Collecting
social data is not the objective; rather it is selecting those metrics that
best support the Board's ability to design and oversee social strategy and
management's efforts to execute that strategy in progressively more efficient
and effective ways.
Studies, surveys, institution data, client
data… there is a lot of data being collected.
The financial industry is
constructed around data and the availability of data. The information that this data provides
allows financial institutions to scale, increase outreach, manage risks and enhance
profitability. Although MFIs have
multiple bottom lines, their approach to data should be no different than a purely
profit-maximizing institution. This importance of data in enhancing performance
in each bottom line has been acknowledged in microfinance and motivates, in
part, the significant time and effort expended to develop the social
performance data collection tools that have launched over the past few
years. The MIX Market plays a large role
in increasing the transparency of the industry and other initiatives like the forthcoming
SPI4 self-assessment and the
GIIRS Rating will continue to provide
platforms which support social data collection.
These platforms, plus companies’ proprietary collection methods, provide
the means for gathering comparable data suitable for bench-marking in a relatively
efficient way. BUT in many cases, the data are not being used to manage and
improve social performance, but almost exclusively for communication with
external stakeholders.
There is far less
analysis being done.
Social data collection and social
performance standards have become widely accepted as an important tool in maintaining
support for international microfinance, especially since the critiques and
crises of 2009-2011 caused many to question the social value of
microfinance. But while many MFIs do collect
social data and subscribe to standards to allay the concerns of external
stakeholders, they rarely use that information to inform their own decisions
about how to better articulate operational targets and streamline their operations.
The data collection is simply not being
translated into the most important part: analysis and learning from that
analysis to improve and advance the industry at every level. Grassroots has
seen this demonstrated in its governance involvement in multiple MIVs and MFIs
– they collect a lot of data, but aren’t using it for any substantive purposes. Not only is this a wasted opportunity, but
threatens to transform the whole social performance management effort from a
good faith attempt to refocus microfinance on the client into an empty exercise
in compliance.
Why is there such a
lack of analysis and resulting implementation?
The all too frequent failure to
take advantage of the availability of improved data and more robust benchmarks
and comparables to improve social performance reflects different constraints
for different players, but the common result is that the data all too often stay
in the databases or at best, in reports that are little read. The immediate reasons differ; for MFIs they
are a focus on efficiency and achieving financial targets; likewise for
investors and funders there are the challenges of meaningfully aggregating
metrics across multiple sectors as well as pressure to achieve financial
benchmarks; and for nearly everyone there are challenges of training staff and
modifying MIS. Underlying all these
constraints, however, is a common theme:
what are the priority goals of the MFI and how do social performance
data support the achievement of these priority goals? Not all MFIs specify social goals, but most
do. And
even if they are as broad as “increasing financial access” data can be
collected and analyzed to help management, boards and shareholders articulate
their goals in measurable ways – Access for who? Measured how?
With what intended results? – and use the answers to refine strategy and
enhance operations. Unless the social
bottom line is positioned with equal weight with other, financial goals, social
data collection and reporting will fall far short of its potential as a
powerful instrument in improving the double bottom line performance of MFIs. It
is ultimately up to the funders and investors to mandate regular social
performance data to be included alongside financial data reporting from their
portfolio companies. If social data were
required to be reported at this level, regular and thorough analysis would increase
and the industry would benefit.
Stakeholders and
industry players need to begin taking advantage of social data to enhance
performance.
The industry needs to use the
available data much more to inform the dialogue on social performance, set
targets and determine which strategies, products and services are most
effective at meeting social objectives. While
a number of technical assistance providers support this type of “evidence
based” approach, this “supply push” needs to be complemented by “demand pull”
from investors and directors. Steps in this direction will enable the industry
to better learn from the information and make better decisions more quickly,
while avoiding the wasted effort and cynicism associated with leaving data sitting
in Excel spreadsheets around the world.
Grassroots’ has been
working to support effective “demand pull” by focusing on the Board and
Management levels. The approach starts
with creating simple dashboards that focus on social data relevant to each
company's articulated mission and then delivering this in a concise report with
annual targets, trends over time and benchmarks, so it can be routinely
reviewed by the Board alongside standard financial metrics. We expect that over time, the metrics
followed by each company will be refined and replaced to focus more precisely
on the institution’s particular mission. A company may even develop some
of its own unique metrics which are not captured by the standard industry platforms,
and this is fine. The point is that collecting social data is not the
objective, rather it is selecting those metrics that best support the Board's
efforts to design and oversee social strategy and management's efforts to
execute that strategy and make sure they are used to these ends. Grassroots’ believes that integrating data
analysis into operations starts at the top: the Board must provide direction and
Management drives implementation. As this
kind of social performance data analysis becomes routine, and not just a side thought
or an empty exercise in compliance, the industry will feel the positive results
that occur when progress is shaped by information and evidence.
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