Transcript Slide 1

Pursuing Financial and Social Goals:
Initial findings on trade-offs and synergies.
Adrian Gonzalez, MIX – SPTF Meetings, Bern, June 30th 2009
Expected trade-offs and synergies
NonTargeting V.
Financial
Poor or Poor
Services
Q. 1
Q. 3c


SP training
Q. 4-5
Social Resp. to
Client
Social Resp.
clients
Retention
to Staff
(CPP principles)
Q. 7
Q. 10a-b
Q. 8
-Borrowers per staff
(Productivity)
-
--
-
++
-
+
-Portfolio at Risk
over 30 Days
-Write-off Ratio
(Portfolio Quality)
-
-
-
--
--
-
Operating Expense %
GLP
(Efficiency)
+
++
+
--
+
+
Cost per Borrower as
% of GNIPC
(Efficiency)
+
++
+
--
+
+
Green:
Synergies
Red:
Trade-offs
Regression Analysis for each FP
Controls: age, loan size as % of GNIPC, MFI size, deposit mobilization,
lending methodology, % urban borrowers.
Summary of Actual Results
Targeting V.
NonPoor or
Financial
Poor
Services
Q. 1
Q. 3c
-Borrowers per staff
(Productivity)
Social Resp. to
Social Resp.
SP training Client Retention
clients
to Staff
Q. 4-5
Q. 7
(CPP principles)
Q. 10a-b
Q. 8
+
-Portfolio at Risk
over 30 Days
+
-*
-
-Write-off Ratio
(Portfolio Quality)
Operating Expense
% GLP
(Efficiency)
+
+
Cost per Borrower
as % of GNIPC
(Efficiency)
+
+
-
Green:
Synergies
Trade-offs
Yellow
Red:
+
+
+
Inconclusive, larger sample,
more details needed
Takeaways:
 Several expected trade-offs and synergies between SP and FP can
be confirmed:
 Efficiency trade-offs for targeting the poorest, SP training and
social responsibility (SR) to staff
 Productivity synergies for SP training and SR to staff
 Productivity and efficiency synergies for client retention
 Investments in human capital (SP training and SR) go hand-in-hand
with higher staff productivity and better portfolio quality, but lower
efficiency
 SP training and HR policies have stronger synergies and weaker
tradeoffs with FP
 Serving the poor/very poor comes at a cost in terms of efficiency, but
not of risk or productivity
 even after considering differences in loan sizes
Implications
 For MFIs
 Improving client retention improves financial performance
 Process discipline and staff support pay off
 For funders
 You cannot ignore MFI investments in staff training, incentives
and human resource policies, whether you are socially or
financially driven
 For critics of high interest rates/high costs
 Exclusive targeting of very poor/poor borrowers increases the
average cost of loans to the borrowers
 For SPTF / Researchers
 Need to control for SP-factors known to influence FP, in order to
better understand differences in FP
 Need to refine questions that have ambiguous attribution
 (e.g. SP training versus general training effects)
Productivity:
Borrowers per Staff
140
126
118
120
100
124
100
100
No Yes
No Yes
112
130
116
103
100
80
60
40
20
0
0
2
4
Training
Staff apraissal
Number of
of staff on SP
on SP
Human Resource
Policies
0 20 40
Dropout
Rates (%)
Human resource policies: clear salary scale based upon market salaries, medical insurance for all staff, pension
contribution, practices and procedures which ensure safety of the staff, equal pay for men and women with equivalent
skill levels, staff participation in decisions that affect them, anti discrimination policies, and anti harassment policy
Portfolio quality:
Portfolio at Risk over 30 Days as % of Loan Portfolio
9
8
7
6
5
4
3
2
1
0
8.0
8.0
7.7
7.3
7.0
6.6
2
3
4
6.4
No
Yes
Training
of staff on SP
0
1
Number of policies
safeguarding data
Policies safeguarding data: written policy and procedures regarding treatment of client personal data in place,
internal audit reviews security of locations and electronic systems where client data is stored, the IT system is secure
and password protected, staff explains to clients how their data will be used, client consents is require prior to sharing
data outside the institution, client say review and correct their information, clients are instructed on how to safeguard
access codes and PIN numbers.
Efficiency:
Operating Expense % Loan Portfolio
70
60
50
67
60
60
44
40
30
20
10
0
Very More
poor diverse
or
as well
poor
Target Market
No
Yes
Have staff
incentives for SP 1/
1/ Similar effect for “loan officer incentives related with SP”.
Efficiency:
Cost per Borrower % GNIPC
30
25
20
20
22
20
22
20
22
24
15
10
5
0
No Yes
No Yes
Targets very poor
Have staff
or poor clients
incentives for SP
0
20
40
Drop out rate (%)
Additional Resources:
 “Microfinance Synergies and Trade-offs” (2010), MIX data Brief No. 6,
forthcoming.
 http://www.themix.org/publications/search/results/taxonomy%3A17
 [email protected] for preliminary draft.
 http://www.spblog.org/
 For updated on research and preliminary results
 “MIX Research Agenda: Linkages between Social Performance and
Financial Performance”
 http://www.spblog.org/2010/03/mix-research-agenda-linkagesbetween-social-performance-and-financial-performance.html