In recent years, attention has focused increasingly on client welfare, and measuring the performance of providers against key indicators relating to the clients they serve. Though financial sustainability is essential for massively expanding services and for running a business, it does not automatically ensure that client-level benefits are realized. Both financial performance and performance in positively affecting people’s lives—social performance—matter. Many funders and financial institutions are seeking more transparent ways to measure social performance in addition to measuring financial performance, the so-called “double bottom line” approach.
Retail providers need to take deliberate actions to design and deliver appropriate financial services that not only protect their clients from harm but also help their clients, working to achieve their social and development goals and holding themselves accountable to their mission. The Universal Standards for Social Performance Management, adopted by the Social Performance Task Force (SPTF), provides a set of management standards to help guide these actions for all microfinance institutions pursuing a double bottom line.
The SPTF has built consensus among industry stakeholders on these Standards as well as on a core set of 11 social performance indicators, which the MIX has integrated into its reporting platform. Improved transparency on social performance can help retail providers to benchmark themselves and improve practices over time, as has happened with increased disclosure of financial performance.
The adoption of the Universal Standards for Social Performance Management, and their incorporation on the MIX reporting platform, represents an important milestone in creating universal industry standards. But MFIs aren’t the only ones responsible for social performance management. Donors and investors need to send the right signals and align their investment and grant decisions with responsible finance goals and practices, positioning themselves as strong partners to retail providers, policy makers, and other industry players. The Principles for Investors in Inclusive Finance (PIIF) provide a useful set of principles under the umbrella of the United Nations Principles for Responsible Investment (UNPRI) specifically incorporating the Smart Campaign’s Client Protection Principles and the SPTF performance management principles.