Microfinance & the Double Bottom Line: ( Measuring Social Value for Microfinance & Microcredit with Education

1. Microfinance & the Double Bottom Line:(Measuring Social Value for Microfinance & Microcredit with Education Programs) Drew Tulchin Social Enterprise Associates BYU Provo, Utah March, 2004

2. Review of Paper • The Problem • Research Conducted • Definitions • Frameworks & Logic Models • Measure for Microcredit with Education • Application for Practitioners • Next Steps • Q&A Too much information, too little time

3. Acknowledgements • This Research Owes Gratitude to: • Ford Foundation • BYU, Grameen Foundation USA, MicroCapital Institute, Mix Market & Prisma Microfinance • The many individuals who have provided feedback & support: • Dr. Monique Cohen, Erica Mills, David Myhre, Wendy Prosser, Andrew Ralph, David J. Satterthwaite, Anton Simanowitz, Didier Thys, Dr. Joseph Tulchin, Dr. Koenraad Verhagen, Dr. Gary Woller & Many Others

4. Drew Tulchin, Social Enterprise Associates A network of professionals making communities better by applying business skills & sustainable practices. Who are you? How familiar are you with microfinance, ‘SRI’ & the Double Bottom Line? Introduction Who am I?

5. The Problem • 3 billion people in poverty (live < $2 / day) • Demand exceeds supply (< 10% demand met) • Microcredit Summit 67 mil. clients • Potential aggregate portfolio value $5-7 bil. • Few MFIs financially self-sufficient (1-10%) • Not enough donor funds ($.5 to 1 bil. / year) How can MFIs serve self-reliant entrepreneurs to achieve ‘massification’ as sustainable making an impact on poverty alleviation?

6. Research Conducted • Outgrowth of other work, ‘subsidized research’ • Interviews: more than 30 investors, 30 practitioners & 20 DBL / SR specialists – still ongoing • MFI literature Review & Catalogue • Investigation of SR, DBL & related literature outside of MFI industry • Applied action research. Share findings w/ others, get new ideas, revise, disseminate…

7. NOT necessarily socially scientific validity E.g. NCAA College Basketball rankings Client motivated activities & program Manager-centric tools & solutions Reduce cost Increase accessibility Apply information in decision-making Enable local, self-reliant organizations Encourage BYU Interns First Findings

8. Continuum of Return Expectations Investment Donations Morino Institute, Blended Value Proposition

9. Value of Social Return • Broadly What is its function? • Enhance impact measurements • Marketing / PR • Tie to Socially Responsible Investment (SRI) • Mobilize new investment/sources of cash into microfinance • Specifically Who is social return for? • Use by managers in decision-making • Segment interested investors. • Craft tailored messages to SRI, use social return for some • Consider social benefits from financial inputs (investment)

10. Impact Framework United Way’s Logic Model Org.’s Activities Outputs Outcomes Community Mission Goal Effect, impact & measurement related back to MISSION Source: United Way & Kellogg Foundation

11. Double Bottom Line Framework Track Social & Economic Value Creation Input Activities Outputs Outcomes Impact (Investment) Effect, impact & measurement related back to INPUT as a return ratio Source: Soc. Ent. Assoc Microfinance and the Double Bottom Line, Ford Foundation

12. Double Bottom Line Measurement Goals • Develop an industry metric & apply it uniformly • Establish comparables (apples to apples) • Aggregate Data (industry totals, vs. other sectors) • INTERNAL audience: • Easy to use, add value to operations • EXTERNAL audience: • Easy to understand, add meaning to investment decision &/or evaluation • SROI operating on two fronts: • R&D to develop better & social science valid standards • Use existing available data for best use

13. Double Bottom Line Measurement Goals • Develop an industry metric & apply it uniformly • Establish comparables (apples to apples) • Aggregate Data (industry totals, vs. other sectors) • INTERNAL audience: • Easy to use, add value to operations • EXTERNAL audience: • Easy to understand, add meaning to investment decision &/or evaluation • SROI operating on two fronts: • R&D to develop better & social science valid standards • Use existing available data for best use

14. Measurement - Discount Model Social Return 5% Alternative Investment: Financial Return 10% Financial Return 5% Bank MFI Total Return: 10% 10%

15. Measurement - Value Added Model Social Return - Education 3% Social Return -Microcredit 3% 3% Financial Return 5% 5% 5% MFI-Microcredit with Education Bank MFI Total Return: 5% 8% 11%

16. Application for Practitioners • Learn from others: don’t reinvent the wheel • Impact Assessment, Other industries • Avoid decision paralysis, take a first step • Use information MFI already captures • Examine collected data • Consider all client ‘touch’ opportunities • Talk to your client, Listen to what they say & Respond • Emphasize institution’s competitive advantage • Remember DBL is a tool (and only one tool)

17. Next Steps • Responsibility of the entire industry / movement: • Increase MFI DBL Dialogue • Bring in other allies (i.e. BYU & community) • Motivate more activity (like Call for Papers) • Measure what you can, build a tool • Version 1.0 ok, don’t wait for perfection • Disseminate widely; transparently • Measure Donors’ & Investors’ activities, too • Continue this process ‘upstream’ • Facilitate increased investment • Use DBL for marketing & PR

18. Q&A Thank you! Drew Tulchin Social Enterprise Associates www.SocialEnterprise.NET drew@SocialEnterprise.NET