Responsible Microfinance: Community Bankers Program
Around the world, about 2.5 billion adults are unbanked or without access to financial services, 59% of them in East and South-East Asia. Some 200 million small and medium-sized enterprises are also unbanked, with about half of them in East Asia. Mainstream banks neglect them because they live in remote rural areas and have no assets or dependable income. They are forced to rely on unregulated moneylenders and endure crippling interest rates.
Microfinance institutions (MFIs) are opening new financial options for people living in poverty, offering products and services designed to meet their special needs. Delivered responsibly, microloans are a powerful tool to fight poverty. But they can cause harm if sold to vulnerable people who cannot realistically repay the debt.
That’s why Good Return only partners with organisations that share our social mission. They also believe in our integrated approach of delivering responsible microfinance alongside skills development programs. Our goal is to help their bankers deliver financial services that are responsible – safe, affordable, and reliable banking products, and inclusive – available to everyone, particularly those living in remote, marginalised communities.
Community Bankers in Action
— Photo Gallery
Responsible Microfinance 101
Would you be a good banker?
» Click here to see what makes a good Community Banker
Deliver responsible microfinance
Good Return starts this by working with our partners to review their policies, processes, and products. We suggest areas for improvement and help them implement the changes. We train their management in social performance management so they can measure their progress towards social goals in delivering responsible microfinance to their communities.
Believe in a social mission
Knowing what to do is one thing – to walk the talk is another. We select our partners carefully, and only work with MFIs who passionately believe in social responsibility.
Good bankers care enough about the well-being of their clients to willingly put social goals on a par with financial targets.
Adopt new ideas
As a leading adviser in the microfinance sector, we continue to look for new concepts and tools to review, track, and manage our partners’ social performance.
New initiatives we’ve been working on include the Universal Standards for Social Performance Management (USSPM), the Smart Campaign, the Microﬁnance Information Exchange (MIX) and Progress out of Poverty Index (PPI).
Deliver what’s needed where it’s needed
Good bankers are good listeners. They need to understand their clients so they can recommend products that truly meet their needs, and protect them from financial risks such as over-indebtedness.
Our bankers work in the foothills of Nepal, the jungles of Borneo, and the rice paddies of Cambodia. They travel by motorbike, bus, or boat. They deliver affordable savings, loans, insurance, and other financial services to the doorsteps of people living in some of the region’s poorest and most remote communities.
Good bankers are committed to extending ﬁnancial inclusion to everyone, making sure no one in their communities is left unbanked.
» Click here to see more on our Social Performance Management initiativesYou may have heard about the microfinance crisis in India a few years ago. Several people committed suicide after borrowing from multiple lenders and faced defaulting on their debt. Too large a supply of credit, even if intended to benefit the poor, can cause harm.
How can we be confident microfinance is helping, when there are such examples as this? One solution is to assess objectively if we are achieving our social mission. Essentially, this is what we mean by social performance management. It’s a broad term for a suite of tools which allows organisations to measure the social benefits of their work.
Currently, we’re developing these initiatives.
Universal Standards for Social Performance Management (USSPM)
The USSPM (website) is a manual of best practices in the microfinance sector to help financial institutions achieve their social goals. The manual is organised into six dimensions:
- Define and monitor social goals
- Ensure board, management, and employee commitment to social goals
- Design products, services, delivery models and channels that meet clients’ needs and preferences
- Treat clients responsibly
- Treat employees responsibly
- Balance financial and social performance
The Smart Campaign (website) provides microfinance institutions with tools and resources to deliver transparent, respectful, and prudent financial services to clients. It sets out the minimum standards that clients should expect including:
- Appropriate product design and delivery
- Prevention of over-indebtedness
- Responsible pricing
- Fair and respectful treatment of clients
- Privacy of client data
- Mechanisms for complaint resolution
Microﬁnance Information Exchange (MIX)
MIX promotes responsible financial services through data analytics and market insight, using the following two platforms:
- MIX Market (website) is a public data hub where microfinance institutions and supporting organisations share institutional data to create transparency and market insight.
- FINclusion Lab (website) is an analysis and data visualisation workshop designed to coordinate the delivery of responsible financial services to underserved communities.
Progress out of Poverty Index (PPI)
The Progress out of Poverty Index (website) is a tool to measure poverty through a questionnaire about a household’s characteristics and asset ownership. Answers are scored and evaluate the likelihood that the household is living below or above the poverty line. The PPI can help identify people who are most likely to be poor or vulnerable to poverty. This data can then be used for assessments and strategic decision-making purposes.
Meet Our Community Bankers
Our Community Bankers come from diverse backgrounds. But they all have one thing in common: their commitment to help people break out of the poverty cycle.
Here are four Community Bankers who have let us follow them through their working journey. Read their stories to find out about their challenges, joy and hope at work and in life.
Curious to know more? Please send in a question – ask us anything.
Our Plan and Results
Good Return’s effort on Social Performance Management (SPM) has had positive results as we develop the expertise of our partners. As such, going into 2015 we will continue to work on measuring and tracking poverty (Progress out of Poverty Index or PPI), client protection, and promotion of the Universal Standards for Social Performance Management (USSPM).
We endorse the USSPM as they guide our MFI partners in managing their social, environmental and financial performance – with special attention to poverty tracking, client protection, and a community based agenda.
Dimension 1: Define & Monitor Social Goals - The first dimension helps institutions to define and monitor their social goals, set a strategy to achieve them, and collect information to measure your effectiveness in achieving the goals. For example, if the institution wants to improve the lives of the poor, collecting poverty data from clients’ will tell them how good a job they are doing.
Our Plan for 2014 - Good Return is planning to help our MFIs partners in Fiji, Cambodia and the Philippines integrate poverty measurement into their operations, using the Progress out of Poverty Index (PPI) tool developed by the Grameen Foundation.
Dimension 2: Ensure Board, Management, and Employee Commitment to Social Goals – This dimension encourages everyone— including the board, management and staff — to be committed to achieving the social goals of the institution and ensuring each is formally accountable to the targets.
Our Plan for 2014 - Throughout the year, we will provide training to the management and staff of our partners in Indonesia (CUKK), Cambodia (TPC), Nepal (RMDC), the Philippines (SECDEP) and Fiji (SPBD). The training focuses on how these institutions can strengthen their Social Performance Management to achieve their social goals and mission to help the poor.
Dimension 3: Design Products, Services, Delivery Models and Channels That Meet Clients’ Needs and Preferences – This third dimension encourages institutions to listen to their clients and design products and services that directly meet their needs and preferences. In this way, institutions become more competitive and efficient, and at the same time they will boost customer satisfaction and loyalty.
Our Plan for 2014 - We will be actively working with our partners in Cambodia, Fiji and the Philippines to respond fully to the Smart Campaign client protection assessments completed by Good Return in 2013. By doing this, they should demonstrate a commitment to responsible finance, ensuring the services provided to clients are appropriate to their needs.
Dimension 4: Treat Clients Responsibly – The fourth dimension is about treating clients responsibly. We work with poor people, who are vulnerable and often financially illiterate. Making sure they understand their rights is the best way to protect them from harm. Doing this improves the relationship with clients and reduces the risk of their becoming over indebted. This means making fees and interest charges fully transparent, protecting clients from over-borrowing, treating them fairly and respectfully, ensuring data privacy, and resolving complaints in a proactive manner.
Our Plan for 2014 - Along with implementing the Smart Campaign's client protection principles (see USSPM 3), Good Return aims to develop a client complaints database with CUKK in Indonesia and SPBD in the Pacific. This will help these MFIs to use client feedback to improve their products and services.
Dimension 5: Treat Employees Responsibly – The 5th dimension is about treating employees responsibly. Staff are an invaluable source of information for any business. As such we encourage our partners to accept staff feedback, respond to employee grievances and ensure that staff receive a fair and living wage. Staff who feel valued at work perform and work better to help the institution to achieve its goals. In this way institutions can improve their efficiency and capacity to serve clients better.
Our Plan for 2014 - In conjunction with SPTF and MFC, Good Return is producing an animated video for the sector to promote USSPM. It aims to train staff of MFIs about USSPM and how it can benefit their work and their organisation.
Dimension 6: Balance Financial and Social Performance – The sixth and final dimension aims for the right balance between financial and social goals. Microfinance is about helping less advantaged people improve their lives through access to financial services. While it is important to be profitable and financially sustainable, forgetting about client well-being in pursuit of profits is unethical. Balancing financial and social performance will help make institutions become more well-rounded, responsive to market changes, and more attractive to donors and investors.
Our Plan for 2014 - Currently, Good Return is not planning any activities in this USSPM dimension. However, as part of our Responsible & Inclusive Finance program, we advocate all partners to adopt a cohesive approach that strike an effective balance between social and financial performance.
“Providing the poor access to financial services comes with it a deep responsibility of ensuring that these will not drive them deeper into debt and more hardship. Responsible microfinance providers prepare the poor by educating them on the intricacies of managing money and how to seize new opportunities to improve their future. Hence, microfinance should promote entrepreneurship rather than consumerism.”
Rico Munoz, General Manager of SPBD Fiji