Cost-Effective Social Performance Management : Meeting the Social and Financial Goals of Microfinance

This note presents a framework for assessing social performance (social performance assessment - SPA), and how this information can be used to inform decisions that affect both the social and financial performance of the microfinance institutions - this we term social performance management, SPM. Impact assessment studies commissioned primarily to serve donor interests are often of little help to MFIs themselves. They tend to be too complex, time-consuming and costly. They do not generate information that is sufficiently timely, regular, reliable and cost-effective to aid MFIs' own social performance management. As a result, microfinance has made less progress towards institutionalization of social performance management than it has towards institutionalization of financial performance management. Improvement in the way MFIs routinely define their social goals and assess progress towards them are beneficial in two ways: 1) Greater transparency about their success in reaching and serving target markets will assist donors and investors in making good use of microfinance resources and in funding development programmes. 2) Social performance information helps MFIs to understand their clients' needs and to develop more appropriate and effective services. The development of simple, routine and self-directed methods of social performance assessment by MFIs themselves offers a way forward. By investing in this, donors can ensure both that the social return to microfinance improves and that it is seen to do so.