Social Investor and DFI Meeting on Responsible Finance 2015March 11-12 – Luxembourg, EIB

Executive SummaryThe European Investment Bank (EIB) hosted the SPTF social investor working group meeting in Luxembourg on March 11-12. Day 1, March 11, was a day of pre-meetings for members of the SPTF social investor working group. The objective of the day was to discuss among members updates on all ongoing initiatives and identify key action items for the group for the year. On Day 2, March 12, the group opened the discussion to a broader audience that had not always been part of the conversation in the past. The objective of the day was to exchange experiences and ideas with the broader audience and, based on the discussions of Day 1, refine the action plan for the SPTF social investor working group for 2015.

One key theme common throughout all discussions of the two-day meeting was the importance of coordinating the work of the different initiatives and tools, harmonizing language, and working collectively. A strong appeal was issued to all to increase commitment to implementation - any initiative that the group works on can only achieve its goals to improve practice in the responsible finance sector if it is taken up and translated into change by a growing number of stakeholders. There are a number of challenges and hurdles to be addressed, internally and externally. This working group focuses on addressing them, sharing them, and by doing so supporting individuals who commit to push change in their respective organizations.

The next meeting of the SPTF social investor working group will take place in June 9, 2015, as pre-meeting of the SPTF Annual Meeting in Cambodia.

Below is a summary of the topics discussed each day (pages 1-6). For detailed notes refer to pages 7-23 for March 11 and pages 23-40 for March 12. For the list of attendees see page 41. Presentations for both days as well as other relevant materials have been posted on the SPTF website under the social investor working group section and can be accessed through the following link http://sptf.info/sp-task-force/http-www-sptf-info-sp-task-force-social-investors-working-group

Summary of discussions of March 11 (organized by session, according to agenda)

Update on the work of the SPTF and Implementation of the Universal Standards. The Universal Standards have managed to achieve a very high level of awareness across stakeholder groups in the microfinance industry. However, more needs to be done now to support implementation by MFIs and investors/donors to change practice. To continue to support implementation and help change practice, the SPTF has planned several activities, which are described in its recently developed 3-year strategic plan under the section “Improve Practice”. One way in which the SPTF is

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working to improve practice is through the recently launched Responsible Microfinance Facility (RMF) thanks to the support of AfD. Furthermore, to allow improvement in practice, the SPTF knows that stability and relevance of the standards is key. For this reason, the SPTF is collaborating with Cerise and The Smart Campaign to maintain the Universal Standards, the Client Protection Principles, and SPI4 stable until June 2016. The SPTF is also in the process of creating a process and structure to manage and review the Universal Standards going forward. Key takeaways : A key aspect mentioned during this session, and that came up

many times during the 2-day meeting was the importance of working collectively to implement change. Any investor interested in learning more about the activities in the 3-year SPTF strategic plan or interested in getting involved should contact Laura Foose at laurafoose@sptf.info.

Results of the SPTF-run survey “How socially responsible is your MIV?” Sascha Noe shared a summary of the results of the survey conducted by the SPTF in late 2014-early 2015 to MFIs to understand their perception of how socially responsible their investors are. The survey was an initiative of the SPTF social investor working group and might be conducted again in 1-2 years to compare results and measure progress. If so, it was discussed that SPTF will partner with other initiatives (e.g., GIIN, Symbiotics) as well as with investors to increase reach to MFIs. Key takeaways : Results from the survey showed that MIVs have room for

improvement in regards to legal conditions being fair, no surprises taking place between terms and conditions mentioned during due diligence and those translated into loan agreement, clarity in communication of terms and conditions, and whether covenants are in line with Lenders’ Guidelines; also while MIV monitoring of risk of over-indebtmentness at the client level is common, it does not always happen on a consistent basis; MFIs agreed that social reporting would be easier if a common reporting framework (SPI4) was widely adopted and required by MIVs, MIX, raters, shareholders; and while MIV support to MFIs to improve SPM is common, it is not widely adopted (particularly for lender MFIs). To access the full report click here.

Overview of GIIRS rating. The session provided an overview of the GIIRS rating for funds and MFIs and included the experience of Grassroots Capital Management and Bamboo Finance in using GIIRS. Key takeaway : The SPTF is working with GIIRS to ensure alignment and include

in its tools the Universal Standards and SPI4. As a next step, discussions will be started regarding better alignment of GIIRS and PIIF.

Investor use of SPI4. Emmanuelle Javoy provided an update on the SPI4, particularly regarding the development of a version with a reduced number of indicators that can be used by investors for due diligence and monitoring (SPI4 light). She also showed an example of the custom SPI4 version used by Cordaid. Participants discussed and provided feedback on a list of additional indicators to be added to

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those already largely chosen for the SPI4 light. The goal is to narrow down and finalize a list to 70-80 indicators. Key takeaways : Investors are generally aware of the need to improve SPM

collection information processes and are open to consider reviewing internal processes, of course depending on internal constraints. The next steps are to finalize a due diligence adapted tool and test its uptake by the industry.

MIX Gold. Blaine Stephens provided an overview of MIX Gold including the feedback and experience of investor users. Key takeaway : There is global awareness of the inefficiency of present financial

reporting from MFIs to various donors and investors. The financial model still lacks of visibility and adaption to the investor readiness to move on. We need performing examples that satisfy investor needs to generalize the offer.

Responsible pricing. Chuck Waterfield shared the results of the pilot conducted with investors to gather data. He mentioned the decision of MFT to stop gathering data, yet noting that tools and resources will remain available on the MFT website. Investor participants expressed interest in continuing the work on this topic. Key takeaways : Responsible and transparent pricing is a central topic of

responsibility in the industry. While many investors in the room expressed interest in continuing the discussion it is also important to note that this topic needs to be taken up seriously. Investors must acknowledge their responsibility in terms of contributing to data collection (part of the fault for the failing of the MFT pilot failing was the lack of data collection). It was decided for the SPTF social investor working group to create a specific workstream to coordinate and continue industry work on the topic. Concrete details will be shared in the next weeks.

Measuring and reporting outcomes. Frances Sinha provided an overview of the ongoing work and future plans of the SPTF outcomes working group. Christophe Bochatay shared the experience of TripleJump. Bamboo Finance and Oikocredit also shared brief experiences in the topic. Investors decided to not create a separate working group on this topic only for investors but rather join the work of the ongoing group. Those interested in joining the SPTF outcomes working group should contact Amelia Greenberg at the SPTF ameliagreenberg@sptf.info. Key takeaways : There is a high level of interest among investors in the topic of

outcomes. It is clear that measuring and reporting outcomes takes time. And while there is no question on the validity of RCTs, when there is no budget for such study, conducting market research (even internally) can also help an organization understand how to serve its target population and whether is its contributing to improve the life of its clients.

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Summary of discussions of March 12 (organized by session, according to agenda)

Transparency and reporting. Dina Pons gave an overview of the PIIF, the Lenders’ Guidelines and shared the experience of Incofin regarding reporting to PIIF. Key takeaways : Industry leaders must commit to implementation. The Lenders’

Guidelines have been finalized and stabilized. Members of the SPTF social investor working group should provide feedback and progress on implementation of the Guidelines at the next social investor meeting to take place in June in Cambodia.

LuxFlag: labeling. Annemarie Arens gave an overview of the work of LuxFlag and its labels for regulated funds. Key takeaway : There is a need to start to coordinate the work of SPTF, Smart

Campaign, rating agencies and auditors on the MFI level to the service providers at the MIV level (such as PIIF, GIIRS, LuxFlag).

Importance of transparent pricing. Chuck Waterfield provided an overview of the data gathered by MFT and its use for investors. All resources and tools are available on the MFT website for investors to use. Key takeaway : Based on importance of this topic in the industry and the interest

expressed by investors both on March 11 and 12, the investor working group will start a workstream to continue the discussion on this topic. Details will be shared soon.

Preventing over-indebtedness (MIMOSA). Emmanuelle Javoy gave an overview of MIMOSA, a tool that helps identify the warning signs of over-indebtedness. A new version of the tool, MIMOSA 2.0, is expected to be ready in 2015. Key takeaway : The new version of the tool will maintain its simplicity yet be

more robust.

Creating common social statements (SPI4). The SPI4 is a social assessment and reporting tool developed by Cerise, together with MIX and SPTF that is completely aligned to the Universal Standards. Cecile Lapenu and Emmanuelle Javoy gave an overview of the level of use to-date of the tool and the ongoing work of a small group of investors (ALINUS) to develop a version of the tool that has fewer indicators and can be used as the common tool for due diligence and monitoring (SPI4 light). Several investors shared examples of how they use the SPI4 and its benefits (BlueOrchard, Cordaid, Proparco, Ada, Deutsche Bank). ADA gave an overview of its Microfact (financial factsheet), which is used by many investors and with the help of Cerise, integrates social performance indicators. Key takeaway : If adopted widely, the SPI4 has the potential to become the

“social statement” to complement annual financial statements of MFIs.

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Importance of good governance at the MIV, MFI, and asset owner levels. Paul DiLeo (Grassroots Capital Management) shared the lessons learned from the AfriCap fund case study (AfriCap was one of the earliest microfinance equity funds, established in 2001, long before many of the current governance and good practice guidelines were available). Dina Pons shared examples of good governance at the MFI level (AMK and Kushali bank). These examples illustrated how social performance is discussed at the board level and implemented throughout the institution. Key takeaways: While there are examples of MIVs and MFIs who have made

very good progress in incorporating SPM into their ongoing processes and operations, unfortunately this is not yet common practice in the industry. AMK and Kushali bank provide good examples to learn from in terms of how SPM can be embedded and the benefits that it provides. Embedding SPM in the governance of an institution (as equity investor) is possible, and it can be simple and cost-effective. If an organization claims to be double-bottom line, having a social dashboard that is part of the regular reporting is absolutely necessary.

Challenges and considerations when exiting. A panel of investors shared their views on the topic of responsible exits from equity sales. Discussion centered on the measures that can be taken into account to help plan for exits that try to maintain the social mission and character of the organization after the sale. Key takeaway : With the volume of sale transactions (exits) expected to increase

significantly in the near future, defining what is meant by “responsible exit” and what can be done to try to ensure is now more important than ever.

Measuring and reporting outcomes. Frances Sinha led the session on measuring and reporting outcomes. Prof. Malcom Harper shared his views and mentioned that while RCTs are the gold standard, organizations can also do assessments in house (e.g., AMK). Assessing results should be part of the regular operations of an organization rather than a one-time research exercise. Investors provided examples of their work, including Bamboo Finance, EIB, Oikocredit, and Incofin. Key takeaways : Measuring social return presents challenges in terms of ease of

measurement and reporting. Analyzing the changes in the lives of clients is possible without having to conduct impact studies (which usually have high costs and longer time frames). Options include: monitoring key indicators that are in the MIS, utilizing the internal research department of the MFI, and commissioning external research studies. The topic of outcomes is of high interest to investors –and many others- in the microfinance industry. The SPTF outcomes working group will continue to have discussions on this topic and welcomes all interested investors to join. Those interested please contact Amelia Greenberg at SPTF ameliagreenberg@sptf.info

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Next steps Social investor working group co-chairs, Jurgen Hammer and Dina Pons will follow up with investor working group members to identify volunteers for each of the workstreams that emerged out of the two days of discussions:

Universal Standards and SPI4 - Continue to support the implementation of the Universal Standards and adoption of SPI4-light by investors

Lenders’ Guidelines for Reasonable Covenants - Continue to work and report on implementation

Outcomes - Continue the discussion through the SPTF outcomes working group Alignment - Continue to work on aligning with different initiatives – engage with

GIIRS and assess overlap with PIIF Responsible pricing – Set up of a workstream within the investor group to continue

the work on pricing transparency Responsible exits - Continue discussion

If you are interested in participating in any of these discussions or workstreams, please contact Leticia Emme at the SPTF leticiaemme@sptf.info

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Detailed notes from sessions

March 11 – Pre-meeting of the SPTF social investor working group

Welcome and introductionPatrick Walsh (EIB) welcomed everybody on behalf of the EIB and mentioned the importance of the work of the SPTF and the social investor working group for the EIB.

Jurgen Hammer (Grameen Credit Agricole Foundation, co-chair of the SPTF social investor working group) welcomed the group and provided an overview of the discussions for the two-day meeting. Jurgen mentioned that this year for the first time the group was opening the discussion to many new investors (joining for dinner on March 11 and for discussions on March 12). He added that during the discussions of March 11 some investors could think that some of the topics addressed were the same as discussed in the past. The reason for this is, explained Jurgen, is to ensure that the group can keep advancing on its work, going deeper and keeping each other updated on their progress.There are two important next steps on the group’s work:

1) Implementing what we talk about in our own organizations2) Sharing with others and increasing outreach

Jurgen added that March 12 was an important day to reach out to colleagues who had not been involved in the past and share with them all that the group has been working on until now and getting them engaged. At the end of the day tomorrow, Jurgen said, we will develop an action plan for the next year for our working group.

Dina Pons (Incofin, co-chair of the SPTF social investor working group) then provided an overview of the agenda for the day and thanked participants for their help in providing key input for the discussions today. Dina emphasized that as SPTF is a task force and as such we rely on the work of our members and working groups to keep advancing our work.

Update on the work of the SPTF and on the implementation of the Universal Standards

Laura Foose (Director, SPTF) welcomed everybody and thanked the EIB for its generosity in hosting the meeting and for helping attack new investors to the meeting. She also thanked the co-chairs of the SPTF social investor working group Dina Pons (Incofin IM) and Jurgen Hammer (Grameen Credit Agricole Foundation) and their organizations for dedicating so much of their time and expertise to move the work of the investor working group forward. As mentioned by Dina, Laura also emphasized that the strength of the Task Force is the work of its members. The SPTF social investor working group is one of the most active working groups of the SPTF, Laura said. We would not be as far

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as we are, without the commitment and leadership of the people in this room. Social investors are a critical stakeholder, Laura added. You have the influence to encourage responsible practices in the field. You have the influence to engage with your own investors, asset owners, to raise awareness of how return expectations of the industry translate to interest rates for the client. This is hard to do alone, but collectively you have influence to change expectations with investors so that all stakeholders benefit, including the end-clients this sector seeks to serve. SPTF can be the platform for those discussions and a place where we can develop this joint messaging. Let’s remind ourselves that we were drawn to inclusive finance to support both social and financial results. We must keep the client at the center of our objectives and work. That is what the Universal Standards for Social Performance Management seek to do. They focus on the client at every step of the way – from protecting clients, to developing products and services that meet their needs, to helping them build their own assets so that they can improve their lives.

Laura concluded by saying that we believe that when financial service providers strengthen their management practices, the client ultimately benefits. For this reason, we continue to ask investors for their support in implementing the Universal Standards in their work and in promoting them with their partners.

Leticia Emme (SPTF) then provided an overview of the exciting growth that the SPTF has seen in the last year, most notably with 60% growth on its membership, higher offering of trainings and resources, and engaging and training regulators on SPM. A survey conducted in 2014 by the SPTF in collaboration with MIX and the Global Appeal for Responsible Microfinance showed that awareness of the Universal Standards for Social Performance Management (Universal Standards) is very high across all stakeholder groups (about 90%). However, only about 20% of MFIs reported to have started to change practice. This means that implementation and improving practice needs more support. Supporting improving practice, added Laura, is a key priority of the SPTF. We just developed the SPTF 3-year strategic plan (which all participants can access through the flashdrives that were handed during registration) with six areas of focus, and improving practice is one of them (the other five are to set standards, to promote standards, to assess practice, to report and benchmark data, and to demonstrate practice). Laura mentioned that the SPTF is looking for support for the different activities laid out in the plan, and encouraged investors to provide feedback if desired or indicate to Laura if they were interested in collaborating in any of the activities. As Laura mentioned, further details on the strategic plan, including a detailed budget, can be requested to her. One of the ways in which the SPTF is working to improve practice, added Laura, is through the Responsible Inclusive Finance (RMF) facility launched in January 2015 in collaboration with the Smart Campaign and the generous support of AfD. This is a 3 year, 2 million euro initiative to strengthen capacity and SPM practices of financial institutions in selected countries in MENA and Sub-Saharan Africa. Priority counties include: Benin, Burkina Faso, Ghana, Madagascar, Mali, Niger, Senegal, Togo. However, the RMF might work on other countries as well. Activities supported by the

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RMF include offering trainings, co-financing activities at the FSP level, supporting research, and developing new resources. (A one pager with the description of the project as well as the website address for FIs to apply was given to participants in printed form and can also be found on the flashdrives each participant received). Laura encouraged investors to share this information with their partners in the region so that they can apply to the RMF. She also mentioned that after collecting lessons learned from this work, SPTF would like to replicate the project in other regions.Leticia added that other ways in which SPTF plans to help improve practice – which are all mentioned in the strategic plan- include offering more trainings (Universal Standards Implementation Series in 5 languages), updating the TA database, promoting the use of the Universal Standards Implementation Guide and the Mentoring Guide (being currently developed by Oikocredit and to be published by SPTF), maintaining the Resource Center updated, and developing additional resources on Dimension 6 of the Universal Standards (Balancing Financial and Social Performance) given that this seems to be the dimension that MFIs find most challenging to implement. SPTF would like to collaborate with investors on developing resources for this dimension, including a profitability case study. Any interested investors in participating of this case study or other activities please contact Laura, Jurgen, or Dina.To help implement the Universal Standards, Laura added, we know that stability and consistent are key. She mentioned that the SPTF, Smart Campaign, and CERISE have recently signed an MOU where they agree to work together to align the timeline of future revisions to their standards. SPTF will maintain the USSPM stable until June 2016, CERISE will maintain the SPI4 stable until the same date, and at that time Smart will put into effect their revised standards. Also, to ensure that the Universal Standards remain relevant and effective, the SPTF is developing a process and structure to manage and administer the review of the Universal Standards going forward. There will be a Technical Review Committee in charge of this work that will be composed of members of key initiatives (SPTF, Cerise, Smart, etc) as well as representatives of new frontiers, representatives of all regions and key stakeholder sectors. The SPTF has worked with an ISEAL expert in developing this process and structure, which will soon be finalized and communicated.

Wrapping up the session, Laura asked to share feedback on the strategic plan and to indicate support or interest in collaboration in any of the activities and reminded everybody that more detailed information on the plan could be requested to her. Discussion with participants David Fitzherbert (Progression Capital Advisors, LLP) asked whether there is clear list

of social performance reporting requirements that investors can to give to their partner MFIs. Dina mentioned that the Universal Standards provide the summary of the standards and practices of SPM. A first step is to share this with the MFI, a second step is to track whether the organization is implementing the practices, which can be done through the SPI4 social assessment tool (investors can require their investees to use this tool). Dina added that some investors are also working on

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using a summarized version of this tool (SPI4 light) for due diligence, topic which was discussed later in the date (for details refer to specific notes on that topic on March 11-12).

Ging Ledesma (Oikocredit) asked whether the SPTF considered having membership fees and gave examples of other organizations that use them as part of funding their work (e.g., European Microfinance Platform).

Jurgen and Dina mentioned the importance for the investor members of the working group to bring the messages of what we want to work/change/implement to our teams, management, and other colleagues. To change practice we need to work collectively so that implementation is widely adopted.

How can we measure how socially responsible we are?

Results from the survey “How socially responsible is your MIV?”

Sascha Noe (Cordaid) provided an overview of the survey and results. The survey was an initiative that emerged at the last meeting in Dakar (June 2014) from some members of the working group. The survey was conducted between December 2014-January 2015. (For the complete report of the survey please refer to pre-reading material on this report posted on the SPTF website which can be accessed through the following link http://sptf.info/sp-task-force/http-www-sptf-info-sp-task-force-social-investors-working-group)

Key results from the survey include: MIVs are perceived to take SPM into account during due diligence, however not all

of them share the results of the due diligence with the FI. While overall lender MIVs are perceived to be fair and transparent in terms of

funding conditions and covenants, improvements can be made in regards to legal conditions being fair, no surprises taking place between terms and conditions mentioned during due diligence and those translated into loan agreement, clarity in communication of terms and conditions, and whether covenants are in line with Lenders’ Guidelines.

o Jurgen asked the group who -of the participants in the room- had translated the guidelines into their loan contracts. Only Cordaid, Incofin raised their hands.

o Laura took a step back and asked if everybody knew that the Lenders’ Guidelines are. Not all participants knew about them. Laura mentioned that the document was part of the pre-reading materials and can be accessed through the following link http://sptf.info/sp-task-force/http-www-sptf-info-sp-task-force-social-investors-working-group. She also explained that Dina Pons led the development of the Guidelines and 15

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organizations have signed it. It was an approach to have a common definition on what the covenants should be for loan agreements. However, this will only make sense if all of us implement the Guidelines, not just a few.

o Christophe Bochatay (TripleJump) mentioned that it is possible that the Guidelines are part of the loan agreement but the MFI does not know of them as spelled like that.

o Dina added that implementing the Guidelines takes time (even obtaining agreement with our organizations), but we all have to do it for dissemination to be common. Endorsing is a good first step but for change to happen we need to implement them.

MIV monitoring of over-indebtment at the client level is common, yet not all of them do it on a consistent basis.

MFIs agreed that social reporting would be easier if a common reporting framework (SPI4) was widely adopted and required by MIVs, MIX, raters, shareholders.

MIV support to MFIs to improve SPM is common, yet not widely adopted (particularly for lender MFIs).

When MFIs were asked what makes an MIV “socially responsible”, the most common answers included Fair terms and conditions, collecting of social performance data, using this data to strengthen relationship, and monitoring adherence of CPP are considered to be the main characteristics.

Discussion with participants Laura Gaertner (Oikocredit) asked whether results can be given to each MIV on

feedback received for each in particular so that they can use them to improve their practices. Laura and Leticia indicated that such is possible.

Ximena Escobar de Nogales (Bamboo Finance) mentioned this exercise to be very productive. She was surprised though to not see Bamboo in the list of MIVs who received feedback.

Laura mentioned that for future versions we could also partner with GIIN and other partners to increase reach. Leticia added that investors could also send to their partner MFIs.

Edvardas Bumsteinas (EIB) mentioned that it would be good to have a standard due diligence questionnaire. He added that given that is not clear the degree in which the Lenders’ Guidelines are included in loan agreements, maybe we could have a third party look into this (this could be longer-term), but starting with a standard due diligence questionnaire would be very useful. He also mentioned that CGAP will be reviewing the “Pink Book” (donor guidelines of good practice). SPTF should make sure the Universal Standards are incorporated into it. All investors ask for financial statements, we should also all collectively ask for the same social data. Laura agreed and added that this will be discussed further during the SPI4 session.

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David Fitzherbert (Progression Capital Advisors) mentioned that a challenge of social investors is having long/more “tedious” term sheets than other investors (not socially minded), which can make the MFI prefer the investor with lesser terms/requirements. He mentioned the importance to have a standard set of terms. Jurgen agreed and mentioned that for these things to make sense they have to be generalized/widely adopted. If all investors ask for the same, MFIs will be familiar with them and no investor would be imposing more than others.

GIIRS Rating

Overview of GIIRSKelly McCarthy (IRIS/GIIN, Member of GIIRS Emerging Markets Standards Advisory Council) provided an overview of GIIRS Rating (note that GIIRS is not part of IRIS/GIIN but a part of B-Lab). There are two versions of the GIIRS ratings, for funds and for FIs. Over 80 impact funds and 40 asset owners have been rated. GIIRS is a rating system built on questions on the B Impact Assessment. There are 2 main sections of the assessment (ESG/Operations and Business Models). The questions in the assessment are tailored to the geographical region and size of the organization. Currently, the questionnaire is aligned with 60% of the indicators in the Universal Standards and the remaining 40% is being analyzed for alignment in the near future.

Questions from participants: Somebody asked how the GIIRS rating differentiated from other ratings. Kelly

mentioned that the original intent was to be able to compare results among organizations. Regarding alignment to other ratings, what the GIIRS team did is that they built their assessment on top of generally asked questions from other ratings. Laura added that GIIRS is more of “spot check” and other ratings go into more detail. GIIRS will ask MFIs to attach a social rating to the assessment (if available).

Isabelle Barres (Smart Campaign) added that there is more alignment that needs to happen with the SPTF. Laura mentioned that GIIRS is currently working directly with SPTF to complete the alignment. Isabelle also mentioned that Smart Campaign has a partnership with B Analytics (another product of the B-Lab team) to be fully aligned with the Client Protection Principles.

Grassroots Capital Management experience with GIIRS

Anna Kanze (Grassroots) shared the experience of Grassroots in working with GIIRS. They started working with GIIRS because they believe in universal language and scores. The GIIRS rating is applicable beyond microfinance. One of the main benefits is that standardized data and rating enable benchmarking and assessment across companies, sectors, and countries. However, Anna mentioned, what you gain with standardization you loose in depth. GIIRS provides simplified reporting and it also allows collecting custom metrics (for example those particular to financial institutions, and these of

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course can not be compared across organizations). It also allows aggregating scores at a portfolio level, which is very useful for funds and noted that is not common to have rating systems at a fund level.

Caroline Vance (Deutsche Bank) mentioned that they are going through a GIIRS rating and asked Anna how they communicated with their institutions about having to go through the assessment. Anna mentioned that it was built into their loan documentation that companies would have to be supportive of assessments and ratings. However, since GIIRS was not part of the original documentation, Grassroots had to explain it to them. She also mentioned that GIIRS has evolved since then and is now simpler. Explaining to companies why/how to go through the assessment took a lot of coaching and data-checking.

Laura and Kelly added that IRIS, SPI4 and GIIRS allow for organizations that report to the MIX to have that information uploaded/taken by the tool. Since all these aggregation is done separately and looks different, these organizations should look into how to make it more consistent.

Bamboo Finance experience with GIIRS

Ximena Escobar de Nogales (Bamboo) shared their experience with GIIRS. They’ve used GIIRS Ratings twice, with the Oasis Fund. They started by looking at IRIS (very broad scope of investment indicators) and then realized the connection with GIIRS. Ximena highlighted the strength of the GIIRS team that supports and guides the investee company through the assessment process. As fund, she added, the rating you receive is significantly impacted by the assessment your investees conduct on the fund (90% of the score the fund receives comes from the assessment conducted by the investees and 10% from the assessment the fund submits). It took time to convenience investees to complete it and it has been a good learning experience. She also added that GIIRS on the second year provides an improvement report which has been very helpful to Bamboo.

Laura added that 30% of questions are phone-verified (as different from social ratings where all data is collected at the MFI level).

Ximena mentioned the data collection of GIIRS is quite cumbersome and could take up to 4 hours for each organization. The review call is estimated to take about 1 hour (checking data by a third party) and it is very important. Ximena was asked whether there is a cost associated to it. Since Bamboo was a pioneer fund, it did not have a cost on the first year. In the current situation the fund manager can chose to absorb the cost of the investee (or pass it to the investee). Bamboo decided to absorb the cost of the investee.

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On the benefits of GIIRS, Ximena highlighted the benchmarking aspect, the improvement report, reasonably priced, and supportive GIIRS team. On the challenges she mentioned that more investors need to adopt it and the significant amount of time it takes for staff to complete.

Dina mentioned that there is no specific tool for microfinance investors (previous attempt failed for lack of adherence). Many investors have endorsed PIIF, which is a self-report with no third-party validation. Is there a way to have GIIRS rating coordinate/overlap with GIIRS? Kelly explained that the GIIRS team did an initial mapping with PIIF in January. 1/3 of the indicators in GIIRS (on the fund side) match with the PIIF. Work is ongoing to conduct further alignment.

Cecile Lapenu (Cerise) mentioned that there are ongoing discussions with Cerise, MIX, SPTF, and GIIRS to coordinate.

Dina Pons (Incofin, co-chair of the social investor working group) wrapped up the morning session by saying that a next step would be to have a conversation with GIIRS to see how the assessment can map with PIIF at the fund level and with SPI4 at the investee level. For example, said Dina, if we agree that SPI4 is the tool to use for social assessment and going through GIIRS requires SPI4, that part of the data collection would be integrated.

Jurgen Hammer (Grameen Credit Agricole Foundation, co-chair of the social investor working group) added that GIIRS offers the third-party validation of data, which is very useful and desired by investors of the information their investees otherwise self report (e.g., with SPI4).

Can we assess the social performance of our investees in an objective and cost effective way?

Jurgen Hammer (Grameen Credit Agricole Foundation, co-chair of the social investor working group) introduced the work ALINUS has been doing with the SPI4 to identify a small set of key indicators to integrate into their due diligence (SPI4 light). By having a smaller set of indicators, Jurgen mentioned, investors can focus on verifying the data (as part of the due diligence) and also integrate the indicators into their own scorecards. A smaller set of indicators will also allow for MFIs to provide data on a frequent basis (for monitoring) while reducing the reporting burden on MFIs and increase the quality of indicators reported. Additionally, it will provide improved benchmarking (specially if indicators are included in MIX SP indicators).

How can you use the SPI4 as an investor? Emmanuelle Javoy showed an example from Cordaid on how they have adapted the SPI4 tool to their investment process. Out of the 211 indicators in the SPI4, Cordaid

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selected 40 as the most necessary. There is a version of the SPI4 questionnaire that allows MFIs to report to Cordaid and hence shows the indicators prioritized by Cordaid. Once Cordaid receives the questionnaire completed by the MFI, they can import it into the scorecard created by SPI4 for Cordaid (adapted to their preferences and needs with the 40 indicators selected by them). Cordaid can also see results in a dashboard that automatically gets populated with the data provided by the MFI.

Emmanuelle explained that if all investors agree to use the SPI4, an MFI could provide the same information to all of its investors. Furthermore, by having different investors see the same results they could also make the data-checking process easier. Important to note is that each investor can assign different scores to the indicators depending on their own models. So as long as investors agree on a set of indicators, then each can customize the weight.

Emmanuelle then gave an overview of an ongoing project with ALINUS members to identify a smaller set of indicators to be common for all for due diligence. So far there have been 2 rounds of discussion and each investor has provided feedback on the indicators most important to their organization. After two rounds of work, 70-80 indicators have been prioritized. Many ALINUS members indicated interest in being able to import the result of the indicators into their own scorecard as well as to being able to import the results into a standard ALINUS scorecard.

Based on these results, Cerise proposed a selection of 73 indicators and additional 23 to be discussed. This selection includes the following characteristics: Was focused on choosing all indicators that were selected by at least 6 MIVs (all but

1) Includes indicators from all Standards except green a (“the institution addresses

environmental issues through a formalized strategy”). Includes indicators from 60 of the 89 EPs

Emmanuelle gave a handout to meeting participants with the list of indicators, including the ones proposed to keep and not keep. Meeting participants reviewed them and discussed as a group which ones each would vote to keep and not keep.

As a next step, Emmanuelle and Cerise will incorporate the feedback received and continue the rounds of discussion with investors to finalize the shorter version of the SPI4 tool (SPI4 light). At this point, and based on the feedback from today’s session, it looks like the final tool will probably have 70-80 indicators.

How can we support and contribute to responsible finance as a stakeholder group? Updates on some of the ongoing initiatives

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[Note for meeting attendees: To match the agenda for the meeting, notes have been re-arranged in cases where sessions took place earlier/later than what was planned in the agenda].

What is the role of investors in promoting MIX as the MFI monitoring platform?

Blain Stephens (MIX) gave an overview of MIX Gold. The industry has suffered from a lot of reporting waste. MFIs are asked for redundant or conflicting data by different parties. Standards and formats alone do not work – is there another way to go? MIX Gold provides a shared reporting infrastructure that reduces reporting burden on MFIs and provides more efficient information to users (e.g., investors).

What is the current status of use of MIX Gold? +300 FSPs providing data to the group Represents a diverse group of actors (investors, regulators, networks) Reporting burden has significantly decreased for FSPs (removed 30-60% of data

points to report given that data is combined)

What is the investor experience with the use of MIX Gold? Lessons learned: Retool staff and FSPs through joint communications and trainings Identify key transition points (systems, legal) Expect that transition will take time – must have realistic expectations or otherwise

will be disappointed Set goals and a monitoring plan Adopt standards but allow customization – Gold users have collaborated to create

and implement standards to turn overlap into common data and reduce waste on superficial differences. However, this approach also allows customization where users seek different information

Jurgen Hammer (Grameen Credit Agricole Foundation, co-chair of SPTF social investor working group) mentioned that pushing these issues should be in the agenda of investors.

Dina Pons (Incofin, co-chair of SPTF social investor working group) asked about the cost and also about the confidentiality of data. Blaine answered that the cost depended on the number of MFIs and data reported (range can go from $20,000-$50,000 a year). Regarding confidentiality of data, Blaine mentioned that users have the option to decide whether they allow MIX Gold to use the info to be disclosed in MIX or whether they prefer the data to only be communicated to the investor. Each Gold user owns the data in their own database. Additionally, there are a number of steps and features that ensure confidentiality of data.

Latest updates in transparent and responsible pricing

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Chuck Waterfield (MFTtransparency) gave an overview of the work of MFTrasnaprency in gathering data. Phase 1 (2009-2012) was MFT going into countries to collect data. Phase 2 (2012-2013) was MFT working with partners (Planet Rating, MFIN India and Pakistan MF Network) to update data collected on Phase 1. This did not show to be effective from a time or cost perspective. Phase 3 was a pilot partnering with select funders and networks to gather data. Overview of pilot

o 10 funders and international networks o 5 countries (Philippines, Azerbaijan, Nicaragua, Dominican Republic,

Georgia)o 64 MFIs affiliated with the 10 partnerso Process streamlined to take 2 hours

Results of pilot - organizations volunteered to be part of the pilot but results were far below expectations

o Only 19 of the 64 original MFIs agreed to participateo Of those 19, 8 completed the processo Of these 8, analysts completed 2 of MFIs, and MFT staff completed 6o What were the challenges to MFIs?

Reluctance to be in transparent minority Fear of public criticism of their prices Reporting burden Challenges of assembling the technical information required

o What were the challenges to funders and networks? Time pressures to collect additional data Varied degrees of closeness with MFIs Concern being only funder requesting pricing info – Ximena Escobar

de Nogales (Bamboo Finance) was surprised to hear about this as investors do typically collect pricing information. Chuck explained this was probably due to the fact that information collected by investors is typically confidential as part of their due diligence and not publicly disclosed.

Dina Pons (Incofin) added that Incofin was part of the pilot and one of the challenges for them was that after having gone to MFI for due diligence it was hard to go back to them and ask for additional data on a different reporting format. She suggested that if data was requested on a more customer-friendly method, participation could be higher.

Paul DiLeo (Grassroots) asked who are the most eager consumers of this data. Chuck responded that it was the microfinance industry, including investors.

Chuck then mentioned that based on the results of the pilot, MFT has decided to stop facilitating data collection and that it will finish all operations on 2015. However, revised

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versions of MFT pricing tools will be shared. New data will not be posted on the MFT website but educational resources will continue to be available on the website.

Somebody asked if MFT had tried a different approach, even training regulators. Chuck explained that they had tried to train regulators but the take up was very slow. There are materials (a manual developed with Planet Rating for regulators) available. Laura added that between SPTF and MFT, there were 8 trainings conducted at the BCEAO (Central Bank of 8 African estates).

Regarding how could others continue with pricing data, Chuck mentioned that market comparison does not usually work. Portfolio yield also has limitations. A better approach, suggested Chuck, would be to use balanced pricing.The balanced price curve takes the following cost components: financial costs, loan loss, operating costs, and profit in order to calculate the total price (“balanced price curve”).

Due to a logistical issue (need to move rooms) notes for “Defining a balanced profit” are not available (please refer to power point presentation for details on that part of the session).

Given the interest in continuing the discussion/work on transparent pricing and announcement by MFT of stopping to gather data, Paul DiLeo (Grassroots) proposed to continue the discussion on this topic within the investor working group. Another investor seconded the idea.

Jurgen Hammer (Grameen Credit Agricole Foundation, co-chair of SPTF social investor working grouo) added that clearly the issue of transparency and pricing is very important for the industry, and there is a need to continue to think about it.

Ging Ledesma (Oikocredit) asked whether there are investors in the room already using the MFT tool. Several investors (including Grameen Credit Agricole Foundation and Oikocredit, among others) raised their hands. Ging mentioned that Oikocredit integrates the MFT tool into a scorecard and suggested using something similar among investors in a collaborative way. Also a simplified version of the tool is available on the MFT website.

Chuck mentioned that only a small number of institutions changed practice after the information on pricing became available (since their client does not look at this).

Dina Pons (Incofin, co-chair of the SPTF social investor working group) suggested that the information gathered in the SPI4 for APR could be a good entry point to then discuss how to understand the state of practice. She suggested starting with realistic expectations on the work that can be accomplished and checking in on progress in June at the next investor meeting in Cambodia at the SPTF Annual Meeting.

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Paul DiLeo (Grassroots) said that one way to simplify the discussion is going back to the last part of Chuck’s presentation (grading of MFI’s pricing). There are different metrics that can be used as input. Generating something on APR based on the SPI4 could be useful, product mix could be useful, among many others. But, how many institutions are having the conversation of what is reasonable pricing conversation at the board level? What if we start the discussion by asking what are the inputs to profitability? Dina Pons added that for her, it is harder to start the conversation that way. But if we all start using the same tool (e.g. SPI4) that to her would be a more practical approach.

Laura Foose (SPFT) added that we could use both approaches – and that could be part of the profitability case study that SPTF would like to do.

Dina wrapped up by saying that clearly transparent pricing is a topic that must remain in the agenda and we need to define how to continue it.

Can we assess the social outcome of our investees in an objective and cost effective way?

The ongoing work on measuring and reporting outcomes

Frances Sinha (EDA, lead of the SPTF outcomes working group) led the discussion on the ongoing work on measuring outcomes. The sector is now demanding more work on this topic. Tracking outcomes is relevant to a double bottom line sector. We need it for several reasons: Impact investors want to see evidence of positive change Results mean accountability and improvement The reputation of microfinance is at a low ebb

There are different methods that can be used in regards of measuring outcomes but there are no clear answers yet on which one is the most cost-effective, credible, and coherent (please note discussions have started on these issues during 3 webinars held so far by the SPTF outcomes working group – if interested in joining the group email info@sptf.info). Frances added that there are a variety of indicators, tools, and reports available and we are at a point where we need to be practical at defining the ones we want to focus on.

Frances Sinha continued saying that the SPTF outcomes working group was launched in October 2014 to develop practical guidelines for credible measurement and reporting of outcomes, drawing on experience with different approaches and tools. Anybody interested to join is welcome to participate in the group. It is a pragmatic discussion that recognizes the challenges in the work and works to develop guidelines that are peer/expert reviewed, jargon-free, with relevant examples.

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In the pre-reading materials sent to participants in advance of the meeting (and also available through the following link http://sptf.info/sp-task-force/http-www-sptf-info-sp-task-force-social-investors-working-group) there are 3 briefs with a summary of each of the sessions the outcomes working group has had so far (as well as a summary of the outcomes discussion that took place at the 2014 SPTF Annual Meeting).

What do we mean by outcomes? What do we mean by output?Frances explained that the theory of change framework has several stages (mission and objectives, strategies, target population, inputs, outputs, outcomes near-term/longer-term, impact) and there are different indicators required at each stage.Outputs, for example, is the number of clients that access a service. Outcomes are the changes that a client experienced – which can be short-term or longer term. Impact, however, looks at measuring changes and attributing the change to a particular input (microfinance); impact measurement requires a counterfactual, if possible under randomized control conditions.

Impact studies (such as RCTs) look at data over a relatively limited period of time and compare treatment results with a control. . By focusing on outcomes, this working group, said Frances, is looking at change (short-term and long-term) that can be plausibly associated (correlation rather than causality as in the case of impact) with microfinance Plausible association can include questions at endline that ask the client’s perspective on changes that have taken place, and the reasons for the changes.

Ximena Escobar de Nogales (Bamboo Finance) shared that at the Clinton Global Initiative, Bamboo committed to work on outcomes. Since they have a limited budget that does not allow for RCTs what they decided to do was send a survey through SMS (i.e., people received it on their mobiles). One of the most interesting lessons, said Ximena, was that SMS is cost effective and that you can reach the client to obtain quick feedback. Results from the survey helped the MFI better understand their clients’ needs and their (relatively low) knowledge of the products of offer. This allowed the MFI to improve their offering of products/services. Ximena added that there is no question on the validity of RCTs, but as MIVs their objective is to better understand how to serve the target population and whether they are improving the life of clients. She noted that without budget for RCTs, there are other ways we can explore to help us answer that question.

Ging Ledesma (Oikocredit) shared the experience of Oikocredit in trying to understand the question of “what is happening with the lives of the clients?” In 2008, Oikocredit started to promote the Progress Out of Poverty index (PPI) and subsidized partners to engage in this. While there was a lot of initial excitement about it, it required a lot more work than just introducing the tool and the initiative phased out. About 3 years ago they decided to look at social objectives. They defined 2-3 indicators for different objectives and asked partners to report on them. This did not seem to work either. So they decided

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on a 3-prongred approach: use PPI, take the perspective of how can partners use the data they are collecting to improve their operations, and also include an impact assessment through a partnership with a university (this last stream is not for microfinance projects). They know that it will take a long time to be able to develop and report on results. One of the lessons learned of this work is that it takes patience. For example, Oikocredit found out that partners would sometimes cancel attendance to a data collecting training, or would say they collected data and when data was checked there were differences between what was said and what was actually being collected.

Frances Sinha added that the outcomes working group plans to link with other initiatives to share what they are working on. Some of these include the Microfinance CEO working group, Acumen, Big Society Capital, Mission Measurement, Entrepreneurs du Monde, Grameen Foundation, Women’s World Banking.

Discussion with participants

The proposal for the continuation of the work of the SPTF outcomes working group was shared (in printed form) with all meeting participants. Laura Foose (SPTF) asked for feedback and whether there was anything important missing from the point of view of investors.

Bert Richly Brinkenberg (FMO) mentioned that for them it would be good if the working group accommodated the range of approaches that can be used, including perhaps impact too). FMO is currently employing a mixed approach, covering both microfinance and other social enterprise partners: tracking employment through regular internal monitoring by all investees, and periodic research studies of selected investees.

Frances asked the room about their priorities for measuring outcomes and what they would like to see from the working group.

Somebody mentioned that he would like to understand what are the indicators that people would like to use.

Laura Gaertner (Oikocredit) mentioned that they tried the approach of asking partners for what indicators they were interested in. They thought they would have 2-3 indicators for each objective, however the range they received was so big that they decided to not use that approach. Frances added that the most recent webinar of the working group is looking at the work of Microfiance CEO Working Group, the indicators currently used, under different themes (or outcomes areas) and the possibility of working towards a ‘menu’ of indicators for different themes that can be applied/adapted in different contexts.

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Ellen Willems (Triodos) expressed concern over coming up with a list of indicators and dictating those on institutions. Dina Pons (Incofin) explained that such is not the intent of the working group at all. Rather the idea is that a list of “common” indicators that could provide a starting point for investors/board members to suggest types of data that investees/MFis might be interested in using based on the data that each wants to track, depending on their mission and target population. The indicators developed by the working group would provide information on what has worked and what has not for others, and investors can use that to inform their guidance of investees.

Laura Foose (SPTF) asked whether SPTF should have a separate outcomes working group for investors or whether their interests and discussions can be included in the current working group. Laura Gaetner (Oikocredit) mentioned that the current working group is broad

enough that allows discussion of all stakeholders. Anna Kanze (Grassroots) agreed and mentioned that one working group enables

more experience sharing and collaboration across different actors.

Outcome measurement: Getting the most out of available data

Christophe Bochatay (TripleJump) gave an overview of the ongoing work of TripleJump in regards of measuring outcomes. Even though tracking data is costly and complex for MFIs, the benefits are important in terms of better understanding clients and hence of being able to adapt products services to clients’ needs. An MFI that gathers data can reduce risks and hence be more attractive to investors.

RCT impact studies show that the impact of microfinance is highly dependent on context, target group and program/product design. However, Christophe mentioned, the complexity and high cost of RCTs should not discourage MFIs to approach the question of impact; it should encourage them to consider alternative strategies.

TrupleJump conducted a study with EAConsultants to draw insights form client monitoring databases. The approach was to analyze outcome monitoring client databases, assess data management process, and recommend how to use the results. Threee MFIs were part of this study (Fundacion Paraguaya, Fundacion Genesis Empresarial - Guatemala, and IDEPRO - Bolivia). As result of the study 7 conditions for effective outcome measurement were defined:

1. Define the purpose of outcome measurement process

2. Broad, institution-wide commitment

3. A theory of change describing how the MFI produces impact, and a corresponding set of indicators to track

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4. An efficient data collection system

5. Effective data storage that links to banking system

6. Basic capacity for data analysis

7. Established processes for sharing and responding to results

The common pitfall, said Christophe, is the diminishing flow of data – collecting a lot of data but only using a small portion of it.

Given the cost and complexity for MFIs of collecting data, yet the importance of showing results, Christophe mentioned that TripleJump is willing to finance and implement more assessments in 2015 (which would be accompanied by targeted technical assistance on key areas).

Frances Sinha (EDA) added that seeing results requires a long-term approach. For example, AMK, after 2 years, was not able to see changes in client poverty level.

Conclusions and Wrap Up from Day 1

Dina Pons and Jurgen Hammer (co-chairs of SPTF social investor working group) wrapped up the day by saying that they would like the group to be able to make a few commitments about the direction of the work of the group going forward as well as set expectations of what can be achieved by the next investor meeting in June (at the SPTF Annual Meeting which will take place in Cambodia).

Based on the discussions of the day, some of the workstreams for the working group to continue to work on in 2015 could include the following (please note that final action steps will be finalized after March 12 meeting discussions and these were only initial suggestions): Work related to SPI4 Reasonable covenants implementation Assessing overlap of GIIRS and PIIF Continuing discussion on pricing transparency

These suggestions will be circulated with participants on March 12 and following the meeting to gather feedback as well as proposed volunteers for the different workstreams.

March 12: Social Investor and DFI Meeting on Responsible Finance

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Promoting responsible investment in microfinance: Improving Practices & Measuring Outcomes

Welcome and introductionHakan Lucius (EIB) welcomed everybody.Jurgen Hammer (Grameen Credit Agricole Foundation, co-chair of the SPTF social investor working group) gave an overview of the Social Performance Task Force (SPTF) and the work it has done in the ten years since its inception, including the development of the Universal Standards for Social Performance Management (Universal Standards), the development of the Lenders’ Guidelines, and engaging with multiple key stakeholders across the world.

We are aware, Jurgen added, that to make change happen we need to work together. For the front runners is now time to implement what we’ve been discussing and developed so far, and to continue to promote and disseminate the tools and initiatives.

Following Jurgen’s introduction, the video about investors implementing the Universal Standards was played (the video can also be watched through the following link https://vimeo.com/78379316)

Dina Pons (Incofin IM, co-chair of the SPTF social investor working group) followed Jurgen’s introduction and gave an overview of the topics to be discussed during the day. After ten years of hard work we have managed to stop talking about social performance management (SPM) in an “intent” way. Now can do it in a rigorous and objective manner. The next step, Dina added, is to ensure dissemination of the Universal Standards, and to make sure that we have the same language when we talk.

To accomplish a creation of double-bottom line industry we have to work together and track SPM collectively, independent efforts will not achieve change in scale. Today, Dina added, we will discuss what we are achieving, what are we not achieving, what are the challenges as a working group, and for our new audiences we would love to hear what else should we be discussing and how you can all get involved.

Responsible finance at the investors and assets owners level: How can we ensure we are investing responsibly?

Transparency and reporting: PIIF, Lenders’ GuidelinesDina Pons (Incofin, IM) provided an overview of the Principles for Investors for Inclusive Finance (PIIF), which was launched in 2011 by the UN PRI. Currently the PIIF has 50 endorsers including large institutional investors, large microfinance assets owners and managers (totaling USD 9 billion in assets).

The PIIF accounts for 7 principles that look at the behavior of investors when lending:

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1. Expanding the ranges of financial services to low-income people2. Integrating client protection principles 3. Treating investees fairly4. Integrating E&S factors into policies5. Promoting transparency in all operations 6. Pursuing balanced long term returns7. Working together to develop common investors standards on inclusive finance

The PIIF and endorsers have also worked on developing a reporting framework. The first result was available in 2014 (the report can be downloaded on the PIIF website, and the 2015 version is was included as part of the pre-reading materials for this meeting and can be accessed through the following link http://sptf.info/sp-task-force/http-www-sptf-info-sp-task-force-social-investors-working-group)

Dina added that within the SPTF social investor working group investors looked at principle #3 “treating investees fairly” and as a group decided to take a step to be able to implement this principle. As such a sub-working group was created to develop the Lenders’ Guidelines for Setting Covenants in Support of Responsible Microfinance. Reasonable covenants, are covenants which ensure that the Borrower will adopt a “responsible financing” behavior which will not harm its end clients. (This document was part of the pre-reading materials and can be accessed through the following link http://sptf.info/sp-task-force/http-www-sptf-info-sp-task-force-social-investors-working-group). After 2 years of work and discussion among 15 investors the group developed a set of 7 financial covenants and 2 social covenants for debt transactions.

The organizations that endorse the basic goal of such Guidelines are: Agence Française de Développement (AFD); Agencia Española de Cooperación Internacional para el Desarrollo (AECID); Agora Microfinance N.V. and its affiliates; BNP-Paribas; Cordaid; Deutsche Bank Global Social Investment Funds; Grameen Credit Agricole Foundation Foundation (GCAF); Grassroots Capital; Incofin Investment Management; Oikocredit; PROPARCO; SNS Asset Management; Triple Jump

Dina continued the PIIF overview by explaining that investors that report to the PIIF receive two types of reports: a transparency report and assessment report – this is helpful for the investor in understanding where it stands on each essential practice and how it can improve.

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Dina provided the experience of Incofin with reporting to PIIF. In the report, the investor gets graded in stars for each principle. This is helpful to understand what are the areas that investors can work to improve. After receiving the report, Incofin broke down their annual SPM action plan into specific activities. For example, on the equity side, Incofin decided that every Incofin person that is part of a board (as equity investor) would have to put in place a simple SPM action at the equity investee. This includes equipping the institution with the tools and resources that they need to implement SPM practices (e.g., help them develop a social dashboard, help them go through a social rating and discuss results together as a board, etc).

PIIF lessons learned: Direct Investors: outcome indicators tracking is still too limited Indirect investors and asset owners: They shall play a more active role in using the

PIIF as a screening and monitoring tool when selecting asset managers. (60% take into account PIIF during selection, while 40% only do so in mandates and contracts)

The reporting framework provides a transparency and accountability tool to collect consolidated data on responsible investment and to benchmark endorsers’ practices.

Labeling: LuxFlagAnnemarie Arens (LuxFlag) provided an overview of LuxFlag. Launched in 2006, LuxFLAG, is an independent organization that supports the financing of sustainable development by providing clarity for investors through awarding labels to investment funds which meet specific published criteria.

Labels are granted to products only if compliant with eligibility criteria. These criteria are linked to clarity in transparency, responsibility, independence, and sustainability.

Within the responsible investment, LuxFlag has several labels, including focus on the environment, social, and governance.

LuxFlag labels help investors identify investment funds that are active in responsible investment. For asset managers, LuxFLAG labels enhance the visibility of investment funds and reflect the asset managers commitment to responsible investment. Microfinance label - launched in 2008. There are currently 27 labelled MIVs

representing approximately USD 3.5 billion AuM. Environment label – launched in 2011, 9 labels have been issued.

ESG label – launched in 2014, it is the first European ESG label for funds. It covers environment, governance, and social. Currently 3 funds have received labels.

Questions from participants:Q: ESG looks at different things for different institutions – how do you assess criteria for the label?

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A: One example of criteria is having an exclusion criteria for investment decisions, the fund must officially publish the portfolio at least once a year. Additionally a requirement is that the product must be regulated.

Q: Are labels only for European countries?A: Labels can be applied to any fund as long as they have regulated products.

For more information on the criteria for each label please refer to the LuxFlag website or contact Annemarie Arens.

Dina Pons (Incofin, co-chair of the SPTF social investor working group) wrapped up the session by saying that there are a number of social performance initiatives at the investor level and a lot of the work that the social investor working group tries to do is to harmonize the different initiatives. For example, she added, yesterday we discussed how the GIIRS rating overlaps with PIIF. We must agree on a number of standards and practices. We can’t afford to have hundreds of different practices and initiatives around as that creates confusion. Coordinating in practices allows investors to speak the same language when talking about responsible finance.

Pricing: How can we make pricing information more transparent?

Chuck Waterfield (Microfinance Transparency, MFT) presented on the importance of transparent pricing and the challenges of achieving it.

MFT has worked in 30 countries, with 500 lenders and trained regulators in more than 20 countries. Chuck showed examples of pricing of MFIs in several countries (Tanzania, Philippines, Ghana, Bolivia). These graphs were created with the information gathered by MFT from MFIs in each country. The graphs showed how prices in each country vary significantly depending on each MFI (with ranges that go from 50-150% in the Philippines, or 50-175% in Ghana). Pricing maps showed how the smaller loans have significantly higher prices.

Conclusions from the data gathered by MFT: Pricing doesn’t show any real market behavior Considering an MFI’s portfolio yield as “price” is deceptive An MFI doesn’t have “one price” A product of an MFI doesn’t have “one price” Prices vary significantly, and many times the price quoted to the client is not the

“real” price

Chuck mentioned that after gathering data for many years, MFT has decided that going forward it will not continue data collection. However, all tools and resources will continue to be available on the MFT website. Investors can continue to use the MFT tools to calculate the price at each MFI they consider investing in.

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Q: Is there possibility for another organization to take over the work of MFT?A: At this point it does not look like that will happen. There have been conversations with some institutions but it is not likely.

Jurgen Hammer (Grameen Credit Agricole Foundation, co-chair of the SPTF social investor working group) added that given the importance of the transparency pricing topic, the SPTF social working group discussed the day before different ways in which the group can continue the work going forward.

Q: Why do prices vary so significantly?A: The vast majority of institutions do not know their real price, or the price of the competition. When they have problems, they add fees (for example), which affects prices. There are many financial products that may look cheap but have many hidden fees. Pricing is very confusing.

For more information contact Chuck Waterfield.

Preventing over-indebtedness: Microfinance Index of Market Outreach and Saturation ( MIMOSA)

Emmanuelle Javoy provided an overview of MIMOSA, a tool that helps identify the warning signs of over-indebtedness.

The first approach of MIMOSA was MIMOSA 1.0 - a simple scoring scale (1-5) to predict the level of market penetration on a given country, which is then compared to the borrowing rates in each country. The index was based on Findex data (2011 data).

Emmanuelle added that the next version, MIMOSA 2.0, is currently being developed and will be completed in June 2015. This version enables to see capacity and penetration differences within country borders, is timely, looks at data within the 3 years mark of data available through Findex, and is more robust and microfinance specific than the first version. The new approach will be tested in 8 pilot countries with diverse levels of penetration and transparency levels. The countries are: Azerbaijan, Bolivia, Cambodia, India, Kyrgyzstan, Morocco, Peru, Senegal.

Responsible Finance at the level of our investees: What is already happening to improve social performance practices? How can you get engaged?

As investors, how can we coordinate efforts to harmonize our evaluation and reporting requirements of our investees?

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Jurgen Hammer (Grameen Credit Agricole Foundation, co-chair of the SPTF social investor working group) gave an overview of the development of the Universal Standards for Social Performance Management (Universal Standards) and its importance for investors. To be able to implement them, he added, investors needed a reporting tool. Therefore, Cerise (who had experienced with the SPI – social performance indicators) together with MIX and SPTF worked to develop the SPI4, a social assessment and reporting tool that is completely aligned to the six dimensions of the Universal Standards. The SPI4 also contains a green dimension and allows for the user to add other dimensions (such as poverty). This tool can be used by MFIs for assessment (self or accompanied) as well as by investors to inform their decision-making.

The full version of the SPI4 used by MFIs has +200 indicators. Since investors do not need all of these for their decision-making, and given the benefits that having a common data collection tool would provide to investors, ALINUS –a small group of investors- is working with Cerise to develop a “SPI4 light”. This will be a shorter version of the tool (with a significant reduced number of indicators) that investors can use during due diligence.

Cecile Lapenu (Cerise) and Emmanuelle Javoy provided more detail on the work of Cerise and the plans for the SPI4.

Cecile mentioned that the SPI4 is now stable and will remain stable until June 2016. So far 100 MFIs have used the SPI4, 85 people have been trained, and +20 auditors are in process of being qualified to guide MFIs through their assessment.

Emmanuelle Javoy showed an example from Cordaid on how they adapted the SPI4 tool to their investment process. Out of the 211 indicators in the SPI4, Cordaid selected 40 as the most necessary. The SPI4 questionnaire allows MFIs to report to Cordaid and hence shows the indicators prioritized by Cordaid. Once Cordaid receives the questionnaire completed by the MFI, they can import it into the scorecard created by SPI4 for Cordaid (adapted to their preferences and needs with the 40 indicators selected by them). Cordaid could also see results in a dashboard that automatically gets populated with the data provided by the MFI. This is useful for decision-making and the dashboard and scorecard summary, for example, could be shared with the investment committee.

Benefits of using the SPI4 in the investment process Contribute to a wider use of the Universal Standards (through the SPI4) Reduce the reporting burden of MFIs by centralizing data collection in one place Contribute to a better quality of indicators reported in SPI4 (self-reported data by

MFIs – if several investors are looking at the same data and there are any Allow improved benchmarking across the industry on this set of social performance

indicators (if indicators get included in MIX social performance indicators)

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As mentioned above, ALINUS –a small group of investors- is working on developing a shorter version of the SPI4 that is customized to the needs of investors, particularly for due diligence. The work is ongoing and the group is currently discussing which are the key indicators (of the 211) that the SPI4 light version should have. So far there have been 2 rounds of discussion among the ALINUS group, plus a discussion yesterday among participants of the social investor pre-meeting. At this point it looks like the group will aim to reduce the list of indicators to a total of 70-80. The next step is to conduct further rounds of discussions to finalize the set of indicators that will be on the SPI4 light tool.

Investors in the audience shared the benefits of participating in the ALINUS discussion/using SPI4 BlueOrchard has had a social performance scorecard since 2009. When the SPI4 was

finalized, BlueOrchard adapted their scorecard to match it into the 7 categories of the SPI4. They integrated all the questions the original scorecard had into the seven categories of the SPI4, adapted questions where possible to match the SPI4, and added new ones from the SPI4 where appropriate. If the SPI4 light becomes the standard reporting tool for MFIs both MFIs and MIVs would save time in data collection/reporting which would lead to more time for analysis. The challenge at this point is that many questions of the SPI4 are Yes/No questions and possibly what a yes is for BlueOrchard might not be a yes for another investor.

Sascha Noe (Cordaid) shared the experience of Cordaid in asking Cerise to adapt the SPI4 for them. Since SPI4 will be the tool used by all MFIs, why develop a separate tool for them as investors? Instead, better to use the same tool.

Caroline Vance (Deutsche Bank) mentioned that so far Deutsche Bank has relied on a scorecard that was created in-house. It has 50 questions. Each investment officer must complete the questionnaire based on the information they gather. The scorecard integrates financial and social data. One of the main benefits of the SPI4 will be the ease of the reporting burden on an MFI. Second, by having a smaller set of indicators, we believe that data integrity will improve. Third, less time in data collection will enable more time for data verification and other important follow ups. Deutsche Bank’s scorecard was already aligned to the Universal Standards and it overlaps with the SPI4 quite a bit.

Dina Pons (Incofin) added that the SPI4 has the potential to become the social factsheet that all investors refer to when assessing social performance in investees/potential investees.

Stefanie Afonso (ADA) provided an overview of the ADA factsheet (which with the help of Cerise includes social performance indicators). This (financial) factsheet is being used by several of their investors and can be downloaded for free.

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The importance of Social Performance Management (SPM) as part of good governance what can we do at the board of directors level to promote SPM?

Paul DiLeo (Grassroots) shared the lessons learned for Grasstoots from the AfriCap case study. He mentioned that over the last 12 years, Grassroots has invested in 50 MIVs and MFIs on the equity side and that looking at the governance process on an ongoing basis is very important to them.

While there are examples of MIVs and MFIs who have made very good progress in incorporating SPM into their ongoing processes and operations, based on the experience of Grassroots, the organizations that incorporate SPM into their ongoing operations are the outliers.

Paul shared the experience of AfriCap and learnings that emerged of it. AfriCap was one of the earlier microfinance equity funds. An important caveat is that the fund was launched in 2001, way before guidelines on good governance were available.

Summary of accomplishments: made the case for commercial MF in Africa, invested in 16 countries in institutions in all different stages, had a substantial technical assistance component and with 2 successful exits, brought attention to Africa as an attractive place to invest in the microfinance sector.

Summary of shortcomings: objectives were too ambitions for the time (develop the sector), the geography was too wide and diverse with different languages, there was a lot of instability in the institutions (which added responsibility to the board), and management, board, and investors were not aligned.

Major responsibilities of a board – and assessment of AfriCap position for each Define and uphold social mission and purpose of the Fund – the board

tolerated/promoted an agenda that was too ambitious and directors lacked experience.

Develop/approve strategy with management; monitor strategic goals -- the board did not have confidence in management and ignored signs of misalignment of objectives/agendas with management.

Ensure adequate resources to achieve mission – the board did not seem to assess the adequacy of the team resources to effectively execute all the responsibilities.

Paul concluded by saying that it is key to have humility on what actually can be accomplished and be very strategic and focused on identifying what is that can be accomplished – doing everything is not possible.

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For the full report please refer to www.grassroots.com or www.calmeadow.com. As he wrapped up, Paul reminded again to keep in mind that the AfriCap fund was launched in 2001 – before good practice guidelines were available.

Dina Pons (Incofin) shared the example of two investees of Incofin to illustrate how social performance is discussed at the board level and implemented throughout the institution.

Case 1: AMK, Cambodia – by the time Incofin invested in AMK, social performance was already very embedded in the organization. Lessons learned:

o Identify the decision-making bodies that can guide and ensure implementation of SPM – in AMK the board of directors created a Social Performance Committee (SPC) staffed with people with the right experience.

o Break down social mission into clear and measurable indicators that can be monitored to assess whether the organization is achieving its social mission – AMK has several indicators that allow it to measure whether it was achieving its social mission.

o SPC is informed with accurate and regular data that allows to monitor an guide the organization – AMK’s social performance framework enables the organization to identify key information that is then used to better serve clients (e.g., to develop savings product).

AMK benefited from embedding SPM into its strategy and decision makingo Most innovative rural saving mobilization in Cambodiao First institution to develop emergency loano Sole institution to offer agricultural credit line product

Case 2: Kushali BankIts shareholder Agreement mentioned: “ to set-up and E&S function with a dedicated person in charge, within one year after investment”. In only one year, the organization has put in place several actions to comply with this objective: E&S unit has been set up as part of the Risk Department Discusses the social mission at the BOD level Developed a social dashboard in line with the social mission Tracks USSPM implementation through SPI4 Recently created an SPM committee at the BOD level

Dina Pons concluded by adding that embedding SPM in the governance of an institution (as equity investor) is possible, can be simple, and can be cost-effective. If the organization claims to be double-bottom line, having a social dashboard that is part of the regular reporting (BOD package) is absolutely necessary. This allows the Board to

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verify if the organization is meeting its double bottom line claim and proactively make relevant changes if needed.

Q: Can we conclude that embedding SPM into the strategy and mission of an institution makes sense financially too?A: While we can not generalize, at least in the two cases described here, yes, it did pay off.

Responsible finance for equity investors. What more recent debates have been emerging and require more discussion and input?

Challenges and considerations when exiting – Panel discussionThe panel was moderated by Loïc de Cannière (Incofin, IM) and panelists included: Jean-Gabriel Dayre, Senior Investment Officer, PROPARCO Paul DiLeo, President of Grassroots Capital Management Steven Van Weede, Managing Director, Capital Advisory Services, Enclude

Loic referred to a paper wrote by Daniel Rozas and published by CGAP called “The Art of Responsible Exits in Microfinance Equity Sales” (which was included as pre-reading material for this session and can be accessed through the following link http://sptf.info/sp-task-force/http-www-sptf-info-sp-task-force-social-investors-working-group)

Loïc de Cannière (Incofin) mentioned that the first question he is often asked after an exit is “What was the return?”, but has never been asked “Was the exit responsible?”. He also pondered, what does “exiting responsibly” mean. We need to understand, he said, where our responsibility ends when we exit an MFI. As a simple example, if I sell my car, I want a good price for it but it would be irresponsible to sell it if the breaks do not work. However, if the buyer is an irresponsible driver, that is not my problem. So there is a point where my responsibility as a seller ends. I would like to discuss that in the microfinance industry.

Another interesting point of discussion, added Loïc, is what in Incofin we call “The Hotel California syndrome” (you can check out whenever you want but you can never leave).

Jean-Gabriel Dayre (Proparco) added that as a member of this group he believed that responsible exits is a topic very important that needs to be discussed. The industry will see a sizable number of transactions (exits) in the future. In Proparco, he said, when we take board seats we try to make sure social performance is embedded in the organization (we ask of our investees to implement Client Protection Principles, Universal Standards for SPM, etc). He also said that he would not fully buy into the car analogy mentioned before. According to him, there are ways in which you an investor

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can protect/try to make sure the buyer is responsible. While exiting in a “perfectly responsible manner” might not be possible, we need to have the debate on what is to exit responsibly in a realistic way.

Steven Van Weede (Enclude) mentioned that a lot of what has been said about responsible exits puts the eye on the buyer, “Does the buyer have the same mission than we do?”. At Enclude, he said, we change the perspective. Instead we think, “What is in the best interest of the MFI?”. For example, do they need a buyer with strong financial standing? A buyer than enables them to expand across the country? It goes beyond whether being bought by a commercial bank is responsible or not. There is an argument to be made that if you take the asset from a DFI into a commercial player and that you do it responsibly, that is a success, and that is development.

Paul DiLeo (Grasstoots) added that we need to keep in mind that companies do change their strategies over time and buyers might change their priorities. Grassroots has had 16 exits. Paul has seen buyers that start saying that they will prioritize social outcomes and after a while they change their mind and want to maximize financial return. So somehow it is important to hardwire the concept that maximizing financial return in spite of social performance is not acceptable. If its embedded (e.g., written in a contract), hopefully it will discourage the type of investors that only look for financial returns. Based on the experience of Grassroots, Paul said that they have learned that is important to be clear on expectations when raising funds. You have to build in that you will not sell to the highest bidder but that you will take into account the character of the institution so that it is not fundamentally altered.

Loïc mentioned that based on the experience of Incofin, it is not easy to fundraise and at the same time say that you will not prioritize financial return. Paul agreed on the fact that is a difficult proposition, as investors typically want everything (maximized return and social impact) but such is not possible and that for him (Paul), being clear on expectations during the fundraising stage is key.

Steven added that in his view as investor its important to ask the client “What would be a successful transaction?”. Paul added that Steve can do that on individual transactions but at the fund-level that is not possible.

Jean-Gabriel added that they understand that as asset owners they set the rules from the beginning. DFIs, including Proparco, have done a good job at looking at things from the get go. We have a fiduciary duty, he said, to behave by the rules. If we introduce elements regarding responsible exits we free up more hands. The question is “How many asset owners will allow that?” Most probably there are two worlds, one where there are no trade offs and one where there are. But starting an attempt to define non-financial criteria for the exit will help.

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Loïc referred to the survey conducted by Daniel Rozas (as part of the paper mentioned above) to LPs where they are asked about the priorities when selling. While people responded different things, Loïc noted, in reality, the sale almost always went to the highest bidder.

Steven added that it depends on how the process is done. If you do a pre-screening of potential buyers and then from those you choose the higher bidder, then that can be responsible.

Paul mentioned that Grassroots’ most recent exit was in 2010 and by then –compared with earlier exits- the LPs were more aligned in what they wanted from the institution. In Grassroots, he said, we want to strengthen the SPM of an institution and while you want to think that it will strengthen the value of the institution, not always the buyer appreciates it. Equitas in India is a good example of having hardwires (e.g., profit cap in shareholder agreement) in a very well documented way. These are the kinds of features that we would like to introduce to our companies. But to do this we need to first have an explicit understanding with our investors, because if they don’t share that view they might argue those conditions can hurt the value of the company.

In situations with multiple sellers, Steve added, that it is very common to have sellers who are not aligned within an organization. Advise # 1 – housekeeping. We had an example, he said, where we were presented with 5 different shareholder agreements. Also in cases of multiple sellers you often see shareholder agreements and conditions that protect the minority shareholders. The problem with this is that it hurts the momentum of the deal. Every time you want to make a move you have to notify everybody and give right of first refusal. Advise #2 – think about this in advance and prepare accordingly. Advise #3 – from the first moment the sellers are considering an exit, get all shareholders around the table and try to get them aligned.

Jean-Gabriel agreed that trying to keep right of first refusal at a minimum is ideal. Paul mentioned that if the shareholder group is very diverse, it might not be simple to keep right of first refusal to a minimum.

Loïc asked panelists whether it is realistic to think that commitment to SPM can survive the sale. Paul gave the example of Ben and Jerry’s ice cream (sold to Unilever by the two funders), which managed to preserve the social mission. But added “because they are the most profitable ice cream company in the world”. This is what safeguarded the social mission. Is that replicable in microfinance? I don’t know, Paul said. We can do as much as we can to structurally preserve the key elements, but if that is not in place I would think it would be a weak link. Steven looked at it from a different perspective and said that as long as your hardwire the key aspects, you have more chances of the fundamental aspects surviving. Steven added that not only engaging all sellers at the beginning of the sale process is important but also engaging with all stakeholders, as it is important for them to know they have a say (or feel that they do, he said).

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On price levels, Loïc mentioned that most recent transactions are showing lower prices. He asked panelists whether pricing could become irresponsible in the sense that the buyer can put pressure on the MFI to make the investment profitable. Steve said that is it very difficult to draw the line of where the behavior becomes irresponsible. What he suggests doing is to screen and pre-qualify the buyers (choosing the ones you think will be responsible).

Questions from participants:

Jurgen Hammer (Grameen Credit Agricole Foundation, co-chair of SPTF social investor working group) mentioned that if we in this room can not find a way to educate investors to a different mindset of values and that at the end of the day the only priority is price, given the number of transactions that will take place in the near future, we will be down to pure financial transactions. Simply saying that at the end the sale goes to the #1 or #2 highest offer is scary, he added.

Steven said that we tend to see the world as divided in two (commercial vs. microfinance). However, he said, maybe we should think of it more as a continuum. The market can figure it out.

Paul added that as long as you are clear with your investors on where you want to locate yourself in that continuum, you have a better chance of an exit that meets your expectations. He also agreed that we need to have a more refined dialogue with our investors – for many years we said that they didn’t have to choose between financial and social return, and we now know that is not the case.

Q: We’ve talked a lot about discussions with the investors, how about discussions with the owners?A: (Steven) The institution is very much in the center of the discussion. The first thing we look at are the needs of the institution.A: (Paul) You absolutely have to involve management in the discussion.

Paul added that for better or for worst, in the last year or two we started to have data on the performance of closed funds. Now, he said, you can have assess to what has happened with vintage funds (started in 2001-2004), how many have closed, what was the result, etc.

Q: A few years ago the topic was “IPO” exit. Now is “responsible exit”…A: (Steven) From the point of view of an asset owner, I would not recommend anybody to count on an IPO (process, unstable, long). On the other hand, you could make the point that a public owned company might have better chances to keep its mission/priorities than one that receives pressure from a bank, for example.

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Somebody added that there is a study being conducted by Wharton to be published later this year and hopefully will give more insights on the “success” of exits on the financial and social aspects.

Measuring and reporting outcomes: As investors/shareholders, what are the realistic measures of social return and what can we do to know that we are contributing to social outcomes through our investment?

Frances Sinha (EDA), lead of the SPTF outcomes working group) moderated the session. Input was provided by Professor Malcom Harper (Cranfield School of Management), Georg Weiers (EIB), Ximena Escobar de Nogales (Bamboo), Laura Gaertner (Oikocredit), and Dina Pons (Incofin).

When it comes to outcomes, information needs to be measurable, credible, realistic and cost-effective. We often call ourselves “impact investors”, Frances said, yet we don’t actually define what we mean by impact, or if we do, we define it in different ways. To-date there is a mix of data and reports and we get criticized for not having clear measurement for what we are achieving. The first step is agreeing on what we mean by impact or what we want to achieve.

Measuring social return presents challenges in terms of ease of measurement and reporting. Also, Frances added, while microfinance can lead to success, we can’t always expect success. We have learned that there is client drop out, multiple borrowing, etc. What is clear is that if we want to learn what is happening in the lives of our clients we need more information. At the same time, it is important to note that we are not necessarily trying to prove “impact” (as measured by RCTs) or do into indepth ethnographic studies. These do provide useful insights but usually have high cost given the research capacity needed and take time to complete.

The SPTF outcomes working group defines outcomes as “change for clients that is plausibly associated with the financial services”. Frances clarified that the group does not use the term impact. What we are interested in, she said, is in reporting the value for clients and issues that need attention. We are interested in going beyond statistics to useful analysis of the data. The theory of change framework starts with mission and objectives, strategies, target population, inputs and has 3 types of results: outputs, outcomes, and impact. As you move closer to the right (refer to slide for visual) it gets harder to measure. Each of the stages has key metrics.

Professor Malcom Harper mentioned that since the start of microfinance and given its significant growth there have been a large number of studies trying to measure its impact. Not very surprisingly, in his view, studies have not been able to prove any significant impact. There are a lot of questions about the impact or results of microfinance that remain unanswered.

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When, how, by whom, he said, should impact be measured? RCTs are the gold standard but they go far enough, there is no need to go further. Impact and results can be measured by a third party but also in-house. The case of

AMK is a great example of how a company can do it in-house. The ultimate goal, Prof. Malcom said, should be that impact assessments are part of

the regular operations. That social impact data is collected and used.

Frances then discussed the options for investors:1. Monitor key indicators as part of MIS2. Research department within FI3. Commission external evaluations

George Weiers (EIB) shared the experience of EIB. At the moment, he said, when we talk about outcomes, we look at standard indicators and try to gauge the demand side (who is getting the loan? What comes out of the investment?). Before we go into the impact side, even at the outcome level we already face concerns in terms of cost effectiveness and availability of data. Why do we care about outcomes? We want to go beyond just saying “we invest in microfinance”, we want to know what it is that we are achieving. And in the microfinance sector, he said, it not as straightforward to measure as in other sectors.

Frances shared the case of TripleJump, who commissioned a study with 3 MFIs in Latin America. The study looked at the databases available at each MFI, assessed the data management process, and recommended how to use the results. One of the conclusions of this report, Frances said, is that there are clear concise ways to present outcomes data on a routine basis, and that when we ask for data from our investees we need to think of it is an end-to-end process.

Ximena Escobar de Nogales (Bamboo) commented that Bamboo conducted a survey with an investee in Zambia through SMS to understand interest in a savings product. She also added that MIVs should focus on “how do we serve the client better?” and for this we need market research. Currently, she said, we are not using all the information available. For example, how often do we look at the complaint books our clients have? All our industries look at this and put the client at the focus of the work – how does the client use the product? What does the product lack? The Bamboo market research study relied on SMS to send the survey. It was very cost-effective, Ximena added. We have at hand many mechanisms we can use to track the results of what we are doing. Ultimately we all care about serving the client better.

Laura Gaertner (Oikocredit) mentioned that the question of what is happening with the client has been in the agenda of Oikocredit for a long time. Last year Oikocredit took the approach (similar to Triple Jump) to build the capacity of their partners – using their data and integrate the outcome indicators into their MIS (option #1 previously

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mentioned by Frances). We conducted a study, she said, with 7 partners, 5 of them who were using PPI. This study showed several challenges: Partners have a lot of data but don’t use it (e.g., a partner had PPI data but did

nothing with it). Partners’ MIS are not always sophisticated enough to store and compare data over-

time (many times partners were over-writing new data over old data and losing the historic data).

Currently Oikocredit wants to expand this effort and is looking to identify more partners with available data that are committed to also understanding what is happening with the lives of their clients.

Dina Pons (Incofin) shared the experience of AMK Cambodia, a recent investee of Incofin IM, in a study conducted by the AMK research team comparing results of a small sample between 2006/7 and 2012. This was a period which saw some years of economic shock due to food and fuel inflation, the fall-out of the global economic crisis, and flooding. Using their own developed ‘well being’ tool, they found that clients of AMK had a slighter higher likelihood of improving their wellbeing score vs. non-AMK clients. This trend was more significant for the poorest clients. They also found out that across the board (clients and non clients) there where situations of asset sell due to health emergencies. This was a worrisome finding and prompted AMK to engage into developing a micro-insurance product.

Frances then gave an overview of the SPTF outcomes working group started in October 2014. The emphasis of the working group, she said, is on practical and cost-effective measures. The group is open to anybody interested in the topic of outcomes. Frances also mentioned that among the pre-reading materials (available through the following link http://sptf.info/sp-task-force/http-www-sptf-info-sp-task-force-social-investors-working-group) are the briefs of the 3 sessions that the outcomes working group has had so far. For more information on this working group contact Amelia Greenberg at the SPTF ameliagreenberg@sptf.info or visit http://sptf.info/sp-task-force/working-groups

Frances added that the outcomes working group plans to link with other initiatives to share what they are working on. Some of these include the Microfinance CEO working group, Acumen, Big Society Capital, Mission Measurement, Entrepreneurs du Monde, Grameen Foundation, Women’s World Banking.

She encouraged investors to look at the briefs mentioned above and to send ideas and suggestions for the working group.

Ximena mentioned she would like to sign up for the working group.

Conclusions and next steps

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Jurgen Hammer (Grameen Credit Agricole Foundation, co-chair of the SPTF Social Investor Working Group) mentioned some initial workstreams for the working group and asked investors to share suggestions.

Roll out of Universal Standards for Social Performance Management and SPI4 Continue the discussion on outcomes through the SPTF outcomes working group Continue discussion on pricing transparency within the investor working group SPM applied to investors – engage with GIIRS ratings, overlap with PIIF Continue discussion on responsible exits

The workstreams mentioned above will be shared with all investors to find volunteers who interested in participating in the different topics. In June, at the next meeting, the group will discuss updates and progress in each of the workstreams.

Dina and Jurgen encouraged investors to contact them to share any ideas or suggestions.

Edvardas Bumsteinas (EIB) closed the event by thanking investors for their attendance and SPTF and organizers for their work and invited all those present to attend the cocktail reception hosted by ADA.

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List of Attendees

# Organization Last Name First Name1 ADA Afonso Stefanie2 ADA Blondeau Nicolas3 ADA Canetti Sarah4 ADA Morilhat Caroline5 ADA Regnier Guy6 Advans SA Brown Katherine7 AMK Board Member Siedek Hannah8 Alterfin Desmet Sofie9 Anthos Quaegebeur Margot

10 Bamboo Finance Escobar de Nogales Ximena11 BANK IM BISTUM ESSEN eG Kreysern Martin12 BIO-Invest Gaspar Luciana13 BIO-Invest Dock Regis14 BlueOrchard Sherk Lisa15 CDC group Hallam Kate16 CDC group Forecast Rebecca17 Smart Campaign Barres Isabelle18 Catalyst Microfinance (CMI) Bollen Martjin19 Cerise Lapenu Cecile20 Cranfield School of Management Harper Malcolm21 Consultant Javoy Emmanuelle22 Cordaid Noe Sascha23 Deutsche Bank Vance Caroline

24Deutsche Bank Asset Wealth Management VanVeen Rob

25 e-MFP Pausch Christoph26 ECLOF Karambadzakis Nicolas27 EDA Sinha Frances28 European Investment Bank Aguglia Riccardo29 European Investment Bank Baptista Luis30 European Investment Bank Betti Raphael31 European Investment Bank Bumsteinas Edvardas32 European Investment Bank Consiglio Francesco33 European Investment Bank Ferreira Yves34 European Investment Bank Ferreira Luis Maria35 European Investment Bank Gavrilut Ines36 European Investment Bank Jennett Nick37 European Investment Bank Lucius Hakan38 European Investment Bank Pouget Perrine39 European Investment Bank Rosolowska Dominika40 European Investment Bank Schublin Marc41 European Investment Bank Sterlin Balenciaga Juan42 European Investment Bank Walsh Patt

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43 European Investment Bank Weiers Georg44 Enclude Solutions Van Weede Steven45 European Investment Fund Eriksson Per-Erik46 Feisol Investment Committee Barbier Jean-Pierre47 FMO Richly Brinkenberg Bert48 Frankfurt School of Finance Muffelmann Silke49 Grameen Credit Agricole Foundation Bottin Laurence50 Grameen Credit Agricole Foundation Hammer Jurgen51 Grassroots Capital Management PBC DiLeo Paul52 Grassroots Capital Management PBC Kanze Anna53 International Finance Corporation Claes Marie Paule54 Inclusive Finance Network Bouchat Julie55 Incofin IM Verhagen Koenraad 56 Incofin IM Pons Dina57 Incofin IM De Cannière Loïc 58 Incofin Investment Committee Boone Brigitte59 INVEST IN VISIONS GmbH Mender Elena60 INVEST IN VISIONS GmbH Schröder Edda61 Investisseurs & Partenaires Nocquet Elodie

62IRIS Project/Global Impact Investing Network McCarthy Kelly

63Italian Sustainable Investment Forum Dalmaso Davide

64 JAIDA Bensaid Fatima Zohra65 JAIDA Laasri Ahmed66 Kiva Jacques Cher67 KfW Detken Annette68 KfW Eichenbauer Irene

69Luxembourg Microfinance and Development Fund Pahlson-Moller Hedda

70Luxembourg Microfinance and Development Fund Wansleben Kaspar

71 LuxFlag Arens Annemarie72 LuxFlag Vankalas Sachin73 MF Consultancy Bullard Mathew74 MF Consultancy Mary David75 Microfinance Transparency Waterfield Chuck76 MIX Stephens Blaine77 NMI AS Streeval Cathrine78 NpM, Platform for Inclusive Finance Sluijs Josien79 Oikocredit International Gaertner Laura80 Oikocredit International Ledesma Ging81 Pamiga Jan Charline82 Progression Capital Advisors, LLP Fitzherbert David 83 Proparco Dayre Jean-Gabriel84 Proparco Angoso Pauline

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85 responsibility Etzensperger Christian86 responsibility Will Johann87 SIDI Frazzetta Camille88 SNS Asset Management Pelzer Nikkie

89Stromme Microfinance East Africa Limited Sooka Andrew

90Stromme Microfinance East Africa Limited Wavamunno Clare

91 Symbiotics SAParashkevova Holmegaard Marina

92 Triodos Investment Management Willems Ellen93 Triple Jump Bochatay Christophe

94Turkish Industrial Development Bank (TSKB) Tunali Sirma

95 VdK Schatteman Ignace96 Volksvermogen Geers Michiel

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