SPTF Social Investor Working Group Meeting

SPTF Social Investor Working Group Meeting

Sunday May 29, 2016

2016 SPTF Annual Meeting, Marrakech

Please tweet interesting content during our Annual Meeting using the hashtag

#SPTF2016

Follow us @SPTaskForce

Agenda •  13.00-13:20 - Welcome and update on the SPTF & the SIWG

•  13.20-13.40 - Update on PIIF (Principles for Investors in Inclusive Finance)

•  13.40-14.40 - Update and uptake on SPI4 ALINUS •  14.40-14.55 - Coffee Break

•  14.55-15.15 - Uptake of the lenders guidelines for setting responsible covenants in support of responsible microfinance

•  15.15-16.10 - Measuring, managing, and reporting on social outcomes

•  16.10-16.50 - Transparent pricing data

•  16.50-17.00 - Conclusions & Next Steps

•  Proud to be one of the most active working groups of the SPTF…

•  … with a growing number of investors joining and committing to our shared objectives

•  We work together to ▫  Raise awareness and create ownership among investors of

ongoing initiatives and developments in SPM ▫  Identify areas of concern in microfinance ▫  Take collective action in areas where it can help the market

develop in a positive direction

Welcome!

4

1.  2-days of discussions and exchanges

2.  March 3-4 2016, in New York City (at Deutsche Bank)

3.  First time in North America

4.  72 attendees – largest representation from investors in North America… and largest number of new attendees to the meeting

Recap of our last meeting

5

1.  Harmonizing investor due diligence and monitoring on social performance -- uptake of SPI4 ALINUS

2.  Harmonizing loan agreements covenants in support of responsible microfinance

3.  Measuring and reporting on social outcomes – guidelines and indicators being developed through the outcomes working group. We will be soon launching a pilot to field test the work

4.   Pricing transparency – defining a model to continue to have transparent pricing data in a “post MFT” era

5.   Aligning efforts with other initiatives in responsible finance (including PIIF, GIIN, etc)

Current priorities of the SIWG

6

1.  After three years of co-leading the SIWG, Dina will be stepping off the board and her role as co-chair of the group, but will remain very active in the group discussions

2.  Since June 2015, Jurgen is Chairman of the SPTF BOD and since January 2016 he is also Director for Strategic Outreach

3.  As of now, Christophe Bochatay (Triple Jump) and Margot

Quaegebeur (Anthos) are our newly elected board members of the SPTF representing investor constituency (asset managers and asset owners)

4.  Also joining the leadership of the SIWG as co-chairs

News on group governance

7

Agenda •  Welcome

•  Update on PIIF (Principles for Investors in Inclusive Finance)

•  Update and uptake on SPI4 ALINUS •  Coffee Break

•  Uptake of the lenders guidelines for setting responsible covenants in support of responsible microfinance

•  Measuring, managing, and reporting on social outcomes

•  Transparent pricing data

•  Conclusions & Next Steps

PRINCIPLES FOR INVESTORS IN INCLUSIVE FINANCE - PIIF

March 2 – 3, New York

Overview

Reminder of what the the PIIF are

The PIIF has 7 key principles in which investors and fund managers should focus on:

1 2

PIIF principles

3 4 5 6 7

Range of services: support retail providers to innovate and expand the range of financial services available to low income people in order to help them reduce their vulnerability and increase incomes. Client protection: client protection is crucial for low income clients and investment policies and practices.

Fair treatment: treat investees fairly with appropriate financing that meets demand, clear and balanced contracts, and fair processes for resolving disputes

Responsible investment: include environmental, social and governance (ESG) issues in investment policies and reporting

Transparency: actively promote transparency in all aspects.

Balanced returns: focuses on balanced long-‐term social and financial risk-‐adjusted return that recognizes the interests of clients, retail providers, and investors.

Standards: collaborate to set harmonized investor standards that support the further development of inclusive finance

More than 55 institutional investors and organisations participated in the PIIF Report on Progress ‘15.

The PIIF Report on Progress aims to help identify PIIF signatories performance and to help foster and learning both within organisations and between direct and indirect investors.

PIIF signatories performance PIIF Report on Progress

Overall, this report highlights improvements in almost all 7 PIIF principles when compared to the 2014 report.

Next steps PIIF and SPTF partnership The PIIF and SPTF are collaborating to develop a Market Map project that focuses on support current and future investments in the impact investment space. This project focuses on providing key information on the impact investment market (including affordable housing, inclusive finance, renewable energy, etc.) across different asset classes.

The end-‐goal of this project is to connect investors to investment products through a web-‐based tool allowing easy access to key information on Environmental and Social thematic investments, and helping investors to identify potential investment opportunities and financial products to invest in this field.

What you will leave here with… 1.  Proof that the SPI4 is gaining traction

2.  A greater understanding of what makes SPI4-ALINUS unique

3.  Stories from investors using SPI4 ALINUS

4.  Examples of benchmarking possibilities

5.  Ideas on what is coming for SPI4-ALINUS

6.  Any other ideas?

14

1. About SPI4 SPI4 gaining traction Recent developments A taste of ALINUS A wider Outreach Supporting investors

SPI4 is gaining traction SPI4 in numbers as of May 2016 150+ SPI4 assessments completed, from 55 different countries

40+ in pipeline FI sending 2nd SPI4: 6 MFIs use SPI4 for “Social Statement”

SPI4: from 66% to 76% of « very familiar, familiar, or aware »

Audits SPI4 by outreach

Audits SPI4 by legal form

Audits SPI4 by assessment type

SPI4 is gaining traction Full SPI4 in main MF markets Philippines: 13 India: 11 Bolivia: 11 Morocco: 7 Ecuador: 7 Kenya: 4 Ecuador: 3 Ghana: 3 Audits SPI4 by region

Recent developments to SPI4

Version 1.3.2

▫ 

ÉæÛÓÊìË

PortuguêsPYCCKűŲ

Français

English

WLwQJ 9,nW

Now in 7 languages!

Español

•  Filter per departement • Allows operational use of USSPM by MFIs

•  Enhanced import modules •  Factsheet 4.0 and 4.1 •  Smart assessment and certification files •  MIX MRE files

•  Reporting for country networks •  100% indicators amongst ALINUS selection •  Enhanced quantitative section

cerise-spi4.org

Average scores for ALINUS

20

7

ALINUS indicator subset scores

= good proxy for an

overall SPI4!

•  From the full SPI4 database => immediately meaningfull benchmarks

A taste of ALINUS – rationale of selection

Analysis of segmentation

⇒  Less training ⇒  More implementation

Analysis of frequencies •  %Yes is high in SPI4 database => « easy » indicator •  %No is high => « hard » indicators ⇒  Formalisation and Verification indicators: very similar ⇒  Training: reduction of « easy » indicators ⇒  Implementation: increase of « hard » indicators

A taste of ALINUS – take away

Training •  Investors expect investees to have solid internal

communication systems in place to make sure policies and procedures are disseminated.

Implementation •  Investors want tangible evidence that policies and

procedures are applied in practice and tend to be reinforced

Supporting wider outreach of ALINUS

•  To MFIs •  Email campaign to MFIs that have conducted SPI4 (40+ MFIs) •  Encouraging them to share results with investors

•  To MIVs •  Email campaign on SPI4-ALINUS (20+ MIVs) •  Encouraging them to communicate with investees

•  ALINUS newsletter (October – May) (300+ in contact list) •  ALINUS page at cerise-spi4.org (#2 in popularity)

•  350+ people trained on SPI4 worldwide •  Since the March 2015 SPTF investor meeting in NYC

•  Pilot Testing: • Triple Jump, Symbiotics, ADA/LMDF, Desjardins, GCAF, Incofin, Pamiga, Cordaid, Oiko (2 local offices), Deutsche Bank

• Virtual trainings on ALINUS (20p+) •  SPTF, BBVA, MicroVest •  Oikocredit (planned)

•  In-person trainings (3p+) •  Pamiga •  BNP-Paribas (planned)

•  Qualified auditors + Raters •  66 auditors in to accompany your investees •  MoU with Microfinanza Rating •  Discussion going on with M-Cril

Supporting investors in using ALINUS

24

2. Testimonies of investors What has been done Pros & Cons Next steps

3. Benchmark your portfolio! SPI4 free benchmarks

SPI4 database: a unique dataset on the Universal Standards

•  145 SPI4 in database

•  110+ of high quality for benchmarking •  Full •  Inc. Comments •  From Certified Auditors

•  Incentives for MFIs to report SPI4 to CERISE •  Standard benchmark for free on reception

Results graphs

28

Benchmarks graphs example of MFI scores compared to global and regional averages

29

Benchmarks graphs example of MFI scores compared to global and regional averages

30

0% 20% 40% 60% 80% 100%

Treat clients responsibly

&GƂPG�CPF�OQPKVQT�UQEKCN�IQCNU

&GUKIP�RTQFWEVU�VJCV�OGGV�ENKGPV�

6TGCV�GORNQ[GGU�TGURQPUKDN[

$CNCPEG�ƂPCPEKCN�CPF�UQEKCN�RGTH

%QOOKVOGPV�VQ�UQEKCN�IQCNU

regional average

global average

44%

46%

86%

88%

87%

59%

Benchmarks graphs – gap analysis example of MFI scores compared to global and regional averages

31

Prac%ces are strongest in Dimension 4, MFI A scores 21.6 above the regional average

Prac%ces are weakest in Dimension 3, MFI A scores 21.8% below the regional average

Black line in center represents the avg. score for the peer group

Benchmarks graphs – per standards example of MFI scores compared to global and regional averages

32

00%# 10%# 20%# 30%# 40%# 50%# 60%# 70%# 80%#

1b-#Repor3ng#of#client-level#data#

1a-#Social#strategy#

Dim#1:#Define#and#monitor#social#goals#

00%# 10%# 20%# 30%# 40%# 50%# 60%# 70%# 80%# 90%#100%#

2c-#Staff#accountability##

2b-#Senior#management#accountability#

2a-#Board#accountability#

Dim#2:#CommiJment#to#social#mission#

00%# 10%# 20%# 30%# 40%# 50%# 60%# 70%# 80%#

3b-#Benefits#to#clients#

3a-#Client#needs#and#preferences#

Dim#3:#Design#products#to#meet#client#needs#

00%# 20%# 40%# 60%# 80%# 100%# 120%#

4e-#Mechanisms#for#complaint#resolu3on#4d-#Privacy#of#client#data#

4c-#Fair#and#respecOul#treatment#of#clients#4b-#Transparency#

4a-#Preven3on#of#over-indebtedness#

Dim#4:#Treat#clients#responsibly#

00%# 20%# 40%# 60%# 80%# 100%# 120%#

5c-#Employee#sa3sfac3on#

5b-#Communica3on#of#terms#of#employment#

5a-#HR#policy#

Dim#5:#Treat#employees#responsibly#

00%# 20%# 40%# 60%# 80%# 100%# 120%#

6d-#Compensa3on##

6c-#Profits#

6b-#Alignment#of#objec3ves#

6a-#Growth#rates#

Dim#6:#Balance#financial#and#social#performance##

Average of MFI A Average of REGION (# MFI)

Average of All (109 MFI)

4. Next steps

Pilot-testing •  Pilot-testing ALINUS for a diversified portfolio •  Defining EU adapted SPI4 ALINUS SPI4 V2 in July – No changes in indicators next 3 years •  Slight rewording and improvements

•  Fair treatment of clients and pricing policy (investors’ feedback) •  Better alignement of Org Info with IRIS

•  New tool available mid-July •  1 iteration process beg. of July •  ALINUS dashboard integrated in SPI4 V2

Ongoing

5 good reasons to adopt SPI4 ALINUS 1.  SPI4 enjoys widespread uptake and recognition

2.  Spend less time on collecting data and more time on making improvements

3.  Compare investee social performance and generate benchmarks

4.  Because SPI4-ALINUS addresses investor-specific concerns.

5.  The data is already there!

Questions?

Thank you!

CERISE’s team: [email protected]

• Working group established in 2012 •  Latest version of guidelines finalized in 2014 •  Incorporated in PIIF under Principle 3: Fair

Treatment •  15 endorsers:

Ac%am Grassroots Capital Agence Française de Développement Incofin Investment Management AECID Oikocredit Agora Microfinance N.V. and its affiliates OPIC BNP-‐Paribas PROPARCO Cordaid Triodos Investment Management BV Deutsche Bank Global Social Inv. Funds Triple Jump Grameen Credit Agricole Founda%on

Reasonable Covenants - recap

39

Usefulness Example #1 •  Indonesian MFI, USD 23m GLP, 260,000 clients,

cooperative legal status ▫  Six MIVs as debt providers:

�  3 Guidelines endorsers only: 2 fully aligned their covenants ▫ 

What happened: �  Unconvincing equity increase plan from the MFI �  Different “solvency” covenants: debt/equity vs CAR vs equity/assets �  Complicated covenant monitoring and lack of understanding of

covenants formula in general: Breach!

à Two lenders lost patience and confidence and decided not to roll over, sending the wrong message to other investors.

à  A full harmonization of covenants could have potentially prevented this

40

Usefulness Example #2 •  Myanmar MFI: USD 9m GLP, 23,000 clients, credit only financial

institution:

•  Incofin is likely to be their first debt provider

•  Social undertaking – ROA < 7.5% •  MFI comment: While the forecasts never show this ratio to be in breach, can

we discuss the rationale for setting an upper limit on the ROA?

•  Incofin comment: The upper limit is in relations to responsible growth and responsible pricing. For instance, did the ROA exceed because the company increased its pricing beyond market level? It is a “social undertaking”, thus a breach would only initiate a discussion on the reasons behind the high growth performance and will not trigger a callback of the loan.

•  MFI comment: Well noted, we have no problem with this undertaking since

our business model profitability and shareholders return expectations don’t foresee an ROA higher than 5% for the next five years.

41

Usefulness Example #3

•  Azerbaijan microfinance market crisis was mostly a foreign exchange crisis!

•  What if we had all implemented the Guidelines covenant on:

▫  Net un-hedged foreign currency open position to equity < -/+ 25% and ▫  In complying with this covenant, the Borrower shall commit not to

pass FX risk on to its clients by agreeing on a ceiling of the level of hard currency loans extended to its clients as a % of its GLP.

à Would institutions and clients have been hit that hard?

42

Implementation

• Even traditional banks, shareholders, asset owners can be open to the idea of revising their set of covenants:

▫  Suggest a review of the covenants at the occasion of a

broader legal documentation conversation, or during the launching of a new fund.

▫  Even social undertakings can be understood by legal departments

43

Conclusion

44

•  The Guidelines remain a relevant tool: ▫  For Tier II/III MFIs, in non regulated markets with little covenant

understanding ▫  For greenfields structuring their first debt deals to limit multiple

covenants reporting in the future ▫  For Tier I MFIs in high regulated competitive markets, to give

bargaining power to request “responsible/needed” covenants ▫  In case of breach/default, it eases coordination during work-out

groups

The Guidelines was recently revised according to endorsers’ feedback: ▫  His format has changed to an “Educational Tool” for you to more

easily disseminate and refer to it with your investees, and with your asset owners. ▫  We will introduce the new format to the regional and national

networks to inform more MFIs.

Investors social outcome guidelines

First draN May 2016, Marrakech

1.  Timeline 2.  How to obtain social outcome data 3.  Case studies & sharing experience 4.  Feedback

Overview

47

1. Mee%ng #1

2. One-‐to-‐one calls

3. Mee%ng #2

4. DraN guidelines

5. Feedback on draN

6. Mee%ng #3

7. Final guidelines

8. Dissemina%on

Done;

Timeline e-‐MFP, Luxemburg, Nov 2015; Feedback on outline

Individual calls with investors & material sharing

SPTF Investors, NYC, Mar 2016; feedback on first contents

May 2016

May-‐June 2016

SPTF, Marrakech, May 2016

Sep 2016

Nov2016

On-‐going; Not started 48

Contents 1. Gap analysis 2. Why doing outcome management

A. Manage social mission and risks B. Asset owner driven accountability C. Asset manager driven accountability

3. How to do outcome management

A. How to obtain social outcome data B. Use of social outcomes in investee decision making C. Use of social outcomes in investors decision making

Reviewed in NYC

Focus in Marrakech

Reviewed in webinar

49

Full poreolio Case by case Hybrid

High Different Mixed

Objec%ve

1) Coverage 2) Indicators’ comparability

New data Exis%ng MIS Hybrid

From scratch Marginal Incremental

High Medium Low

Implementa%on

3) Approach

4) Method robustness 5) Data source

Investor + FSP Consultant + FSP FSP

Investor Hybrid FSP

Resources

6) HR 7) Budget

How to obtain social outcome data 7 decision steps

50

Bamboo Equity Inclusive LAC

Acumen Equity Impact Global

Root Capital Debt Impact LAC, SSA

Sarona Equity Impact Global

BBVAMF Equity Inclusive LAC

Triple Jump Debt

Inclusive LAC

Oikocredit Debt

Inclusive Asia

Cost

Relevance

1) Coverage

2) Indicators’ comparability

3) Approach

4) Method robustness

5) Data source 6) HR 7) Budget

Case studies snapshot

51

Feedback

52

Investors’ decision making

Time

What type of decision

When

How basis of decision

Make investment (outcomes score weighted in the total score)

Differen%ate loan pricing / return targets

Offer outcome measurement TA to selected investees

Influence investees’ decisions towards improving outcomes (equity funds) or modify the investees mix (debt funds) to improve the fund outcomes.

Set expecta%ons up-‐front (on outcome results / measurement)

At investment Post-‐ investment

Existence of an outcome management system

Investee outcome results compared to targets & benchmarks

Investee use of outcome results for decision making

Investee improvement of outcome results

Fund’s outcome results compared to targets & benchmarks

53

Thanks

Lucia Spaggiari Business Development Director, MicroFinanza Ra%ng 411 Rue Toyota, Bonapriso, Douala, CAMEROON

T +237 691 936 326 Skype lucia.spaggiari

54

Data Plaeorm

SPTF, Investor mee%ng Marrakech, May 2016

Outline

1.  Model 2.  Manager 3.  Comparison with MicroFinance Transparency 4.  Core and enhanced database 5.  Quality control 6.  Website 7.  Examples of use 8.  Feedback

57

Model, start-‐up

MicroFinanza Ra%ng

MicroFinanza Ra%ng

Data

Start-‐up subsidy

DFIs, Founda%ons

MIVs

Plaeorm concep%on, building database, development of website, repor%ng op%ons, data submission channels, data

valida%on system, APR predictor model, test & launch

System built so that other org. can submit

data in phase 2

Phase 1

MFT

58

Model, ongoing Phase 2

Data

For free: visibility, guide, consistency check, global benchmark report; Service: training, valida%on; transparency recogni%on.

Service: Expected APR model; peer group reports; tailored reports; database

Subscrip%on fee

Ra%ng agencies

MIVs and DFIs

FI networks

Cerise

Individual FIs

DFIs, Founda%ons

Regulators

Standard seqng bodies

MIVs

Research ins%tutes

MicroFinanza Ra%ng

Plaeorm coordina%on, website admin, data gathering, update & valida%on, responsible APR predictor model update

59

Manager

Manager MicroFinanza Ra%ng

BoD: MFT, substan%al funder (op%on), MFR

Pricing expert Ben Wallingford, MFR (former MFT)

Website expert Carlos Minaq, Independent

Econometric expert Daniel Rozas, Independent

Extensive exper%se for special projects

Methodology, training & quality control.

MFT website development specialist

Expected APR model development exper%se

Pricing senior expert Chuck Waterfield,

MFT BoD

60

Plaeorm compared to MFT Model

Confiden%ality Access

Collec%on Update

Financial and Social metrics Minimum guaranteed

Manager Pricing exper%se Website exper%se

Website Cost Date Detail

Uniform reliability Coverage

Less valuable solu%on

Mixed

Beser or equally valuable solu%on

61

Core and enhanced database

Data from MicroFinanza

Ra%ng

Core database

Enhanced database

Addi%onal data from: other ra%ng agencies, MIVs and DFIs, validated SPI4 audits, FI networks,

individual FIs

Min. database guaranteed at

all %mes

Depending on each organiza%on actual data contribu%on

The input model proposed balances the incen%ves to provide the broadest possible coverage through the collabora%on of a variety of players, with the guarantee of a minimum volume of quality data at all %mes.

62

Quality control

1.  Ex-‐ante control: methodological guide and APR training 2.  Ex-‐post control: lean consistency check or more rigorous consistency and

accuracy valida7on

63

Website

Reports available to subscribers: 1.  Ra%ngs, client protec%on

cer%fica%ons, 2.  MIMOSA country reports 3.  and validated SPI4 audits

Data available to subscribers: 1.  pricing,

2.  financial performance and risks,

3.  social performance and client protec%on.

Website

Module 1 Reports

Module 2 Data

64

Use 1: Assess responsible pricing

Ques%on: can I say that 75% APR for the main product of the FI “FinCredit” is fair in my due diligence? Each investor choses whether to adopt the 2 methods in line with the SMART Campaign (below) or to adopt a different one tailored to the internal defini%on of fair pricing: Method 1 benchmarking against peers -‐ market segment method developed by Emmanuelle Javoy -‐ recommended when Country data is sufficient and the market is not distorted. Method 2 benchmarking against expected performance-‐ expected APR model to be developed by MicroFinanza Ra%ng and Daniel Rozas in phase 1 -‐ recommended when Country data is not sufficient or the market is distorted.

65


Answer with method 1: yes because the large majority of the APRs of FinCredito loan segments (i.e. loan size and term) are lower than its peers in Ecuador (indicated in green)

APR FinCredit Loan size / term 3-‐6 months 6-‐12 months 1-‐2 years 25%-‐75% GNIpc 80% 75% 70% 75%-‐150% GNIpc 70% 60% 40%

APR Ecuador Loan size / term 3-‐6 months 6-‐12 months 1-‐2 years 25%-‐75% GNIpc 90% 70% 60% 75%-‐150% GNIpc 80% 65% 50%

In addi%on to the segment tables above, the Plaeorm will keep producing the APR and loan size graph, a simpler version of method 1 taking into account only 2 variables (APR and loan size) instead of 3 (APR, loan size and loan term).

APR

Loan size

66


APR of the FI Assessment < expected APR Price is fair > expected APR but < expected APR + # standard devia%ons

Price is fair, focus on client benefit to be monitored

> expected APR + # standard devia%ons

Price deviates significantly from peers, possibly due to poor poreolio quality, low efficiency or high profits. Review of the validity of possible jus%fica%ons for the devia%on suggested in case of high devia%on (e.g. young FI with con%ngent capitaliza%on needs).

The method consists in applying the expected APR model (mul%ple linear regression model that will be developed using the high quality data of the database) to the FI: APR= α loan features+ β country cost and risk+γ other controls+ error | | | Size, term, Credit risk, business risk, infla%on, Rural outreach, currency, etc. infrastructure, labor cost, etc. etc. Applying the model to the FI can have 3 outcomes:

67

Use 2: Benchmark 1 investee to peers

Top management/ field staff compensa%on

FinCredit Small scale LAC NBFI Regulated No savings

Average 15 5 10 11 9 7 3rd quar%le 8 14 13 12 9

Ques%on: is a ra%o of top management to field staff compensa%on of 15 jus%fied for this financial Ins%tu%on (FI), or is too much? Answer: maybe not fully jus%fied, further qualita%ve analysis recommended (e.g. management quality).

68

Use 3: Benchmark among investees

Ques%on: what are the rela%ve strengths and weaknesses of the investee FIs in terms of governance and risk management? Answer: FinCredit shows a compara%ve strength specifically in governance, while PayLess, together with EasyInvest, display the strongest risk management systems. GrowLong and SeeFar would highly benefit from a risk management TA.

FinFuture SeeFar

GrowLong EasyInvest

PayLess FinCredit Average

Governance

GrowLong SeeFar

FinFuture FinCredit

EasyInvest PayLess Average

Risk management

69

Use 4: Benchmark investees to peers

•  Ques%on: how does the aggregate social performance of the investees of Fund DoWell compare with all the FIs evaluated in the data plaeorm according to the USSPM?

•  Answer: DoWell investees perform beser than the average in terms of defining and monitoring social goals, ensuring BoD and staff commitment and designing products that meet clients’ needs, they are in line with the average for the balance of social and financial performance and client protec%on, while they score less than the average on the responsible treatment of staff.

USSPM 6

USSPM 5

USSPM 4

USSPM 3

USSPM 2

USSPM 1 Fund All FIs in database

70

Feedback

1.   Collect: if you currently collect / calculate APR, how do you do it?

2.  Willingness to pay a subscrip%on fee: please feel free to share ini%al reac%ons; the Plaeorm will be developed only if sustainable

3.  What type of addi%onal analysis and repor%ng format would be useful?

71

Thanks

Lucia Spaggiari Business Development Director, MicroFinanza Ra%ng

Bonapriso, Douala, CAMEROON T +237 691 936 326 Skype lucia.spaggiari

72

1.  Harmonizing investor due diligence and monitoring on social performance -- uptake of SPI4 ALINUS

2.  Harmonizing loan agreements covenants in support of responsible microfinance

3.  Measuring and reporting on social outcomes – guidelines and indicators being developed through the outcomes working group. We will be soon launching a pilot to field test the work

4.   Pricing transparency – defining a model to continue to have transparent pricing data in the post MFT era

5.   Aligning efforts with other initiatives in responsible finance (including PIIF, GIIN)

Conclusions & Next Steps

74

Thank you!

[email protected]

Resources and more information

•  All about ALINUS: https://www.cerise-spi4.org/alinus/ •  Social Investor Working Group page in SPTF website:

http://sptf.info/working-groups/investors •  Universal Standards Manual:

http://sptf.info/images/usspm%20englishmanual%202014-05-09.pdf •  Universal Standards Implementation Guide:

http://sptf.info/images/usspm%20impl%20guide_english_20141217.pdf

•  The Resource Center: http://sptf.info/resources/resource-center •  The TA database to help find a SPM consultant:

http://sptf.info/resources/find-a-ta-provider

Data Platform: Additional slides

1.  Submission 2.  Full or partial transparency 3.  Indicators 4.  Coverage 5.  Lessons learned

77

Timing Channel 1. Anywhere any%me Data providers can submit data of one or more FI from any Country any%me. Suggested as the standard approach to increase coverage.

1. On-‐line ques%onnaire For data providers to submit data on the spot. Suggested for one or few FIs, or for quick data input and use.

2. One country at a %me Data providers can submit data of all FIs of one Country collected at a specific point in %me. Suggested when there is interest for full coverage of a Country.

2. Excel database template For data providers to share data in a standard format compa%ble with the database. Suggested for several FIs or when no stable internet connec7on is available)

3. Bulk Data providers can submit a set of data of several FIs from any Country referred to any periods at a specific point of the year. Suggested to data providers with large volumes of data.

3. SPI4 or SPI4 ALINUS The SPI4 tool will be upgraded to allow expor%ng data in a format compa%ble with the database. Suggested for investors or FIs using SPI4.

Data providers can choose their preferred combination of timing and channel to submit the data

78

Data Platform: Additional slides - Submission

Data Platform: Additional Slides - Full or partial transparency

Two options will be available to data providers:

1. Full transparency: recognition of transparency, identification of the FI disclosed along with data;

2. Partial transparency: data disclosed for benchmarking, identification of the FI disclosed exclusively to the data provider and the Platform manager (to manage duplications and updates).

79

Data Platform: Additional Slides - Indicators Topic Level Iden%fica%on and Peer group: ID, year, Scale, Charter type, Saving mobiliza%on, Viability, Regulated, Lending methodology, Country, Sub region, Region, etc. Macroeconomic indicators Financial & risk: Profitability, Poreolio yield, Credit risk, Provision expense ra%o, Funding expense ra%o, Produc%vity, Efficiency, Capital adequacy ra%os, Liquidity ra%os, Growth, Key financial statements items, Voluntary savings, Compulsory savings Microfinance Ins%tu%onal Ra%ng grade, outlook and scores Client protec%on: APR, Transparency index, Loan size, loan term, Other product features, Client protec%on cer%fica%on status. Social: Outreach, Client drop out and client reten%on, Staff turn-‐over, Management compensa%on ra%o, Staff gender ra%os, Poreolio breakdown by lending methodology, by urban / rural, by sector, by gender, Client educa%on, Client household poverty rate, ownership of assets. Social Ra%ng grade, scores and narra%ve assessments by indicator. SPI4 audit scores, SPI4 audit narra%ve assessment by indicator Social from client survey: Client over-‐indebtedness ra%os, client household vulnerability to shocks, employment, start-‐up business, Client financial exclusion profile by type of previous access (formal/informal), Reduc%on in client dependency from moneylenders, Use of the loan.

Country F i n a n c i a l Ins%tu%on Product Loan Client Household Nature Quan%ta%ve Qualita%ve Type Number Score text Standard IFRS MFT CPC USSPM SPI4

80

Data Platform: Additional Sides - Coverage

Coverage per year MFT 2013 Core database 2016

Core database compared with MFT

Enhanced database

# APR datapoints 2,347 4,320² ↑ Larger sample

↑ Depending on the data providers actual contribu%on

# Products 610 240 ↓ Only large products

# Financial Ins%tu%ons 164 80 ↓ Rated ins%tu%ons only. Unless country-‐wide studies are conducted

# Countries 11 33 ↑ Majority of Countries with significant financial inclusion

To guarantee a minimum coverage, the Core database, linked to MicroFinanza Rating ratings and certifications, will be available at all times. Its coverage will increase every year (table shows estimate for 2016). The coverage can be further increased with the enhanced database, which can potentially be larger than MFT.

81

Data Platform: Additional Slides - Lessons learned 1

Lesson learned 1. It isn't easy to get forty different organiza%ons to agree on the rules and procedures for an ini%a%ve that has never been done before. Chuck Waterfield, MicroFinance Transparency CEO

Lesson learned 2. A public good model like Microfinance Transparency (MFT) is not sustainable in the long term. Advoca7ng Transparent Pricing in Microfinance: A Review of MFTransparency's Work and a Proposed Future Path for the Industry (hereinaNer, A Review of MFTransparency's Work), Chuck

Waterfield, MFT CEO.

Lesson learned 3. It would be necessary for one organiza%on to take on the role of collec%ng and publishing the data and maintaining the website. The pricing data collector should: have a good

reputa%on, be independent, have entrepreneurial skills, be able to design and run a web plaeorm, know the local microfinance market and have good connec%ons with MFIs worldwide. Emmanuelle Javoy,

Pricing Data Collec7on For The Microfinance Sector (hereinaNer Pricing Data Collec7on), 2015

Lesson learned 4. Investment or project officers from MIVs, DFIs, Donor (IOs): Some MIVs, DFIs or Donors ask their IOs to issue an opinion on whether prices charged by a given MFI is responsible. In that case, IOs do collect some pricing data, albeit with methods that vary greatly from one player to the other. The pilot conducted by MFT contributed to demonstrate that, even if these players can usually get this informa%on from MFIs, they have difficul%es geqng the authoriza%on to share it. The pilot also demonstrated that the %me of IOs is very scarce and that addi%onal tasks can only be added if they allow to save %me on other

aspect of the work. Emmanuelle Javoy, Pricing Data Collec7on), 2015 82

Lesson learned 5. We found that we had to exchange not 3-‐4 emails per MFI but an average of between 31 and 64 emails per MFI. Emmanuelle Javoy, Pricing Data Collec7on), 2015

Lesson learned 7. MFIs oNen face a situa%on where risks (reputa%on risk4; compe%%ve disadvantage, etc.) outweigh incen%ves to publish their pricing data. Emmanuelle Javoy, Pricing Data Collec7on), 2015

Lesson learned 6. FIs are more open to sharing data if the data access is limited to subscribers.

Lesson learned 8. It would make sense for it to be available in the same loca%on as data on financial performance. Emmanuelle Javoy, Pricing Data Collec7on), 2015

Lesson learned 9. Process and tools should be easy to use and understand, reasonably quick, and widely accepted. Emmanuelle Javoy, Pricing Data Collec7on), 2015

Lesson learned 10. Pricing of loans can indeed be very complex and MFT has iden%fied that MFIs oNen made mistakes in the way they entered the data. Emmanuelle Javoy, Pricing Data Collec7on, 2015

83

Data Platform: Additional Slides - Lessons learned 2

SPTF Social Investor Working Group Meeting

Documents

Transcript of SPTF Social Investor Working Group Meeting