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Event Summary

Planet Rating and Grameen Foundation, in cooperation with the Microfinance Council of the
Philippines and Oikocredit, brought together microfinance investors and practitioners in a
regional workshop on the emerging trend of social investments in microfinance. The
workshop was held last January 29th, 2010 at the AIM Conference Center Manila in Makati
City. This workshop is the third module of the Capital Access Workshop Series and included
the following highlights:

 Welcome greeting from conference organizers Planet Rating, Grameen Foundation,


MCPI and Oikocredit;
 Presentation on the Evolution of the Microfinance Investment Landscape and
Reasons behind the Growth of Social Investments;
 Interactive panel discussion on the Role of Social Investors with the participation of
Oikocredit, Kiva and FSSI;
 Experience sharing among MFIs and Technical Assistance Providers on
Opportunities and Challenges in Social Investment;
 Networking opportunity for participants, organizers and guests;
Goals and Objectives of the Capital Access Workshop Series

 To provide insights on microfinance benchmarks and international best practices.


 To help MFIs think more strategically about their capitalization needs, their
fundraising approach and mitigation of market and liquidity risks.
 To highlight newly emerging funding and liquidity challenges specific to the
microfinance sector and taking into account the adverse impact of the financial crisis.
 To provide a venue for microfinance practitioners in the Philippines to interact and
network with various national and international stakeholders.
 To build a vibrant community of microfinance stakeholders committed to promoting
viable financial institutions that serve the poor.

Objectives of the Social Investment Workshop

 To raise awareness on social investment and create an understanding of the social


investment landscape.
 To share experiences and best practices on social investing and social performance
management.
 To identify intermediary players who can assist MFIs in enhancing their social
performance.
Presentation on the Evolution of the Microfinance Landscape
and Reasons behind the Growth of Social Investments

 Microfinance Institutions as Agents of Social Change


 Microfinance is a tool for poverty alleviation with social objectives of poverty
reduction, employment creation, empowerment of marginal groups, and social
mission and commitment at its core.
 Microfinance implies building inclusive financial systems that serve the poor.

 A Victim of its own Success: Growth and Professionalization of Microfinance


 For investors, microfinance is often considered a special asset class of socially
responsible investment, balancing financial return with social impact.
 Foreign capital investments in microfinance topped 10 B USD in 2008.

 Microfinance is a high growth sector with imbalances as funding is


concentrated in the largest 150 MFIs.
 Many MFIs have experienced extensive growth marked by rapid expansion of
branch networks.
 Financial sustainability through professionalization is essential for achieving
intensive growth.

 The Commercial Drift of Microfinance: From Social Goals to Capitalist


Principles
 Commercialization is necessary to sustain growth in the sector, to scale up
outreach and serve a greater number of financially excluded, low-income
people.
 While a competitive marketplace tends to reduce costs and increase consumer
choices, the push to place significant amounts of additional capital in a limited
pool of high growth MFIs and regions increases the risks of the sector
overheating.

 Beyond Good Intentions: Assessing Social Performance in Microfinance


 The success of microfinance has led to more scrutiny of the sector, with
increasing pressure to substantiate its social claims and business model.
 Social investors are demanding evidence of not only financial but also social
returns on investments.
 Measuring and managing social performance makes MFIs more effective in
achieving its social mission and increasing its impact on target groups.
 MFIs that manage their social performance will deliberately:
 Translate its missions and values into clear, measurable objectives to capture
intentional social benefits;
 Design and implement systems for social responsibility, including client
protection;
 Track, understand and report on whether it is achieving its social objectives;
 Align its business processes to achieve both social and financial objectives;
and
 Ensure that decision-making considers both social and financial outcomes.

 The Road Ahead: Greater Transparency and Accountability in Realization of


Social Goals
 Recognition of social performance assessment as a completely separate and
technically valid area of inclusive finance and its integration into the regular
management systems of MFIs.
 Increased social transparency within the microfinance sector including social
performance assessment of social investors.
Panel Discussion on the Role of Social Investors

The discussion was facilitated by Dina Pons of Planet Rating and participated by Meldy
Pelejo of Oikocredit, Rico Muñoz of Kiva and Anne Marie Torres of FSSI.

 Origin and Nature of Social Investment Vehicle


 FSSI started as a formal endowment fund and started lending to MFIs in 2004.
It uses the triple bottomline approach to gauge MFI partners’ economic
viability, community orientation and ecological soundness.
 Kiva was started as a small website to pool funds for microentrepreneurs in
Africa. In 2006, Kiva was registered as a non-profit organization and in 4
years raised 100 M USD for MFI partners in more than 50 countries. Today,
Kiva pools the resources of 600,000 micro-social investors to benefit
microentrepreneur clients of 141 institutions.
 Oikocredit was created to become the alternative investment vehicle of a
church-based organization. Oikocredit is geared towards advancing the
interest of poor people and partners with institutions bearing a similar mission.

 Social Investment Criteria


 While social investors implement specific policies for identifying partner
institutions, there are similarities in some social investment criteria such as
empowerment of women, economically viable and environmentally sound
enterprises, client protection, among others.
 Incentives such as technical assistance support and interest rate discounts are
provided to institutions that meet special requirements.
 Reporting requirements also vary per investor. Oikocredit look for very
specific criteria from partners and thus require specific reporting formats.
FSSI and Kiva review available evaluation reports of partners.
 Kiva and Oikocredit are also active in social performance working groups
with the latter focused on developing indicators of social performance.
 The use of PPI for profiling clients and social performance ratings are also
considered valuable tools by investors.

 Challenges in Social Investment


 Since social performance management is relatively new, communicating the
use of SPM tools and its results, as well as finding resources for SPM are
critical challenges.
 There may also be internal organizational challenges related to transparency
and the use of public funds.

 The Future of Social Investment


 There is huge clamor for collaboration among funders, to have common
indicators, industry standards and benchmarks, and to have more venues to
articulate opportunities and challenges of social investing.
 There should be a push towards efficient management information systems of
MFIs to include tracking of social performance at the client and institutional
level. A credit bureau for MFIs should also be set-up as a means to reduce
overindebtedness and to help MFIs manage portfolio decisions.
 SPM should be seen as a tool to professionalize MFI management and not as a
burden or requirement from donors that need to be complied.
Experience sharing on Opportunities and Challenges in Social Investment

The discussion was facilitated by Cris Lomboy of Grameen Foundation and participated by
Aida Libunao of ASKI, Lysette Asombrado of PMPC, Mitch Gomez of GM Bank, Mary Jo
Kochendorfer of Grameen Foundation, Dina Pons of Planet Rating and Ron Bevaqcua of
PlaNet Finance.

 Motivations for Social Performance Management


 For MFIs, the inherent social mission of serving poor and rural clients is the
major motivation for pursuing SPM. Through SPM, they are able to assess
whether their products and services are suited to their clients needs. Some do
SPM to satisfy funder requirements and as a way to differentiate from the
competition.
 For technical assistance providers, their motivations for getting involved in
SPM is highly linked with their institutional purpose. Planet Rating as an
intermediary between investors and MFIs aim to provide information on both
financial and social performance. Grameen Foundation developed PPI as a
SPM tool to help track whether it is achieving its mission of reaching the poor.
PlaNet Finance looks at MFIs’ needs and sees the benefits of SPM in helping
MFIs understand the needs of their clients and achieve the impact they intend
to have.

 Constraints in Engaging in SPM


 The common misconception that SPM is an added burden for staff and
requires substantial resources to implement prevents strong buy-in from the
staff and management. Other misconceptions regarding SPM that need to be
clarified include social performance being a requirement to be complied with
and that SPM as being too difficult or too complicated to carry out.
 Institutions struggle with collecting and managing information, which includes
the integration of social criteria into MFI systems and aligning these with an
MFI’s social mission. This is even complicated by definitional constraints and
the lack of industry-level standards and measures for social performance.
 For MFIs who are in the lead of SPM implementation, there are issues on how
to sustain and deepen SPM over the longer term.
Workshop Participants

ASKI MJ Macapagal
BPI - Globe BanKo, Inc. Francis Abcede
BPI - Globe BanKo, Inc. Io Martin Guballa
Cantilan Bank Charles Hotchkiss
Cantilan Bank Emmanuel Almeda
Hagdan sa Pag-Uswag Fondation, Inc. Melchie Badion
Hagdan sa Pag-Uswag Fondation, Inc. Jayson Baldove
Kamayo Foundation Inc. Vivien Grace Martin
Kasagana-Ka Dev't Center, Inc. Maria Anna De Rosas - Ignacio
Kasagana-Ka Dev't Center, Inc. Fernando T. Aldaba
Kabalikat sa Maunlad na Buhay, Inc. Rizaldy Duque
Metro Ormoc Community Cooperative Katherine Apoderado
Microenterprise Access to Banking Services Cheryl Balingit
Minadanao Microfinance Council Jenny Rodil
Opportunity International Mark Daniels
Paglaum MPC John Sermel Neri
Peoples Bank of CARAGA Darling Bulaon
PinoyME Angelica Espinosa
PinoyME Andres Ruba
Rural Bank of San Enrique Arturo P. Muyco
VCF Rodolfo g. Adel jr
Planet Finance Philip Gaeng
NWTF Gomby Maramba
VICTO Jacinto A. Tilbe
MICRA Philippines Foundation, Inc. Wilma Guinto
MICRA Ernesto Calucag
Landbank Hermeo G. Bautista
Partner Rural Bank, Inc. Eugenio A. Demigillo, Jr.
Tulay sa Pag-Unlad, Inc. Hernan Bariring
Tulay sa Pag-Unlad, Inc. Aquilina G. Onesa
Tulay sa Pag-Unlad, Inc. Eleanor S. So
CCT Cooperative Justiniano Gonzaga
CCT Cooperative Donna Chua
CCT Cooperative Revodem Avarientos
SB Capital Investment Corporation Manolo San Diego
RIMANSI Ma. Socorro C. Ates
GM Bank Emerson de Torres
PMPC-KIVA Nasha Virata
MICRA Lourdes Saavedra
RB Pres. MA Roxas Rizalito Sy
CARD Melany Viajante
HSBC Luis Cruz
Green Bank Omar Andaya
Workshop Organizers

The Microfinance Council of the Philippines, Inc. (MCPI) is a network


of microfinance practitioners and allied service institutions working towards the
development of the microfinance industry in the Philippines.
MCPI aims to promote the adoption of poverty assessment tools and social
performance monitoring systems and adherence to international performance
standards. It seeks to build members’ capacity for innovation towards the
development of a market-oriented microfinance sector. To do so, MCPI mobilizes
resources and establishes networks with government, donors, funding agencies,
investors and financial markets.
MCPI is committed to promoting and strengthening Social Performance
Management (SPM). Through the implementation of several awareness-raising,
knowledge-sharing and capacity building programs, MCPI envisions a significant
number of microfinance institutions actively managing their social performance and
improving their SPM practices.

Oikocredit is one of the largest and most durable development


financing ventures in the world, forged by 34 years of ethical investment and
meaningful partnerships in the development finance business.
Oikocredit ultimately aims to facilitate meaningful transformation in the lives
of the end-users of its resources from positions of vulnerability to socioeconomic
security and as much as possible, as community social investors.
Oikocredit explores opportunities to provide relevant financial products and
services to cooperatives, fair trade organizations, microfinance institutions, rural
banks, small and medium enterprises, and other income generating projects that
benefit the poor, are financially sustainable and meet its overall objectives.

At Grameen Foundation our goal is simple – we want to see poor people,


especially the poorest and those living in harder to reach areas, have access to
microfinance and technology and as a result of access to these services, move
themselves out of poverty. We envision a world where the poor have broken the
generational chain of poverty and lead lives of respect, dignity and opportunity.
We are a leader in the fight against poverty in Sub Saharan Africa, Asia,
Middle East/North Africa, and the Americas. Our cutting-edge programs and
resources have helped more than 45 million poor people, mostly women and children,
improve their lives. Grameen Foundation collaborates with local organizations and
allies around the globe to provide products and services that allow them to: 1) reach
deeper into poor communities with microfinance and technology services; 2) provide
access to microfinance and technology services among the poor and poorest in harder
to reach areas and currently unserved/underserved areas; and 3) measure who is being
reached to ensure they are moving out of poverty over time.

Planet Rating is a specialized microfinance rating agency with over ten years
of experience rating microfinance institutions. We are committed to contribute to the
professionalization of the microfinance industry through higher transparency and
access to financing.
Our GIRAFE methodology is an innovative and unique rating approach that
evaluates the performance and institutional risk of MFIs. The objective of GIRAFE is
to promote an international standard of performance thereby strengthening the
confidence of commercial investors. Planet Rating also provides Social Performance
Ratings for MFIs who wish to improve their social performance, attract additional
sources of funds and reduce risks.