What are social performance standards in microfinance?
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The microfinance industry has jointly developed a number of standards and core management practices to define what constitutes “strong” Social Performance Management (SPM). LMDF has participated in and supported several initiatives that have created social performance standards both for microfinance institutions and investors in microfinance.

Standards applicable to investment funds:

The United Nations-backed Principles for Responsible Investment (PRI) were developed to answer the increasing relevance of environmental, social and corporate governance issues to investment practices.

As a sub-set, investors in inclusive finance developed the Principles for Investors in Inclusive Finance (PIIF) to promote seven fundamental principles:

________1. Expanding the range of financial services available to low-income people;
________2. Integrating client protection into all policies and practices;
________3. Treating investees fairly, with clear and balanced contracts, and dispute resolution procedures;
________4. Integrating ESG factors into policies and reporting;
________5. Promoting transparency in all operations;
________6. Pursuing balanced long-term returns that reflect the interests of clients, retail providers and end investors;
________7. Working together to develop common investor standards on inclusive finance.

Standards applicable to microfinance institutions:

The Client Protection Principles (CPPs) provide MFIs with set guidelines needed to deliver transparent, respectful, and prudent financial services to their clients. They are part of the Smart Campaign which is a global effort to unite microfinance leaders around a common goal: to keep clients as the driving force of the industry.

The seven CPPs are minimum standards clients should expect to receive when doing business with an MFI.

_______1. Appropriate product design and delivery
_______2. Prevention of over-indebtedness
_______3. Transparency
_______4. Responsible pricing
_______5. Fair and respectful treatment of clients
_______6. Privacy of client data
_______7. Mechanisms for complaint resolution

Tools helping MFIs to measure social performance:

To measure social performance, tools have been implemented as the Social Performance Indicators (SPI4), which evaluates MFIs’ ability to achieve their social mission or the Progress out of Poverty Index (PPI) which is a poverty measurement tool for organizations and businesses with a mission to serve the poor. Social ratings are an external assessment by a knowledgeable entity of the social performance of an MFI.

LMDF encourages partner MFIs to integrate social performance management in their operations. Ultimately, better management of social performance and the emergence of a wider body of industry benchmark data will help the sector to live up to its social mission.

More details in the following document:

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