Social Performance Management: CSR of Microfinance OR more than that?

Social performance management has been in existance for quite some time now. However, it is assuming new significance in recent times due to the negativity caused by the recent cases of suicides and harassment; as also by the increasing consciousness amongst investors to measure the social impact generated. Add to this, the increasing competition in a maturing industry. In such conditions, an MFI’s best bet is to retain its old clients while attracting new clients. This is possible by being responsive to the customers’ needs and requirements. At the same time, looking after the staff is of prime importance in order to achieve the social objectives of the institution.

In steps the concept of Social Performance Management (SPM) which is about making an organisation’s social mission a reality. Many times, focus on social performance is seen as being lenient on the aspects of financial sustainability and vice versa. However, that’s a fallacy. On the contrary, strong financial performance will enable an MFI to pursue its social objectives in an effective and efficient way. And the strong emphasis on social objectives will help in providing better, client-focused services and improve organisational culture. This in turn will lead to increased client satisfaction and retention; and reduced staff attrition rate.

SPM is beneficial to all stakeholders:

- Clients:
SPM involves taking into consideration the clients’ requirements and thereby innovating, developing and monitoring products & services and delivery systems which are more appropriate to the target customers’ needs and conditions. Better products and services would result in satisfied clients leading to customer loyalty and increased outreach.

- Employees:
Employees form a vital part of the entire process of microfinance. SPM focuses on human resource management including incentive plans, welfare actitivities, skill development, retention plan which would help in developing a motivated field force and reducing the high attrition rate prevalent in the microfinance industry.

- Investors:
In the absence of widely accepted social performance measures, donors and socially responsible investors typically base funding decisions on financial performance alone. Managing social performance allows MFIs to demonstrate their competitive blended returns, thereby providing a simple and cost-effective tool to assess social results of the MFI leading to an improved position in a competitive funding market.
Organisation:

• SPM system will aid in balancing financial and social objectives to make better business decisions based on a more thor¬ough understanding of the trade-offs each involves.
• SPM will aid in improving higher customer satisfaction and in developing demand driven products and services which would make the institution more attractive thereby leading to program growth and better financial performance.
• SPM is necessary to ensure that MFI doesn’t experience mission drift and remains true to its goals and objectives.
• With so much negativity surrounding the field of microfinance, many players are turning to ways through which the good work carried out by them is highlighted. The effective implementation of SPM system will not only fufill double bottom line of the organisation but will also enhance the reputation and brand image of the company while avoiding the negative impact on operations (reputational risk).

Thus, active monitoring and assessment of the SPM system will help an MFI to maximise both social and financial performance.