The document summarizes discussions from the Global Microcredit Summit in 2011. It discusses the challenges of implementing a social performance management (SPM) framework at microfinance institutions (MFIs), including a lack of understanding of client needs, fragmented support, and pressure from investors on financial sustainability over social objectives. It also analyzes the roles of four key stakeholders - MFIs, governments, donors, and investors - in influencing SPM. Key challenges identified include a credit-led focus, proliferation of tools over holistic approaches, and shifting donor priorities. The document raises questions about changing MFI growth and profit motives and creating new types of inclusive finance providers addressing both social and financial objectives.

1. Global Microcredit Summit
November 14-17, 2011
Valladolid, Spain

2.  It is comprehensive and focused, particularly on how to
address implement the social objectives of MFIs,
improving the quality of financial services, and meeting
the needs of clients and potential clients (strategic plan,
systems and procedures, financial products and lending
methodologies, relationship b/n MFIs and clients
 It has provided selected good practices of MFIs in
different countries
 With the support of Teraffina and Mision Africa project
of CRS, my network is playing a key role in
implementing SPM in 12 MFIs. From our field
experience, I can assure you that paper can be used as
additional guide to monitor the implementation of SPM
at an MFI level

3.  The challenge of implementing SPM, according to
Anton, is the result of a failure of MFIs to understand
and respond to the needs of their clients.
 Although the MFIs are key players in SPM, there is a
need to analyze the roles of other key stakeholders. I
believe that there are four key stakeholders which
influence the implementation and monitoring of SPM
activities at an MFI and country level. These include:
 1. Sustainable inclusive finance providers
 2. Government
 3. Donors and other development partners
 4. Investors

4. Sustainable
Inclusive
Finance
Providers
Donors and
SPM Development
Government
Activities Partners
Investors

5.  1. Sustainable inclusive finance providers: This has been discussed
in Anton’s paper in details
 2. Government:
◦ Regulators discouraging SPM (for deposit-taking MFIs) by focusing financial
sustainability.
◦ Regulators discouraging saving mobilization and in some cases encourage saving
mobilization
◦ Provisioning requirements making MFIs risk averse
◦ Governments providing incentives for MFIs with social objectives (eg. Tax
exemptions of MFIs in Ethiopia),
◦ Microfinance support programs of governments
◦ Infrastructure development to expand outreach in remote rural areas
◦ Direct investment of government in MFIs
◦ Creating an enabling macroeconomic environment (eg. reducing inflation)
◦ Financial literacy

6.  3. Donors and other development partners
◦ Donor funded projects promoting the social objectives of MFIs
◦ Donor projects distort the credit market and affect the
sustainability of MFIs, and at the end the overall performance of
finance providers
◦ Capacity building support of donors to promote SPM
◦ Development partners such as CGAP influence the direction of
governments, donors, and finance providers
 4. Investors
◦ Promote the outreach
◦ Some discourage the social objectives of MFIs, by focusing on
financial sustainability
◦ Discourage saving mobilization of MFIs

7. Key challenges
Significant focus on credit-led approaches
Proliferation of tool based approaches to promote SPM
Very fragmented support and interventions, instead of using holistic
approach, to promote SPM at regional and country levels
Limited attention to the role of government in promoting SPM activities
Microfinance strategies of different countries focusing on access,
growth and efficiency, with very limited attention to SPM activities
Lack of clarity on who should take the responsibility of monitoring the
implementation of SPM activities in a given country
The support of donors and development moving from one extreme to
another

8. Continued
Integrating the delivery of financial services with non-financial
services
Growth of commercial investors in MFIs influencing the
implementation of SPM activities
Questions for the participants of this summit
Is it feasible to radically change the growth, efficiency and profit
motives or mission of existing sustainable finance providers?
Is a need to think new breed of inclusive finance providers which
address both the social and financial objectives?

9.  A minister responsible for the development of micro and small
enterprises challenged all MFIs leaders in a workshop by stating
that MFIs in Ethiopia are not created to compete with commercial
banks or construction banks which are risk averse and require
property collateral. MFIs, in this country, were deliberately created
to address the financial needs of micro and small enterprises (in
the productive sector) and smallholder farmers excluded from the
formal banks. We know from the outset that this is a risky business
and you are expect to manage the risks using innovative
approaches. The intention our strategy is not to create giant
institutions which make huge profit from the disadvantaged
groups. If this is the case, we would be forced to redefine
microfinance in this country.