Discussion Proposal SPTF Meeting Bern, June 2010

1. Towards a Social Performance Certification System Discussion Proposal SPTF Meeting Bern, June 2010

2. Contents Why do we need a social performance certification system? SP: What have we done, and what is missing? What is the SPCS? What are its main objectives? What are the main features and the scope of the SPCS? What are the components of the SPCS ? What is the outline of the standardization, accreditation and certification process? What areas are standardized and certified? The SP certification seal in microfinance What are the benefits for certified MFIs? What are the benefits for clients, social investors and other stakeholders? Concerns SPCS implementation phases

3. Why do we need a SP Certification System? • To differentiate the fulfillment of MFIs’ social role from other types of mandates, missions and goals. • To demonstrate consistency betweeen mission and results – does not mean having “good social performance”. • Generalization has led to doubts and interventions (contradictory regulatory frameworks, reduced funding sources) that affect the sustainability and progress achieved in favor of the poorest and most vulnerable. • All interventions are valuable and operating strategies can be similar BUT it is important to differentiate between motivations and destinations of intervention benefits. Profit vs. social and economic development of the poorest and most vulnerable, etc. • To recognize and reward MFIs that achieve certification.

4. SOCIAL RATING Accreditation & Certification CONCEPTS Norms & Codes of Conduct SYMBOLIC RECOGNITION Rewards, Incentives INDICATORS Standards SP: What have we done and what is missing? What?

5. What is the SP Certification System? • A set of norms, processes and mechanisms certifying that a MFI plays a social development role and achieves results consistent with this mandate. Its main objectives are: • Institute a SP Certification Seal to identify, value and differentiate MFIs with a social development mission and focus from those that prioritize seeking financial inclusion and/or demonstrating socially responsible management. • Promote the adoption of principles, standards and best practices aimed at continuously improving, and ensuring the sustainability of interventions by MFIs focused on social development.

6. Social Investors, Cooperating Agencies Certification & Reward: Technical Committees Norms, Accreditation & Standards: Working Groups Certifying Agencies: (Rating agencies, MFI certifying agencies) SPCS: Aim, Stakeholders and Processes? MFIs

7. SPCS Main Features and Scope What type of MFIs are subject to certification? MFIs stating a social mission and interventions focused on the social and economic development of the poorest and/or most vulnerable. (Non-profit-making organizations). • Approaches and results consistent with a social mission and development focus, as well as socially responsible management. • Not Social Performance Management processes or tools, although their legitimacy in generating stated results is valued. What is certified?

8. What are the components of the SPCS? 1. STANDARDIZATION • Universally applied standards defined by consensus in a Global Working Group involving all stakeholders • Parameters used to assess compliance with standards are validated by National-Level Working Groups involving all stakeholders 2. CERTIFICATION • Processes and agencies that assess/validate compliance with standards and award the SP Certification Seal 3. ACCREDITATION • Mechanism that guarantees the technical capacity and objectivity of certifying agencies or other entities responsible for carrying out the certification process and awarding the SP Certification Seal. The creation of an Accreditation Board will be considered.

9. Standardization, Accreditation & Certification Process Outline ACCREDITATION Accreditation Board STANDARDIZATION Working Groups CERTIFICATION Certifying Agency NORMS Certified MFI

10. Standardized and Certified Areas Intention & Design Internal Systems and Activities Outputs Results Impact Results Process • POVERTY • GENDER • RURAL AREAS SP Seal FOCUS • REDUCED VULNERABILITY • PROMOTION PRODUCTIVE DEVELOPMENT • CONSOLID. SOCIAL CAPITAL IMPACT • CONSUMER PROTECTION • COMMUNITY SR & ENVIRONMENT • PERSONAL SR/WORKING CONDITIONS SOCIAL RESPONSIBILITY

11. Social Performance Seal in Microfinance • The SP Seal in Microfinance certifies one or more MFI development approaches, one or more impacts and/or one or more areas of social responsibility. While achieving certification in all areas is not a requirement, efforts made to meet all the standards proposed are recognized. • The SP Seal in Microfinance accredits the MFI with its stakeholders, recognizing that it voluntarily takes on the commitment to fulfill its social mission and development role. • The SP Seal commits the MFI to the continuous improvement of its social role – not the end of a process but rather the beginning or ratification of a commitment with its stakeholders, particularly its clients.

12. Benefits for Certified MFIs • Continuous improvement and social role sustainability benchmarks and tools • Client and social investor attraction, loyalty and retention • Strengthening of MFI image – certification differentiates the MFI as a leader in SP best practices • Opportunity to communicate and generate SP culture internally and externally

13. Benefits for Clients, Social Investors and other Stakeholders CLIENTS • Access to services that rather than prioritizing profit-making focus on making a positive impact on social and economic conditions. • Identification of MFIs focused on and specializing in their specific needs. • Certainty that rights and interests are effectively protected. SOCIAL INVESTORS, GOVERNMENT & OTHERS • Opportunity to target interventions and monitor impact.

14. Concerns Should new organizations be created? The recommendation is to articulate and link interventions by existing organizations (networks, rating agencies, support organizations) rather than creating new ones, because of the costs involved and because it is not necessary. New conceptualization or adoption of existing conceptualization? Adoption and ownership of conceptual development generated at SPTF level, seeking to build on progress achieved. Additional duties and costs for MFIs or refocusing of current duties and costs? Functioning of the SPCS should not involve additional duties or costs for MFIs. Complete proposal or discussion proposal? This proposal is submitted for discussion and feedback from all those interested in the issues addressed.

15. SPCS Implementation Phases • Designing / validating universally-recognized standards and certification processes (awarding SP Certification Seal) • Adapting parameters based on local context and implementation – piloting in 3 countries • Defining accreditation mechanism for certifying agencies and implementation of SPCS

16. THANK YOU!

17. DETAIL MFIs VC MFIs MS EFC/EFP Status Corporations Civil Associations & Corporations Foundations Civil Associations & Foundations Cooperatives Purpose Profit-making Non-profit-making Other Focus Commercialization Reaching poor and Autonomous development of clients of microf ina n ce vulnerable clients Regulation Regulated Non-Regulated Regulated & Non-Regulated (exceptions) Market Urban Rural & Periurban -u Rural Main Microenterprises Microenterprises Peasants & Farmers Women Clients Services & Microcredit, savings, Microcredit & Investment funding, SAF Community Banking SAF Products What is the current state of microfinance in LAC?