Oikocredit: Advancing Social Performance Management

Ging Ledesma, Manager, Social Performance

Oikocredit

• Established in 1975

• Global Network, Local Presence– 9 Regional Offices– 24 Country Offices– 70 countries, 790 project partners

• Loans, Equity, Support for Capacity Building

Our Mission :

Empower disadvantaged people with credit

Diverse Portfolio

• €474 mln end 2009

• 48% in Local Currency

• 80% in Microfinance

• 15% in Africa; 18 countries

Oikocredit: Why SPM?

Social Return & Accountability to our mission in choice of partners and enterprises supported

Larger context: honeymoon is over

A Rapidly Changing Context –Unprecedented growth and increasing competition– Commercialization–Private investment boom–Increasing skepticism of media, governments–Incidence of excesses, negative outcomes

Social performance cannot be taken for granted

SPM - How?

• Choice of Partners– Social & Financial Due Diligence

• Social Scorecard – 23 questions, 43 points, 4 areas: Outreach; Client Welfare & Benefit; Governance; Responsibility to Staff, Community, Environment

• Interest Rate Discount for Extraordinary Social Performance

Scorecard: Outreach (30%)Poverty 0,1 or 2 The organisation has a policy and uses a poverty profiling tool to screen

potential clients or assess client income level during the loan process.

screening Organisation has a policy for targeting poor clients and uses a poverty profiling tool as a standard practice. (1)

Organisation uses poverty profiling tool to screen clients and assess client income level during the loan process and organisation's MIS captures, monitors and reports upon this information (2)

Poverty level 0,1 or 2 50% or more of incoming and existing clients are below the National Poverty Line (NPL).

of clients ≥30% but <50% of existing or incoming clients are below the NPL. (1)

≥50% of existing or incoming clients are below NPL. (2)

Rural orientation and

0,1 or 2 50% or more of clients or portfolio are in rural areas as defined by the national census authority or 50% or more of outstanding portfolio is in agriculture and agri-related activities.

agricultural ≥30% but <50% of clients or outsta nding portfolio are in rural areas or involved in agriculture and agri-related activities. (1)

focus ≥50% of clients or outstanding portfolio are in rural areas or involved in agriculture and agri-related activities. (2)

Average initial 0,1 or 2 Average initial loan size of clients compared to Gross National Income (GNI, Atlas method) per capita.

loan size Average initial loan size >20% but <150% of GNI per capita. (1)

Average initial loan size ≤20% of GNI per capita. (2)

Welfare & Benefit ( 30%)

Prevention of client

0,1 or 2 The credit application process includes an evaluation of client's ability to repay the loan including a check on client credit history and existing debt, to avoid overindebtedness of clients.

overindebted- The capacity of the client to repay is assessed as a standard practice and the MFI has a formal policy on it. (1)

ness The capacity of the client to repay is assessed as a standard practice and the MFI has a formal policy on it and has a formal system for regularly coordinating with other MFIs (e.g. in a credit bureau) to avoid overindebtedness of clients. (2)

Transparancy about costs to

0 or 2 The organisation acitively discloses and promotes client understanding of loan terms and all costs in a language that takes into consideration literacy levels of clients.

clients The organisation actively discloses information and ensures understanding on effective interest rates and of all costs before anyone can get a loan. (2)

Profit distribution to

0,1 or 2 Organisation has a profit distribution policy which benefits clients directly (e.g. in the form of dividends to clients) or indirectly (e.g. in the form of effective interest rate reductions).

clients The organisation has a profit distribution policy and, in at least one of the last three years, has distributed ≥20% of profits to clients as direct or indirect benefits. (1)

The organisation has a profit distribution policy, in at least one of the last 3 years has distributed ≥20% of profits to clients direct ly or indirectly and no single interest (individual or family grouping) received >30% of profits. (2)

Governance (20%)Strategic plan: Active focus on social issues

0,1 or 2 The organisation has a strategic plan which clearly reflects targets for social goals and the actions to be taken to implement the social mission and the Board meetings and reports reflect this.

Organisation has a strategic plan with targets, has taken actions to reach social goals and social issues are reported as a standard item in Board and Management meetings and reports. (2)

Salaries/remuneration and incentives

0,1 or 2 The organisation has a clear salary scale in conjunction with national norms including a clear remuneration policy for top management and is fully compliant with statutory labour requirements.

Organisation has a salary scale benchmarked against regional or national standards and has a clear policy setting limits on remuneration, bonuses and incentives to top management. (2)

Broad ownership base 0,1 or 2 Organisation has a broad ownership base with clients included where possible.

Legal charter does not allow for ownership, or where it does, ownership of ≥30% is held by clients and no other single interest has a stake of ≥30%. (2)

Oikocredit - SPM

• Monitoring of Social Indicators – Semi-annual updating internal database:

average loan size, clients reached, portfolio breakdown by loan use, percentage of women clients, data on savings

– Annual updating of social scorecard

What can Oikocredit partners expect ?

• Social Audits, Ratings – link to Capacity Bldg. support

• Enhanced reporting: SPS and MFTransparency, Oikocredit database

• Support SPM integration

• Support use of SPI and PPI

• Collaborate in developing tools to measure change at client level

Thank you!

PresentationGing LedesmaManager, Social PerformanceOikocredit : Advancing SPM

EventMicrocredit SummitNairobi, Kenya

08 April 2010