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Micol Pistelli, director of social performance at the MIX writes about the growing culture of information transparency in the microfinance sector, as well as some of the work MIX has planned to further improve the gathering of client-level data. By addressing the market need for relevant data, MIX has been a key contributor to building the infrastructure of the sector and supporting the Campaign’s 100 Million Goal.
Over the past five years we have been witnessing an exceptional change in the practice of reporting performance information by microfinance institutions to MIX. As MFIs have started reporting social performance data, a new, more client-centered culture of information transparency has taken shape and spread worldwide. Those who initially thought that the idea of social performance measurement was a donor-driven fad and too large an investment to scale up have been proven wrong by the scale of reporting.
As little as three years ago, the only type of indicators reported by MFIs linked to client segmentation and to an MFI’s mission were gender or geography. We have certainly come a long way:
Today MIX Market hosts up to 87 social performance data points reported by over 1,000 MFIs serving more than 90 million clients.
The scale of social performance data reporting is evidence that social performance measurement has become a mainstream practice in microfinance and this must be seen as a very important step in the direction of a healthier and more responsible microfinance sector.
Of course not all indicators have proven easy to report and social performance measurement usually works better by adopting a phased approach. In particular, the indicators related to poverty measurement are the ones least consistently tracked by MFIs. While 77 percent of MFIs rank poverty reduction as a development goal, less than 20 percent of them can actually report poverty figures of their clients. The practice of systematically measuring clients’ poverty levels, when combined with other indicators of client satisfaction, can be a powerful instrument at an MFI’s disposal to better attend to the needs of their poorest clients. And this is the area of reporting where MIX hopes to see more best practices emerge and more data coming in over the next few years.
In addition to providing data analytics and insights on MFIs, MIX aims to fulfill its mission of promoting responsible financial services for underserved populations by offering a more comprehensive view of financial inclusion through its newly launched FINclusion Lab and by enhancing MIX’s infrastructure for easier reporting. All MIX’s activities find a strong link with the Microcredit Summit Campaign’s efforts in fighting poverty. We in fact believe that through improved data and technology that has been enabled for easier reporting, financial institutions and funders can become more effective and efficient in making decisions and delivering services. This, in turn, has the potential to have a dramatic impact in the way we understand and attend to clients’ needs.
As social performance reporting has already become a mainstream practice for MFIs across regions, MIX’s efforts are today focused on improving the quality of data collected and delivering actionable analysis insights for funders and MFIs. To improve the reliability of social performance data, MIX has created a comprehensive social performance desk review methodology which can be accessed here: Social Performance Desk Review Toolkit.
More than 200 MFIs have submitted documentation for this data quality process. The list of MFIs with their desk-review published can be accessed here.Through our desk review work MIX hopes to establish a solid, high quality database that investors can actively use as part of their due diligence work. This information platform would make their work and that of MFIs more efficient, with less time spent collecting documents and more time spent analyzing and improving MFI performance.
Social performance data reporting has certainly played an important role in creating a new culture of measuring, in a more systematic way, information related to both clients’ and institutions’ risk, especially in the area of consumer protection. While considerable efforts have already been made to create guidelines for MFIs to prevent practices harmful to clients, there is still an information gap regarding whether clients are satisfied with the products and services offered to them, whether they fully understand the pricing and terms of loans and how they value their relationship with their financial provider.
To gain a deeper understanding of clients’ needs, MIX has recently partnered with Hivos on a new project called the Voice of the Client, aimed at collecting client-level data on consumer protection. MIX has been working with the Smart Campaign to identify indicators to be tested with four MFIs’ clients in India starting in May 2014. Data will be collected from 6,000 clients in total, primarily through Interactive Voice Response but also through direct calls and on-site visits. With this new project, MIX and Hivos aim to open a new frontier of data analysis that is truly client-centered and, by doing so, empower MFIs to better understand clients’ needs and take action based on data findings.
Through our multi-level approach aimed at addressing the market need for relevant, reliable data and analytical tools, MIX intends to provide a concrete, valuable contribution to the goals of the 100 Million Project and to be instrumental in building an informational support structure to advance the pro-poor agenda for truly inclusive access to finance.
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