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Responsible investment in microfinance: The value added of social audits for the fund managers
01.12.2011
Microfinance's success in terms of scale, poverty alleviation, and return on investment has drawn the attention of financial markets. At the same time, microfinance is under increasing scrutiny as controversies abound over the risks of overindebtedness, microfinance's actual impact on clients, and other contentious issues. Among some investors, the result has been a call to ‘go back to the basics’ - client-centred institutions that offer products that make a difference. Social performance is therefore becoming an integral part of assessments of microfinance institutions (MFIs), and is gaining ground in the investment world. What are microfinance investors doing to systematize social performance management at the MFI level and to improve their own practices as responsible investors? What tools and approaches are being used? This article introduces the approach of social audit through the example of the Social Audit tool for Microfinance investment vehicles (SAM). This tool was designed to analyse investment funds’ strategies and activities with a view to strengthen and systematize their social responsibility approach. SAM was tested by social performance pioneer Oikocredit in 2009, and its experience is shared here including ongoing activities that have been conducted in response to the audit. -
Combining social and financial performance: A paradox?
01.09.2012
This paper makes the case that when microfinance institutions exhibit strong financial performance, particularly if there is a well-planned social performance strategy in place, the results for social performance are also better. Studies have suggested this in the past but their conclusions were based on incomplete data. This analysis draws on 2006-2011 data taken from 344 evaluations of 295 MFIs in 51 countries that have a total outreach of more than 12 million borrowers. The conclusion is that the double bottom line is no ‘mission impossible’ but can be achieved when trade-offs and synergies are combined cleverly, following a well-planned social performance management strategy.