Case studies

microfinance case studies

Horizonti (Macedonia) wanted to start work on SPM, but did not know where to start with. To learn more how they started their work on SPM click here

To become more effectively fulfilling in social mission and grow up as an organization Micro Development Fund (Serbia) decided to start integrating SPM. To learn how they started their SPM click here

Ana Dragic, Organizational Development Director, said: “Our program has gone through many changes and at some point we started asking ourselves weather we are really contributing to poverty alleviation, especially for children. […]Our management team decided to work with the Microfinance Centre to conduct an internal social audit, and we carried out a comprehensive mission review exercise […]”. To learn more about AgroInvest (Serbia) experience click here

People's Microfinance (the Philippines) works closely with poor women in the pursuit of micro enterprise development, was one of the early adaptors of SPM. Since participating in the SPM Strategy Workshop two years ago, PM has undertaken a number of activities aiming to improve its social performance. to learn about  what kind of activities helped PM to improve their SPM click here

One of the initial steps that Pro-Poor Microfinance Agency (the Philippines) took toward implementing SPM was the revision of its vision and mission to reflect the organization’s financial and social objectives. PPMA was one of the first MFIs to implement the PPI in profiling its Consumers. At the same time that PPMA was working on the PPI, they were also using the QAT tool. To learn more click here

Saving House Moznosti (Macedonia). has been growing very fast during the last years, with the aspiration to transform into a bank. With the increase in the number of Consumers and staff, Moznosti wanted to ensure their commitment to their mission and ensure an initial focus on the low income population of Macedonia. To learn how Moznosti ensure their commitment to their mission read here

Horizonti, Macedonia

Target Consumer definition

During the audit it was identified that both the Board and staff show strong support for social performance. However, field staff admits lack of clear definition of Consumers characteristics makes them shift towards better off Consumers from among their target group.

The institution decided to clearly define the target Consumer group characteristics as well as the intend change they want to make in their Consumers’ lives. The clear definition will allow setting SMART objectives and improving the relevancy of targets.

Information use

Horizonti observed its field staff has access to a lot of informal information on Consumers needs, changes affected by the loan, reasons for entering and leaving the program etc. Despites it is no used. The growth in loan size and business income is not translated into quantified poverty measure. Social –economic parameters and other loan related information are not processed and analyzed.

The unintended results are followed only when they influence loan related performance. Other results like increase in literacy, change of the woman’s role in their family are hardly tracked.

Thinking about the new MIS development, the institution decided to solicit feedback from staff on which SP information will be useful to make informed decisions.

New target group

One of the clear target groups of Horizonti is the community of Roma population. In order to better serve these target Consumers, the institution made a series of decision based on SP data.

First of all, the institution hired and trained staff from the Roma community, willing to work with their peers. Next, the certain amount of premises was located close to the target Consumers places.

The institution kept conducting regular market research among the group. This resulted in adapting services to Consumers needs:

  • Horizonti introduced financial education for the Consumers
  • Answering the Consumers needs, Horizonti introduced a housing product – affordable for the Roma people, in partnership with other organization.

Micro Development Fund (MDF), Serbia

MDF Executive Director said[1]. “There was a time, when donors pushed us towards financial sustainability, often at the expense of all else. In 2005, as a Director, I’ve been feeling for some time we weren’t effectively fulfilling our social mission – and at that moment I knew I could do something about it.

We are a small MFI, so at the beginning it was just me. I knew I needed to get more people on board, so my first task (and most difficult!) was to communicate the importance of our mission and SPM to staff. When I talked about social performance to staff and donors, some were worried that we were going to lose our focus on financial performance.

When the message started to take root, it became clear I needed to form a team to start integrating SPM. I brought in people from all departments and levels and we focused on social audit.”

MDF started SPM by using the QAT. The internal auditor carried out the QAT exercise during one month, organizing a half day audit panel at the end of the process. The exercise helped the team to convince those who had doubts and brought everybody on the same page in terms of understanding social performance concepts.

The results also showed, that MDF is doing a good job in accomplishing their mission, but there were areas they identified in need of improvement: “In a lot of ways, it confirmed my suspicions about our weak areas – and helped us form action plan, which was approved by the Board.” However, the findings also revealed that qualitative data is not optimally used for decision making. The audit prompted management discussion on to ways of improving the use of information collected. They appointed people to revise the information needs analysis and data collection process to ensure data quality and the usefulness of the decision making process at different organizational levels.

One of the information areas was related to Consumer exit surveys, which MDF had conducted quite regularly. However, during the audit it appeared that although enough information existed, it is not analyzed sufficiently to improve the service delivery. To tackle this issue, it was decided to review the exit survey and adjust the questions, so that the information on the reasons for exit can be easily interpreted, analyzed and utilized effectively for decision making.

AgroInvest, Serbia [1]

Ana Dragic, Organizational Development Director, said: “Our program has gone through many changes and at some point we started asking ourselves weather we are really contributing to poverty alleviation, especially for children. […]Our management team decided to work with the Microfinance Centre to conduct an internal social audit, and we carried out a comprehensive mission review exercise. We studied the mission from three key angels: target Consumers, economic development and social impact. All of us – staff, management and the Board – realized that our mission was telling us to look beyond economic poverty, and to consider intellectual poverty (lack of access to education) and physical poverty (lack of access to health services).”

In 2006, an external facilitator visited AgroInvest, who conducted a five day process of social audit using the QAT and involving the whole AI team. A few months later, the institution used its experience form the SPM Workshop (a three day training course) to facilitate an internal workshop for the AI team to analyze and discuss the mission, followed by the development of social goals and strategy to achieve those goals.

“The next step was to integrate this new understanding of our mission in

all areas of our work. I believe we have been able to better focus on the needs of children and families, by planning an integrated model of programs and services. To improve understanding and responsiveness, we have also been working closely with village associations to identify their needs and priorities, and developing programs accordingly.”

After their first experience with the QAT, AgroInvest has repeated the exercise annually, by using an internal QAT facilitator. Every year, new changes based on the QAT results were introduced to improve practice. After these changes, the organization feels that it is ready to apply for a social rating.

People’s Microfinance (PM), The Philippines

PM, who works closely with poor women in the pursuit of micro enterprise development, was one of the early adaptors of SPM. Since participating in the SPM Strategy Workshop two years ago, PM has undertaken a number of activities aiming to improve its social performance: (a) reviewing its vision and mission in order to clarify social goals and objectives; (b) appointing a SPM Champion and created a SPM Team to carry out and monitor the progress of SPM implementation; and (c) conducting a staff orientation course on SPM. To further improve its SPM, PM decided to carry out a social audit in the organization.

The social audit showed that PM still needed to make its social objectives SMART, that is, to translate its performance indicators, including character improvement and skills development of Consumers, into quantifiable targets over a specific period of time, to make tracking possible and useful. The PM management, thus, put working on the organization’s objectives and indicators and incorporating them into its MIS as a top point on their agenda. The PM management also planned to integrate the results of the Progress Out of Poverty Index (PPI): adopting PPI led PM to review and redefine its target Consumers in line with its social objectives—into the MIS. PM had yet to decide though on its target Consumer and eventually to revise its operations manual accordingly.

PM’s current high staff turnover rate of 25 percent did not seem to help PM in its pursuit of SPM. As a number of staff had resigned but recruitment had not caught up with the demand for new hires, even the personnel assigned to work on the SPM implementation were temporarily assigned to other jobs. Thus, the collection and management of SP-related information had taken a back seat. High staff turnover also made education or training on SPM necessary for new staff.

It was thus recommended that PM refine and/or review its HR processes — clearly stating the competencies and skills required upon hiring, training programs for existing staff and culture-building programs and employee engagement centered on the mission of PM.

Due to internal concern about staff turnover, coupled with the low morale of the field staff, the Executive Director (ED) was apprehensive about launching new products despite the demand from Consumers. Currently, the ED intends to link its Consumers to government agencies for health insurance for pensions and educational loans.

Pro-Poor Microfinance Agency (PPMA), The Philippines

The management’s initial reaction was “confusing given two simultaneous initiatives… a lot of information needs to be collected and a lot has been collected but not used. For a tool to be accepted in the field, a simple tool has to be used.” PPMA people, from the field staff to the management, were overwhelmed.

Despite this reaction, the PPMA management realized that although financial and social objectives are synergistic, there are times when tension results from these two, e.g. increasing Consumers does not necessarily mean creating a bigger impact. In the early 2000s, for example, PPMA made a conscious decision to expand in the next five years; the Consumer base did increase but so did the percentage of the non-poor Consumers from a single digit to a double digit, as indicated by the PPI results. Another example given was the expansion to poorer areas, which would require longer break-even periods. The management’s key learning was that in making decisions, it should be considered how this decision will affect our financial objectives and social objectives? Are these objectives the same? If not, how do we balance the trade-off? For every decision, everyone has to be conscious of the impact of such a decision. Synergize, balance, trade off.

The audit also pointed out that the hiring of managers from external sources (as opposed to homegrown talents) as well as the introduction of new, more business-like training programs for the field officers (as opposed to hands-on, on-the-job, field training) subtly contributed to the “mission drift” of the organization. The former did not guarantee the professional managers’ having the heart and passion for the poor as the PPMA founders had, while the latter created a new breed of staff that made the Consumers’ capacity to pay their primary loan criterion.

In the audit, another kind of “drift” was also diagnosed: that between the field operations and the support services, which the former perceived had a bigger power base in the organization or at least, nearer the powerhouse. Taking this into consideration, more operations people were made part of the SPM committee, which PPMA formed eventually. This they did not do only because the operations people were the ones who touch base with Consumers and thus more directly involved in the advancement of the SP objectives, but also because they intended to empower the operations people and bridge the gap between them and the support services.

Moznosti , Macedonia

Saving House Moznosti from Macedonia, has been growing very fast during the last years, with the aspiration to transform into a bank. With the increase in the number of Consumers and staff, Moznosti wanted to ensure their commitment to their mission and ensure an initial focus on the low income population of Macedonia. They decided to take the opportunity and pilot test the QAT as a self-assessment, with limited external help. From December to February, the HR Manager carried out the QAT, talking to senior management, visiting  several branches to meet with branch managers, loan officers and Consumers.

Although Moznosti’s mission is displayed in each branch and office, the social audit revealed that newly hired staff do not always really understand the purpose of their work, which is to serve economically active people excluded from the financial sector. Although well designed products ensure that Loan Officers keep targeting the right Consumers, the planned future changes aimed at fast portfolio growth pose a threat on the desired outreach, due to insufficient commitment and understanding of the mission among the increasing number of new staff.

Discussing the findings of the audit, the institution decided to invest resources in changing the training program of newly hired staff as well as an incentive system to build staff social awareness and ensure that there is mission focus throughout the organization at all levels.

Moznosti has published the QAT report on its web site and uses it as one of the communication tools with external stakeholders, like donors and investors.

Asked about the changes in the QAT process for the next time, the HR Manager said she would travel to fewer branches and would plan the process for another period of the year, to avoid the period when staff are overloaded with tasks related to end of the fiscal year and the winter holiday season.

[1] The quotations used in the text come from Putting the ‘social’ into Performance management: a practice-based guide for microfinance. developed by Imp-Act Consortium and MFC.

Source: www.mfc.org.pl

Category: Payday loans

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