double bottom line. The result is that, to date, insufficient attention is being paid by social investors as to whether or not they are investing in truly poverty-focused MFIs. This trend is evident when comparing investments by MIVs6 against poverty incidence on a regional basis.

Overall, very little work has been undertaken in this area of social performance. While extensive attention has been given appropriately to social performance measurement and management, much less attention has been given to how social performance results can be used to grow poverty-focused microfinance. This is an area where Grameen Foundation has a unique contribution to make. Due to its network of MFI partners, its experience in social performance management and its relationships with social investors, Grameen Foundation knows what these investors want and what MFIs can provide.

Despite the fact that 47 percent of MIV funding comes from socially responsible investors and another 36 percent from development finance institutions (e.g. the private sector arm of public finance institutions such as the IFC, KfW), the mismatch between the regional focus of MIV investing and global poverty incidence is glaring.

6 MIVs are one of two main players in foreign capital investment in microfinance. Of an estimated $�.� billion in managed capital, $2.� billion is managed by Development Finance Institutions and $2 billion by MIVs (including ProCredit Holding AG). MIV growth has been rapid, with 30 new funds and asset growth from $637 million to $2 bil-lion from 200� to 2006. Note that since this 2006 research, there are now more than 80 specialized MIVs in existence, according to Elizabeth Littlefield at CGAP.

“This has taken an enormous amount of effort, because it is not easy for an institution to measure poverty accurately. But we’ve done it. We’re working now with the world’s leading institutions dealing with microcredit, so that everyone can share the same standard for judging themselves, and so that investors and donors can look at each of the microcredit institutions and say ‘who are they truly serving? Who are they holding themselves accountable to?’ ”

Peter Cowhey, Member,Board of Directors, Grameen Foundation

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Because MIVs invest both private and public funds, their risk tolerance may exclude certain MFIs. The challenge for MFIs, as well as for Grameen Foundation, is to make the case for more holistic evaluation of microfinance performance that goes beyond traditional (and important) measures of financial and operational performance to consider social performance. The inclusion of social performance results should not be limited to the investment decision-making process, but should extend to monitoring and evaluation activities. Only when more MIVs, especially those seeking to reach and impact the poor, adopt the PPI or an acceptable alternative will social investors be confident that they, in fact, are investing in organizations that move the poor out of poverty.

Grameen Foundation can take groundbreaking steps in developing industry benchmarks in the area of social performance. The Asset Class survey carried out by Grameen Foundation in 2005 noted that benchmarks were one of the most important qualities social investors would require to increase the attractiveness of investing in microfinance. Grameen Foundation intends to collate PPI results globally to develop key benchmarks for poverty-focused MFIs, creating a basis for social investors and other key stakeholders not only to compare the segment of poverty-focused microfinance to the broader microfinance industry, but also to compare poverty-focused MFIs to one another. It is hoped that Grameen Foundation’s efforts in this space will encourage specialized rating agencies in microfinance also to begin to use benchmarks of this type, thereby better integrating financial and social performance evaluations.

A SEEP survey of 9� investors leads to the preliminary conclusion that, subject to some caveats about the survey, there seems to be evidence of a strong appetite within the investor community for better poverty-oriented measurement and guidance on how to use such measurement data.

Grameen Foundation has a unique role to play in educating MFIs to present themselves in a holistic manner to social investors. The first step is the adoption of the PPI and presentation of its results. Beyond that, Grameen Foundation—through its financial advisory services work—can provide education and frameworks for preparing and presenting a holistic evaluation of MFI performance to social investors.

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Elipidia Aquino Bernardo , a Centeotl client (Mexico)


Through the PPI data collected to date, Grameen Foundation can compare results of poverty-focused MFIs to other microfinance segments and determine whether scale indeed comes at the expense of depth of outreach. This is a key issue for the microfinance industry to grapple with; for the first time, MFIs will be generating reliable data on client poverty levels to inform this matter.

Growing Poverty-focused Microfinance

Grameen Foundation has a very important and clear role to play in using social performance results to grow poverty-focused microfinance, both through its increasing relationships with social investors and leading specialized microfinance raters, as well as MFIs themselves.

Grameen Foundation will:• Collate PPI results globally to develop key benchmarks for poverty-focused MFIs, creating a basis for comparison between poverty-focused microfinance and the broader microfinance industry, as well as for comparison of poverty-focused MFIs to one another. • Serve as a resource center—like industry research groups within investment banks—providing updated industry information and presenting data, including benchmarks and analysis, about poverty-focused microfinance on a global basis. • Encourage specialized rating agencies in microfinance to use benchmarks that integrate financial and social performance evaluations.• Expand relationships with social investors and leading, specialized microfinance raters as well as MFIs themselves.• Raise awareness among social investors about using social performance criteria in investment decision-making.• Assist MFIs in developing strategies to target and raise financing from different kinds of investors, including social investors.

2008

Grameen Foundation creates information for social investors about using social performance criteria in investment decision-making.

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4 Understanding the Impact Upon Your Clients: Measuring Results


• How have your services contributed to client movement out of poverty?

In microfinance, knowing who your clients are and whether they are moving out of poverty is not sufficient to achieving an MFI’s objectives. MFIs also need to understand if movement out of poverty is in fact the result of the products and services that they are offering their clients. Making such a determination is undertaken through impact assessments.

An impact assessment is a study, most often carried out by a third party, that determines the causal link between an MFI’s products and services and improvements in the lives of its clients in areas such as employment, income, nutrition, education and health. Samples of clients using microfinance services in each of these areas are compared to control groups that are not using microfinance services. Researchers can draw conclusions about whether material benefits in client well-being can be attributed to the microfinance services themselves.

For Grameen Foundation, understanding the causal relationship between microfinance and poverty alleviation gets to the heart of its purpose in pursuing microfinance as an effective, scaleable tool to address global poverty. However, recognizing that neither Grameen Foundation nor MFIs are research institutions, Grameen Foundation’s role is going to be to support and promote, where appropriate, impact evaluations.

Understanding the Impact on Your Clients

Understanding how microfinance actually results in poverty alleviation requires further research, ideally through impact assessments.

Grameen Foundation will:• Encourage research institutions to design, develop and carry out impact assessments.• Support and promote impact assessments when possible and/or appropriate.

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Pro Mujer Bolivia client (Bolivia)


Looking Ahead

Through its social performance management work going forward, Grameen Foundation envisions a day when social performance results are measured by and used to manage MFI activities and improve delivery of services to the poor as readily as financial data are used today. More broadly, Grameen Foundation imagines social performance results being reported alongside financial and operational data to provide investors, particularly social investors, raters and other third parties the information required to make a holistic evaluation of MFI performance.

There is an urgent need within the microfinance industry for MFIs to understand better the type of client they serve; use social performance data to improve products and services; attract increased investment to poverty-focused microfinance through a more holistic evaluation of performance that includes social performance results; and explore the causal link between microfinance and poverty alleviation.

With its explicit commitment to microfinance as a means to the broader end of poverty alleviation, Grameen Foundation is in a position to take a unique leadership role in the area of social performance.

Grameen Foundation will continue to engage the wider microfinance community on social performance results being achieved by its partners. It will seek to integrate the PPI and the use of PPI-generated data into a wide range of existing and future external efforts, including social audits and initiatives outside the microfinance industry. And it will encourage better use of social data to interpret the overall performance of MFIs, linking social and financial assessments for a more meaningful whole.

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Children are some of the greatest beneficiaries of the work of SEAP, a Grameen Foundation partner. ( Nigeria)

About Grameen Foundation

Grameen Foundation is a global non-profit organization that combines microfinance, technology, and innovation to empower the world’s poorest people to escape poverty.

It has established a global network of partners in 28 countries that has impacted an estimated 34 million lives in Asia, Africa, the Americas, and the Middle East. Based in Washington, D.C.,

Grameen Foundation was founded by Alex Counts, who began his work in microfinance with 2006 Nobel Peace Laureate Dr. Muhammad Yunus, the founder of Grameen Bank. Dr. Yunus is

a founding and current member of Grameen Foundation’s board of directors. For more information on Grameen Foundation, please visit www.grameenfoundation.org.

50 F Street NW, 8th FloorWashington, DC 20001

www.grameenfoundation.orgwww.progressoutofpoverty.org

grameen foundation: a vision for social performance

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grameen foundation marketing

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grameen bank

management tool

poverty reduction

microfinance industry

poverty assessment tool