CERISE: Social Performance Indicators Initiative

CERISE developed its Social Performance Indicators (SPI) tool to assess the social performance of MFIs. The tool compares an MFIs intentions and actions by analyzing its internal systems and organizational processes, determining whether or not an institution has the means in place to attain its social objectives. The underlying assumption is that the soundness of internal processes is a reasonably reliable proxy for actual social performance. The SPI tool focuses on process management, looking at an MFIs stated objectives and how effectively its systems achieve them. It analyzes social performance using a wide range of indicators (12 criteria), giving an MFI an exhaustive overview of how its mission and actions size up against a number of common social objectives. Each SPI indicator is simple, directly attributable to an MFI, and based on data that is easily available to an MFI and that can be quickly checked by an external auditor. The indicators are grouped under four dimensions: Outreach to the poor and excluded populations Adaptation of products and services for targeted clients Economic and social benefits for the clients Corporate social responsibility The SPI can be applied to any MFI, making it possible to compare institutions, promote peergroup analysis of social performance, and analyze the relationship between social and financial performance. It has been used by 170 MFIs in Africa, Asia, Europe, and Latin America. A user can transmit an MFIs results to a database to receive an additional analysis that compares its SPI scores to those of different peer groupsby country, region, size (clients, portfolio), age, or geographic intervention coverage area (urban, rural, mixed). On an individual level, an institutions results are analyzed against its own objectives, defined in accordance with its stated mission. The SPI tool is designed to be simple enough for so that any MFI wanting to conduct a self assessment can use the tool on its own. However, an external consultant can also be called upon used to help an MFI implement use the tool and make recommendations based on the findings. For the purpose of the User Reviews, all the MFIs interviewed implemented the SPI with the assistance of an external consultant. Outputs The results of the SPI are answers to a questionnaire, which can be entered into a downloadable Excel file. This format allows the answers to be presented as radar and diamond graphs that give a clear image of an MFI's social performance. Analysis of results can be carried out via discussion with an MFIs management and other interested stakeholders.

CERISE CERISE (Comit dEchanges de Rflexion et dInformation sur les Systmes dEpargnecrdit), is a knowledge exchange network for microfinance practitioners. Founded in

1998, CERISE is richly diverse, bringing together a variety of practitioners, researchers, donors and investors from the North and South. CERISE was founded out of the desire of its five members to share and learn from each other. Our work is focused on four themes: 1) Impact and Social Performance 2) Agricultural and Rural Finance 3) Governance and Social Viability 4) Intervention Methods In each of these areas, we have reflected on the experiences of our members to draw lessons and, in some cases, develop operational tools. This process of capitalizing on each others experiences has created alliances and synergies throughout the microfinance sector. Coordinating this network of alliances has become a key element of our work. Impact and Social Performance For many years, sustainabilty was all about "the financials"social performance was taken for granted. CERISE and its partners were the first to pioneer a social performance assessment tool for microfinance, in 2001. Developed in collaboration with networks from the North and South, the Social Performance Indicators is one of the most widely used social audit tools in the sector today. In addition to the SPI, CERISE has also developed innovative methodologies for assessing impact. CERISE has spearheaded a whole new facet of performance assessment to complement financial analysis. Our goal is to help MFIs become sustainable while genuinely contributing to development. In a context of financial turbulence and growing skepticism, these innovative tools offer constructive solutions for MFIs.

Social Auditing of MFIs Microfinance is maturing. Its no wonder donors and social investors are demanding greater accountability from their MFI partners, who do they really serve and what effects are they are having on clients? Some MFIs also sense that improving social performance will, in the medium-term, boost their financial performance. Social auditing tools like the SPI analyze internal processes to assess if the MFI is meeting its social goals. This approach helps MFIs set objectives for improvement and take the necessary steps to meet them. CERISE is a pioneer of social audits. Today, over 500 MFIs have administered the SPI either alone, with their network, TA provider or social investors.

CERISE certification for SPI users The CERISE SPI tool, available for free, was designed using an open, collaborative and transparent approach. Used by more than 500 MFIs worldwide, the CERISE SPI tool is the premier social performance audit tool for institutions committed to improving the lives of their clients. The volume of users henceforth impedes the promoters of the tool to maintain in-depth case-by-case quality control. Moreover, the microfinance sector has changed. Scandals and increasing criticism have put it under the scrutiny of media, governments, regulators and the wider public. MFIs both need and want to be more transparent and improve their practices. The CERISE SPI is useful toward this end, but it also creates a potential market for free riders. Quality of assessments must be ensured. SPI now includes Standards of Use , and a Certification process for trainers and auditors. The Standards of Use formalize the CERISE SPI application process to ensure quality control and define optimum conditions in which the SPI tool can be used. Certification is required to be considered as an external auditor and to train other organizations on the SPI tool.

Certification aims to
avoid inefficient use of the SPI tool by MFIs and their partners (bad quality, unreliable information); ensure quality control and potential benchmarking among SPI users by guaranteeing with reasonable confidence the process used for the audit; avoid inappropriate use of the SPI tool by third parties (free riders using SPI for commercial purposes, duplication of efforts, creating unnecessary reporting burdens for the MFIs); ensure reliable reporting to MIX.

Added value of the certification

For the audit user (MFI stakeholders): ensures rigorous quality control and reliability of the audit, increases external credibility of results, and facilitates trustworthy information sharing. For the auditor: grants international recognition, access to updated knowledge and training in the efficient use of SPI. For the MFI: ensures high quality data for decision making, boosts credibility of results, demonstrates strong commitment towards social performance. Since 2011, several CERISE partner organizations have successfully completed or have started undergoing the CERISE-SPI certification process, producing a significant network of external auditors for MFIs to validate their SPI results

Socially Responsible Investors in Microfinance Social utility is the main argument for microfinance investment. Investors who cannot clearly demonstrate the social impact of their activities risk overstating microfinances benefits and seeing their own reputation discredited when problematic aspects are publicized. But, for investors to make decisions based on social value added, they must be able to measure it. Social audit tools for MFIs have multiplied in recent years, helping MFIs measure and improve their social performance. While some of these tools have been used by investors, Socially Responsible Investors (SRIs) deserve an audit methodology adapted to their own concerns and structures. CERISEs SPI Investor is a four-dimensional audit tool for investors that draws on the UNs Principles for Responsible Investment and CGAPs work on aid effectiveness. Currently being tested by social investor Oikocredit, SPI Investor enables SRIs to take stock of operations, strategies and social impact. Designed to be administered internally, the SPI Investor can also be used as a management tool to guide investment decisions, and a communication and benchmarking tool to increase transparency improve credibility of SRIs in microfinance. Action-Research on Social Performance The SPI tool is open access. In exchange for using the tool, users send their findings to CERISE along with comments on the tool. This user collaboration has led to an improved version of the SPI and a rich database with results of over 200 social audits. CERISE has used this databank to test the relationship between social and financial performance to verify synergies between the two. CERISE has also tested the relationship between SPI and the results of impact studies to verify synergies between systems and impact. CERISE works with its investor partners and the Social Performance Task Force working group on social investors to identify criteria for promoting socially responsible investment. Rural and Agricultural Finance Rural areas lack the financial services needed to develop and diversify economic activity. CERISE strives to find sustainable solutions to meet the huge demand for rural finance. Microfinance has the potential to play an important role in creating synergy between actors from the public and private sectors and civil society and ultimately improve access to rural finance. For example, linking producer organizations to MFIs can not only build producers capacity to use financial services, but help MFI better understand and satisfy rural demand. CERISE uses value chain finance and livelihood finance approaches to promote sustainable access to rural finance. Microfinance and Producer Organizations

Producer organizations are key actors in rural areas. And yet, they are virtually unknown to most financial institutions. The converse is also true. As a rule, producer organizations and financial institutions ingore each others modus operandi, rules, needs and constraints. In order to bridge this gap, CERISE has developed an Operational Guide to building partnerships between producer organizations and financial institutions. Developed in conjunction with FARM Foundation, the Guide draws on action-research carried out by IRC in Niger. It shows how to analyze the financial needs and constraints of producers and teaches producer organizations how to effectively access and use financial services. Because alliances between producer organizations and financial institutions are critical to meeting the huge need for agricultural finance, this Guide should help increase farmers financial access. Value Chain Finance and Fair Trade We believe rural development depends on making finance available for all types of rural activities. Thats why CERISE is committed to a value chain approach that emphasizes support to rural entrepreneurs and finance for all segments of the rural market. This approach encourages MFIs to finance the whole rural economyfrom production, processsing to commercializationand build relationships with the private sector to ensure market channels. Its about strengthening the economic fabric of rural regions. Fair trade adds value to many agricultural exports by securing stable, decent incomes for farmers. CERISE has joined forces with French fair trade label Max Havelaar to find innovative ways to bring importers, producer organizations and microfinance together, to build sustainable solutions to rural finance and expand fair trade. Governance Governance is a major risk facing the microfinance sector today ("Banana Skins" 2009). Sustainable requires not only financially viable institutions that operate according to existing legal frameworks, but [a transparent and efficient organizational structure appropriated by all the institutions stakeholders(salaried staff, elected officials, clients, members, TA providers, donors, or shareholders). CERISEs approach to governance starts by identifying stakeholders and decision-making processes in order to analyze the MFIs capacity to manage crises, plan strategically and prevent risk.

Governance in Microfinance Governance is critical to the success of any institution. The "art of governing" goes beyond the technical relationships between a Board and management. It is about the political stakes of power relationships, conflicts of interest and the clear definition of roles and responsibilities. CERISE developed a Handbook to analyze MFI governance based on an approach focused on stakeholders and their decision-making influence. The Handbook for the Analysis of Governance of Microfinance Institutions is designed for MFIs and TA providers looking to align mission with actions. Governance and Social Performance Social performance governance refers to the strategic and operational decision-making processes stakeholders use to pursue the institutions social mission and enact its social policy. Effective social performance is based on a strong relationship between social strategy and governance. An MFI that integrates its social mission into governance mechanisms is better equipped to manage its social performance. It enables the MFI to strike that delicate balance between financial and social bottom lines and take into account the perspectives of all those affected by the institutionowners and directors, management and staff, users (clients or members), the community and the environment. Deeply knowledgeable of the relationship between governance and social objectives, CERISE proposes to help take governance analysis a step further, to social performance management.

The Role of NGOs in Microfinance Innovation remains a challenge in microfinance. Unmet demand is huge; rural populations and SMEs are largely unserved. Known for their capacity to innovate, NGOs are wellequipped to take risks: new partners, new financial products, new intervention methods. Through a series of Peer Reviews, similar to those carried out by CGAP with affiliated donors, CERISE has fostered mutual learning among our members and collectively defined a series of "good practices" for practitioners. CERISE facilitates discussions with French NGOs working in microfinance on a regular basis, at the impetus of public cooperation agencies like Agence Franaise de Dveloppement (AFD) and networks of international solidarity organizations like Coordination Sud. European Stakeholders in Microfinance: Whats our role? CERISE is a founding member of the European Microfinance Platform, a network of European organizations and individuals working in microfinance in developing countries. CERISE coordinates the e-MFPs working group on social performance. CERISE also works with several European universities and research institutes to maintain

dialogue between academia and microfinance practitioners. Our goal is to promote a strong microfinance sector capable of meeting client needs.