Customer Centricity Learning Event Chennai, India Monday February 19, 2018

Transcription

1 Social Investor Meeting on Responsible Inclusive Finance Customer Centricity Learning Event Chennai, India Monday February 19, 2018

2 DIM 1: Our areas for improvement: West Africa, social goals DEFINE in Tier 1 and 2 DIM 6: BALANCE FINANCIAL AND SOCIAL PERFORMANCE DIM 5: TREAT EMPLOYEES RESPONSIBLY DIM 5: TREAT EMPLOYEES RESPONSIBLY DIM 1: DEFINE AND MONITOR SOCIAL GOALS 80% 60% 40% 20% 0% 0% DIM 4: TREAT CLIENTS RESPONSIBLY DIM 2: COMMITMENT TO SOCIAL GOALS DIM 4: TREAT CLIENTS GCAMF vs benchmark RESPONSIBLY by region: West Africa DIM 1: DEFINE AND MONITOR SOCIAL GOALS 100% DIM 6: BALANCE FINANCIAL 50% AND SOCIAL PERFORMAN DIM 3: PRODUCTS THAT MEET CLIENTS' NEEDS AND PREFERENCES GCAMF (West Africa region) N=11 DIM 2: COMMITMENT TO SOCIAL GOALS GCAMF vs benchmark by size: Tier 1- MFI GLP>100M 2 Grameen Credit AgricoleFoundation West Africa TIER 1 DIM 3: PRODUCTS THAT MEET CLIENTS' NEEDS AND GCAMF (Tier1) N=6 DIM 6: BALANCE FINANCIAL AND SOCIAL DIM 5: TREAT EMPLOYEE S RESPON AND MONITOR SOCIAL 80% 60% 40% 20% 0% DIM 2: COMMIT MENT TO SOCIAL GOALS DIM 3: PRODUCT S THAT MEET CLIENTS' GCAMF (Tier 2) N=12 DIM 4: TREAT CERISE Database (Tier 2) CLIENTS N=22 GCAMF vs benchmark RESPONSI by size: Tier 2- MFI 10M<GLP<100M Areas for improvement Performance of Sub-Saharan Africa is due to East Africa. West Africa below benchmark for dimension 2 (governance), 3 (product adaption) and 6 (balancing financial and social objectives). Tier 2 partners social performance globally just at benchmark Tier 1 partners globally at or below benchmark Main area for improvement is defining and monitoring of Social Goals

3 Keep the momentum and strengthen our social performance requirements Social Performance Management Strengthen our partner selection based on social performance through the implementation of social covenants and performance targets Global Social Performance score (All six dimensions) TIER 1 > 50% TIER 2 > 45% TIER 3 > 40% Client Protection score (dimension 4) TIER 1 > 70% TIER 2 > 60% TIER 3 > 50% Prevention of overindebtedness TIER 1 > 70% TIER 2 > 50% TIER 3 > 50% Monitor the poverty level of our partners clients and their social outcomes Offer Technical Assistance missions to reinforce social performance End clients focus Introduce specific funding products for agriculture Focus on vulnerable clients, such as refugees (project in partnership with the UNHCR) Grameen Crédit Agricole Foundation 3

4 Feedback from the group and Q&A

5 Thank you! CERISE:

6 Agenda : Welcome and Updates : Understanding the risk for over-indebtedness in India : Implementing the Universal Standards in India : Responsible Exits : Lunch : SPI4 and ALINUS : Update on lender guidelines monitoring in Cambodia : Assessing S&E performance of SME finance : Coffee Break : Digitalization & Fintech : Data Platform : Aligning efforts with the impact investing field : Wrap up and conclusions

7 Cambodia Microfinance Association Lender Guidelines Project

8 An initiative of the Cambodian Microfinance Association led by the CEO Task Force and CMA CEO Club With the Technical Support of the Credit Bureau of Cambodia and Daniel Rozas (MIMOSA) Funded by ADA, BIO, FMO, Incofin Investment Management and PROPARCO

9 Progress CMA Board approves the MoU in December 2016 Endorsed and supported by CBC Endorsed by investors/lenders Endorsed in principle by NBC Signed by 39 CMA members Started monitoring data from Jan 17 to develop and improve monitoring compliance dashboard, which CBC is handling and reporting to CMA Collected data for monitoring dashboard since July 2017, individual report has been sent to each signatory (dashboards exist for April Dec 2017)

10 Lending Guidelines summary Broader data reporting to CBC Prevent unhealthy competition Client protection Income sources supporting loan Parties to the loan (co-borrowers, guarantors) More timely reporting (within 5 biz days) Caps on multiple lending Metrics on loan refinancing Implement rescheduling/restructuring policies Limit asset sales of poor clients to exceptional cases only End use of local authorities for collections

11 CBC Lender Guidelines Dashboard

12 Growth, unabated Portf size (bln 7 USD) Num Portfolio 2 2 CMA member growth Num brwrs (mln) 2.5 S

13 Loan sizes 3,000 2,500 2,000 CMA Members: Avg loan size Ln Size Growth (%) 34% 40% 30% 1,500 1, % Avg 20% 10% 0% Sep-17 Source: CMA; excludes large loans from ACLEDA and Sathapana

14 but multiple lending is low. what s going on?

15 Hypotheses: 1. Loan size growth is key risk in Cambodia 2. Refinancing is riskiest part of loan size growth

16 Competition via refinancing Lender 1 Lender 2

17 And in Cambodia, usually: Lender 2 = Lender 1

18 Refinancing: measuring time risk 1 st trimester 2 nd trimester 3 rd trimester Loan 1 Loan 2

19 Refinancing: measuring size risk Loan 1 Loan 2

20 Proposed Limits for Refinancing Current lending distribution Time Size <=110 >110 >120 >140 >160 >180 >200 1st trimester 2nd trimester 3rd trimester 21% 10% 19% Max level with proposed limits Time Size <=110 >110 >120 >140 >160 >180 >200 1st trimester 2nd trimester 3rd trimester 30% 10% 1% Ø 18% reduction in current disbursements, all at the highest refinancing risk level

21 CBC Lender Guidelines Dashboard

22 Next Steps Revise dashboards to include matrix and industry averages so that MFIs can see where they stand Encourage social investors to collect dashboards during monitoring visits and to have a dialogue with investees Discuss with SMART Campaign on how to include such risks in upcoming certification renewal Keep regulators updated on the trends Lenders to slow growth

23 A new way forward for self-regulation? Identify key risks Clear indicators to monitor Independent monitoring Oversight by interested stakeholders Encourage regulator engagement Loan size growth Refinancing Multiple borrowing Loan-toincome ratio Refinancing matrix Multiple borrowing Credit bureau Social investors MF association Continuously update on project outputs CBC providing dashboard to regulator

24 Thank You!

25 Agenda : Welcome and Updates : Understanding the risk for over-indebtedness in India : Implementing the Universal Standards in India : Responsible Exits : Lunch : SPI4 and ALINUS : Update on lender guidelines monitoring in Cambodia : Assessing S&E performance of SME finance : Coffee Break : Digitalization & Fintech : Data Platform : Aligning efforts with the impact investing field : Wrap up and conclusions

26 Assessing social & environmental performance of SME finance institutions Objective Map the relevance and applicability for SME finance of the Universal Standards (SPTF), investors due diligence tools and other frameworks. Identify possible opportunities for SME tailored analysis. Consolidate the information available on how to evaluate social &environmental performance of SME finance institutions. Source 5 MIVs, 3 DFIs, MFR data, Universal Standards, Cerise SBS and IRIS metrics. Timeline In person meetings at: SPTF 2017, SAM 2017, EMW 2017, SPTF 2018, SPTF SIWG

27 Assessing social & environmental performance of SME finance institutions # Activity Where 1.1 Kick-off meeting with investors to collect feedback on their priorities, preferences, concerns SPTF 1.2 SME literature review, collection and review of ESG SME finance tools publicly available MFR SME assessments review: analysis of social ratings of SME finance FSPs, FGD with MFR analysts Analysis of 200 SME clients survey conducted by MFR in 20 Countries (profile typical SMEs financed) Investors due diligence review: NDAs signed with investors, one-on-one calls, documents and tools Interim meeting to share the initial findings SAM, EMW 1.7 Processing the information and data collected Draft paper (Apr 2018) Feedback period: share draft paper, collect feedback of participants, e-mfp and SPTF Feedback meeting with investors on the draft paper SPTF 1.11 Integrate feedback Final paper, edit and publish Disseminate the paper results EMW, SPTF 2.1 Identify the most appropriate solutions to overcome the gaps highlighted in phase 1: adapt the - existing indicators, introduce new ones to complete the SME assessment add-on for investors 2.2 Draft the list of indicators for the SME module and share it with investors for feedback Incorporate investors feedback to the draft the list of SME indicators Incorporate the lessons learned from the test to the list of SME indicators (Dec 2018) - 27

28 Preliminary findings Segment Employees Assets Small and very small 5-45 <3M USD Medium enterprises M USD Gaps in E&S assessment tools for institutions serving very small and small enterprises (ofterupscaling MFIs) In this segment, high level guidance (e.g. E&S risk management system proportional to risks and affordable by ticket size) may be useful cause majority of FSPs are yet to build and E&S systems. The general guidance should then be translated into a customized ESG risk management system (sector, geo, SME size) It may be beneficial and sustainable for FSPs serving very small and small enterprises to manage E&S risk at portfolio level, with individual analysis reserved to high risks only. 28

29 Thanks Lucia Spaggiari, Business Development Director, MicroFinanza Rating 29

30 Agenda : Welcome and Updates : Understanding the risk for over-indebtedness in India : Implementing the Universal Standards in India : Responsible Exits : Lunch : SPI4 and ALINUS : Update on lender guidelines monitoring in Cambodia : Assessing S&E performance of SME finance : Coffee Break : Digitalization & Fintech : Data Platform : Aligning efforts with the impact investing field : Wrap up and conclusions

31 SPTF and CDC fintech webinar series for investors: Overview Initiative funded by CDC Group to discuss current practice of investors in evaluating fintech investments what practical tips can experts share with investors since standards don t yet exist? SPTF as coordinator based on Social Investor Working Group demand and research for evolution of the Universal Standards 7 webinars 2 held in 2017, rest to take place in 2018 For investors, driven by investor input Featured speakers - drawn from key investors and initiatives working on these issues (e.g., Smart Campaign, Helix/MicroSave, CGAP, CFI, GSMA, UNCDF) Complementary to IFC/Goodwell initiative to develop Investor Guidelines for Responsible Digital Finance For more info 31

32 SPTF and CDC fintech webinar series for investors: Discussion Key thoughts emerging from webinars conducted: Fintech investments: Evaluating Risks and Value to Clients Fintech investments: Evaluating Repayment Capacity Analysis What topics would you want to make sure are included in the webinar series? 32

33 Customer experience and Protection with Digitalization and Fintech February 19 th 2018

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36 Fintechs will adequately protect clients when: Will and Commitment Practical Know-How Rules and Incentives Measurement and Information Systems

37 Fintech Community of Practice Members Buhle Goslar, Jumo Yoni Blumberg, Tala Paul Randall, CreditInfo Luca Giacopelli, PlugintheWorld Wayne Hennessy-Barrett, 4G Joffre Torien, FINCA Get Bucks Schan Duff, JUVO Carol Caruso, Bloom Impact Rohit Garg, SmartCoins Stanley Munyao, Musoni Ross Task, Nobuntu Topics for Discussion Transparency Complaint Resolution Sales and Marketing Client Data Privacy and Security Underwriting and Capacity to Repay Influencing third party partners Responsible Agent Management Collections Practices Smart Campaign Standards For Fintechs Investor Requirements for Due Diligence (i.e. IFC and Goodwell) Donor Requirements for Fintech Grantees (i.e. USAID)

38 Example: Mobile Credit Ø All digitized credit decisions, fund transfers, marketing Ø Big data informs credit decisions, product tailoring Ø Rapid processing, short tenure Ø Escalation from nano-loans, no collateral Ø Used for consumption, emergencies Fintech COP: guidelines on adequate transparency and complaints management Sources: BIG DATA, SMALL CREDIT The Digital Revolution and Its Impact on Emerging Market Consumers. Omiidyar The Proliferation of Digital Credit Deployments. CGAP

39 Guidelines for Investing in Responsible Digital Finance Transforming Global Industry Principles into Action SPTF Investor Meeting - India February 19, 2018

40 As investors in inclusive digital financial services, we commit to adhering to, and promoting the Guidelines for Investing in Responsible Digital Finance -- aligned with the G20 High Level Principles of Digital Financial Inclusion -- Objective: as Signatories, we will operationalize relevant global practices, by self-subscribing and implementing investor action through our investments in DFS

41 Overview of Investor Guidelines (Part I) Guideline 1: Promote Responsible Investment in Digital Finance Guideline 2: Manage Risks Comprehensively with Growth of Digital Inclusion Guideline 3: Foster a Proportionate Legal and Regulatory Framework Guideline 4: Facilitate Interoperability and Infrastructures for DFS Ecosystems Guideline 5: Establish Customer Identity, Data Privacy and Security Standards Guideline 6: Promote Fair and Transparent Pricing Guideline 7: Improve Disclosure of Terms and Conditions for Customers Guideline 8: Enhance Customer Services for Problem Resolution and Product Innovation Guideline 9: Prevent Over-indebtedness, Strengthen Digital Literacy and Financial Awareness Guideline 10: Track Progress to Mitigate Risks and Expand DFS Opportunities Potential Actions and References (Part II) Global industry standards adapted to investor operations, promote or support as relevant with investees

42 Engagement to Broaden Investor Awareness and Collective Outreach u u u u u u u u u u Nov 2016: Formation of concept with Goodwell and IFC Feb 2017: Core Working Group formalized with early drafting Mar 2017: Meeting in WDC for initial first draft of Investor Guidelines Apr 2017: Meeting in Berlin for revised draft preceding Responsible Finance Forum (RFF) and proposed concept shared at RFF and G20/GPFI meetings May to Aug 2017: Expanded investor group, consultations, webinar/confcalls Aug to Oct 2017: Investor Guidelines revised and distributed for comments Nov-Dec 2017: Revised 10 Investor Guidelines + Potential Actions Jan-Mar 2018: Signatory outreach, comments, internal investor approvals Jun 2018: Inaugural launch of Investor Guidelines Throughout 2018: Ongoing signatory outreach / rollout, DD tools, cases, lessons

43 For more info GOODWELL INVESTMENTS u u Wim van der Beek (wim@goodwell.nl) Els Boerhof (els@goodwell.nl) INTERNATIONAL FINANCE CORPORATION u u Margarete Biallas (mbiallas@ifc.org) Lory Camba Opem (mcamba@ifc.org)

44 Agenda : Welcome and Updates : Understanding the risk for over-indebtedness in India : Implementing the Universal Standards in India : Responsible Exits : Lunch : SPI4 and ALINUS : Update on lender guidelines monitoring in Cambodia : Assessing S&E performance of SME finance : Coffee Break : Digitalization & Fintech : Data Platform : Aligning efforts with the impact investing field : Wrap up and conclusions

45 Data Platform Validated data on Financial Service Providers (FSP) pricing, SPI4 and ESG

46 All Network FinCredit FinFuture Client over-indebtedness score USSPM 2 Universal Standards score USSPM 4 USSPM 6 Fund

47 Model Data providers Steering committee: SPTF, SMART, Cerise, MFT, ADA, MIMOSA Users Rating agencies SMART certif. & assessment Cerise MIVs and DFIs FSP networks Individual FSPs Advisory board: AFD, Sida, BRS, PPI Data Free: visibility, guide, consistency check, overview report. Service: training, validation, award. Manager: MicroFinanza Rating, CERISE (SPI4) Service: peer group data, tailored reports, APR model Subscription DFIs, Foundations MIVs Regulators Standard setting bodies Research institutes

48 Timeline 0 Concept 2016 I Pilot 2017 II Start-up Develop database Develop architecture Develop analysis functions III Ongoing 2020

49 Thanks Lucia Spaggiari, Business Development Director, MicroFinanza Rating Cécile Lapenu, Executive Director, CERISE Data Platform info

50 Agenda : Welcome and Updates : Understanding the risk for over-indebtedness in India : Implementing the Universal Standards in India : Responsible Exits : Lunch : SPI4 and ALINUS : Update on lender guidelines monitoring in Cambodia : Assessing S&E performance of SME finance : Coffee Break : Digitalization & Fintech : Data Platform : Aligning efforts with the impact investing field : Wrap up and conclusions

51 As impact investing continues to grow, several initiatives are working to help investors navigate the different investment opportunities SPTF is coordinating efforts with these initiatives to help shape the tools and resources being developed on financial inclusion 51

52 Why is SPTF involved and how is this relevant to you? Share the experience of financial inclusion Collaboration, working towards common objectives Development and implementation of standards, common audit and monitoring tools, advancement of outcomes management work, etc Financial inclusion is a large sector of impact investment and can help pave the way of less-mature sectors seen as example Ensure coordination with broader impact investment initiatives as prioritized by many of you Opportunity to shape frameworks and tools that can be used by asset owners and investors throughout the broader investments sector 52

53 WEF Effort: Accelerating Impact Measurement and Management Led by Overview AG1 and 2: Evidence & Cases Translate and synthesize the existing evidence for making more informed investment decisions AG3: Stakeholder Voice Capture the voice of all those who are affected by the impact investment/ activities of an organization AG4: Conventions and Norms Build on and amplify reach of a shared convention for IMM based on the consensus emerging under IMP AG5: Resource Hub Connect users to appropriate tools, techniques, and resources in a structure related to norms AG6: Training & Capacity Building Create a training program to build capacity within organizations AG7: Training & Safeguardin g Integrity Explore inclusive ways to safeguard and maintain integrity of measurement and management practices The WEF effort brought together the work of many initiatives to ensure coordination 53

54 GIIN: Navigating Impact (WEF AG1-2) Objective: Provide a resource for investors to help select evidence-based impact strategies and aligned metrics Aligned to the 5 dimensions of the IMP Investment themes being developed SPTF has partnered with the GIIN to develop the evidence-based impact strategies for financial inclusion +38 collaborators (investors, experts in IMM and other specific areas, academics, etc.) For more info 54

55 GIIN: Navigating Impact Impact strategies prioritized by the group for development Potential strategy/impact objective Prioritized If time allows 1. Improve access to responsible financial services for historically underserved populations 2. Increase responsible and productive use of financial products and services 3. Help low income populations build assets and mitigate risks 4. Support creation of quality jobs and foster economic development 5. Enhance women s economic empowerment 6. Improve rural prosperity 7. Incerase access to renewable and clean energy Each strategy includes: overview (5 dimensions), link to SDGs, illustrative case, evidence maps, common metrics, tools Those interested in participating contact Leticia Emme Additionally, in 2016, SPTF worked with IRIS (GIIN) and GIIRS to align metrics among the different tools 55

56 SPTF: Guidance on engaging all affected stakeholders (WEF AG3) Objective: provide guidance on stakeholders engagement so that practice can become part of normal business operations Why: good SE practice not common or consistent Key to understand extent to which impact and value are being created effect on people & planet Expert group composition: ~20 organizations, +20 experts in different areas (including SIWG members) 56

57 SPTF: Guidance on engaging all affected stakeholders (WEF AG3) 5 Step Stakeholder Engagement Cycle Guidance and practical examples Refers to all those significantly affected (not just end-client) Work has been integrated into other ongoing initiatives (IMP) and in process of providing input to many others (BIA, Toniic, Feedback Labs) 57

58 IMP: Setting Shared Fundamentals (WEF AG4) Objective: Establish practice of IMM as a norm Gathered input from +700 organizations Defined 5 dimensions of impact SPTF participated of huddles, and integrated work on SE engagement into IMP Currently several initiatives and investors are working to align their approaches to the IMP 58

59 GIIN: Impact Toolkit (WEF AG5) Objective: Provide an open resource to help investor find appropriate IMM tools Under development SPTF and CERISE have submitted resources, guidance, tools for Financial Inclusion (Universal Standards, Implementation Guide, SPI4, etc) 59

60 UNPRI: Impact Investing Market Map Objective: Provide a resource for investors to help identify investment opportunities (companies that generate impact) in one of 10 thematic areas SPTF chairing consultation process on Inclusive Finance Market Maps provide an overview of how to identify companies in each thematic area, what conditions, criteria, standards they must meet, and point to common metrics to assess the performance of investments/companies for the thematic area

61 Agenda : Welcome and Updates : Understanding the risk for over-indebtedness in India : Implementing the Universal Standards in India : Responsible Exits : Lunch : SPI4 and ALINUS : Update on lender guidelines monitoring in Cambodia : Assessing S&E performance of SME finance : Coffee Break : Digitalization & Fintech : Data Platform : Aligning efforts with the impact investing field : Wrap up and conclusions

62 Thank you and Next Steps Stay tuned for news on upcoming webinars (fintech, Navigating Impact, etc) Next in person meeting most likely to be held in June in Luxembourg more details coming soon Contact us with at any time: Christophe Bochatay: Anna Kanze: Leticia Emme: 62