Social Performance Ratings

Transcription

1 JUNE 2010 Social Performance Ratings Presented by: Edouard Sers, Expert Analyst University Meets Microfinance «Measuring the Impact and Social Performance of Microfinance» Planet Rating 13 rue Dieumegard Saint-Ouen France Tél : Fax : rating@planetrating.com

2 About Planet Rating 1

3 Knowledgeable & Committed Shareholders Planet Rating is backed by solid shareholders PlaNet Finance ( A leading French NGO that aims to alleviate poverty worldwide through the development of microfinance. Paris-based with 1,000+ employees in 80 countries; 2008 resources of 9.4 million EUR COFACE Group ( COFACE provides 4 product lines: credit information and corporate ratings, receivables management, credit/guarantee insurance, export guarantees and factoring. FitchRatings (A+), S&P (A-), Moody s (A2). Paris-based with 6,800+ employees in 67 countries; 2008 revenues of 1.68 billion EUR CDC Group ( CDC Group is the leading French manager of public savings deposits and pension funds. It is also a leading investor in social housing and regional/local development projects throughout France. FitchRatings (AAA). Paris-based with 5,200 staff in 80 countries; 2007 assets of 221 billion EUR and net income of 2.5 billion EUR Viel & Co. Finance ( VIEL & Cie is one of the world's top three brokers in financial (money markets, bonds, interest rate, currency/ credit derivatives, equities, equity derivatives, interest rate & index futures) and commodity-related products. Paris-based and Euronext-listed, VIEL operates in 27 countries; 2009 revenues of 920 million EUR 2

4 Planet Rating: 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, thanks to a network of 6 offices spread over 4 continents Paris HQ: covering Eastern Europe Lima Office: covering Latin America & the Caribbean Dakar Office: covering West & Central Africa Nairobi Office: covering East & Southern Africa Beirut Office: covering Middle East & North Africa Manila Office: covering Asia Offices Missions Qualified & experienced team Each senior analyst has conducted at least 12 rating missions on 3 different continents Analyst backgrounds: investment banking, management consulting, non-profit, microfinance 3

5 Social Performance Rating Methodology 4

6 Social Performance Rating development Rating Methodology developed since 2005 and still evolving First tests in 2005/2006 on several MFIs across the world using the CERISE SPI and the USAID AMAP tools and later a pilot methodology Finalization of the V1 in 2007 Rating methodology in line with the framework defined by the Social Performance Task Force based on good practices adopted in the industry Methodology updated (V2) in 2010 After three years of implementation of the v1: close to 40 social ratings between 2007 et 2010 for Planet Rating, and presumably close to 150 for all rating agencies According to our clients feedback and to the latest trends in the industry Next updates shall further incorporate the latest developments/findings from impact studies in microfinance 5

7 Social Performance Framework Social Performance Ratings provide an opinion on the capacity of an MFI to achieve its social goals Social Performance Management is defined as the processes through which MFIs 1) define and formalize their social goals, 2) design the systems to put these intentions into practice, 3) measure actual outcomes and 4) use these results to refine systems and improve practice Social Performance Management Impact Scope of social performance ratings Rating agencies have adopted a common framework of analysis and each one developed its own rating methodology Conclusions about impact are crucial to update the framework used in social ratings and SPM in general 6

8 Social Rating Scale: What Do We Measure? Scale with strong emphasis on the evaluation of the Social Performance Management systems; considered as a strong predictor of performance; Currently measurable and comparable Information and evidence of performance needed to reach the higher levels of the scale Rating Definition Advanced: Long-lasting commitment to social goals; efficient management of social performance and social responsibility risks; institution very likely to achieve its social goals Convincing: Clear commitment to social goals; reasonable management of social performance and social responsibility risks; institution likely to achieve its social goals. In progress: Clear intent to reach social goals; social performance management systems being implemented. Incipient: Clear intent to reach social goals; low capacity to manage social performance. Intangible: Intention to reach social goals is non tangible; low level of management of social performance. Negative: No intention to reach social goals; mismanagement leads to negative social performance. 7

9 Social Rating s Approach We rate an MFI s capacity first to improve and prove its social performance Take corrective ACTIONS Design Your SOCIAL MISSION objectives, target, service offering Evaluate RESULTS Revise your procedures and social mission Design and build INDICATORS Collect INFORMATION TRACK targets SET targets 8

10 Five Social Performance Rating Domains Social Performance Management We rate the intent to achieve the social mission, its institutionalization, organizational buy-in, the quality of performance measurement and tracking as well as the risk of mission drift. Financial Inclusion We rate the MFI capacity to reach the underserved (poor or excluded), and offer them an adapted range of services in an efficient manner. Client Protection and Ethical Finance We measure the MFI s level of compliance with the six Client Protection Principles (as defined by CGAP and ACCION), whether the MFI has a fair pricing and how it mitigates risks of Money Laundering Human Resources Policy We evaluate labor conditions (through the professionalism of HR Management and its compliance with labor laws and ILO standards), the MFI s compensation policy and whether staff benefits from equal rights. 25% 25% 30% 20% Social Change We evaluate how non-financial services offered by the MFI may contribute to social change as defined in frameworks of reference such as the UN Charter, Human Rights and MDGs. Notch 9

11 Case Study 10

12 Presentation of Al Majmoua, Lebanon Institutional Presentation Al Majmoua, started its operations in 1994 as a program from Save the Children (USA) and registered as an independent NGO in Headquartered in Beirut with a network of 10 branches across the country Outstanding portfolio of 14.2 M USD as of December 2009, reaching out to 18,001 clients Group loans (10%) and individual loans (90%) ; Av. loan disbursed at 1,178 USD (14% of GDP per capita) ; Al Majmoua s vision is to be the leader in creating an inclusive financial system where all people in Lebanon have access to affordable services. Its mission is to improve the economic and social conditions of individuals, with limited income, micro and small entrepreneurs in particular, in all areas of Lebanon, by providing access to quality financial and non-financial services 11

13 II. Financial Inclusion Rating Factors 25% Outreach to the Underserved Adaptation of the services Cost of the Services Al Majmoua Highlights 3+ Branches opened in priority in the poorest areas of Lebanon Individual targeting based on the income levels but the actual poverty level of the clientele cannot be compared to international benchmarks Financial services have been well adapted to address the clients financial needs Example of Indicators % poor in areas of operations % female clients % rural clients % clients with social collaterals Penetration Rate Al Majmoua 30,0% 41,3% 49,4% 22,3% 2,0% Lebanon 28,6% 51,0% 12,8% n/a 12,5% Range of services so far limited to lending and credit life coverage Competitive pricing for group loans Average amount disbursed Retention rate (Schreiner) Effective Interest Rate USD 68,7% 35,0% (13.9% PIB/h) n/a n/a 12

14 III. Client Protection and Ethical Finance Rating Factors 30% Prevention of over-indebtedness Ethical staff behavior Transparency of services Responsible pricing Appropriate collection practices Mechanisms for redress of grievances Privacy of client data Ethical finance Al Majmoua Highlights 3+ Good procedures to prevent clients overindebtedness and ensure a minimum level of transparency. However, the lack of credit bureau and communication of flat rates at their nominal value call for sector-wide initiatives in Lebanon. The implementation of formal mechanisms to redress client grievances and better prevent inappropriate collection practices is planned. Example of Indicators % loans checked with a credit bureau % loans checked with other MFIs Max. Installment / Disposable Income % clients with credit life insurance % clients bearing the Foreign Exchange risk Context: Literacy rate Type of interest rate Commission % clients visited by non operational staff % 5-10% 33% 72% 93% 98% Flat Yes 20,7% 13

15 Contacts Global Headquarters 13 rue Dieumegard Saint-Ouen Paris France Tel: Fax: Middle East & North Africa Piccadilly Bldg #407 Hamra Street Beirut Lebanon Tel: Latin America Francisco de Paula Ugarriza 813 Oficina 301 Miraflores, Lima 18 Peru Tel: Fax: West Africa & Central Africa Immeuble Sokhna Astou Lo 4ème étage Sacré Coeur 2 BP 5695 Dakar Senegal Tel/Fax: Asia 444 EDSA 21 st floor, Guadelup Viejo 1211 Makati, Manila Philippines Tel: East Africa & Southern Africa Shelter Afrique House Mamlaka Road PO Box 16658, Nairobi Kenya Tel: rating@planetrating.com 14