Microfinance in Europe Social Performance Management Data from 25 finanical institution Microfinance Centre members in Europe The report was developed with the support of the Social Performance Fund, financed by the Ford Foundation www.mfc.org.pl 1
Main achievements Support to excluded segments of population. Positive contribution to sustainability of microbusinesses Follow minimum practices of client protection Active engagement in supporting local communities www.mfc.org.pl 2
Main challenges MFIs demonstrate strong social commitment, however, few have been able to translate mission into S.M.A.R.T. objectives Non-financial products and services are underdeveloped in microfinance www.mfc.org.pl 3
MFIs social goals MFIs fulfill their primary goal well through helping excluded population to grow business MFIs main social goals Increased access to financial services 19 5 Growth of existing businesses 1 19 Employment generation 0 19 Development of start-up enterprises 0 17 Poverty reduction 4 11 Housing Gender equality, women's empowerment Youth opportunities 0 1 0 6 7 10 Primary goal Secondary goal Adult education improvement 0 5 Children's schooling 0 5 Access to water and sanitation 0 3 Health improvement 0 1 0 5 10 15 20 25 www.mfc.org.pl 4
Strategic documents definition Lack of S.M.A.R.T. social targets creates a difficulty to effectively monitor MFIs social aspirations. 100% 95% 90% 85% 80% 75% 96% Strategic document define 84% 70% 65% 60% 60% 55% 50% Mission Social goals Social targets www.mfc.org.pl 5
Client outcomes monitoring MFIs continue to play positive role in microbusiness sector development number of jobs sustained Outcome 321292 number of jobs created 70421 19 MFIs report at least one indicator related to supporting business. number of clients with increased income (business 9128 income) 0 50000 100000 150000 200000 250000 300000 350000 www.mfc.org.pl 6
Target markets MFI target markets Most MFIs target groups which are excluded from traditional financial services Rural clients Urban clients Women Youth (up to 29 Ethnic minorities Refugees 12% 32% 48% 76% 64% 96% Percentage of institutions targeting group Other migrants 8% EU Internal Migrants 8% Other 16% 0% 20% 40% 60% 80% 100% 120% www.mfc.org.pl 7
Product and service offering Building partnerships with non-financial providers may be an opportunity for MFI to respond to diverse client needs. Non-financial services could play a positive role in further sector Product and service offering Loans Non-financial services 40% Other financial services 20% Deposits 12% 100% development. Insurance 8% 0% 20% 40% 60% 80% 100% www.mfc.org.pl 8
Financial products Number of borrowers (as of 31 Dec 2017) Portfolio in EUR (as of 31 Dec 2017) 39% 61% 34% 66% Business Loans Non Business Loans Business Loans Non Business Loans www.mfc.org.pl 9
Loan purposes Loan uptake (number of borrowers as of 31 Dec 2017)* Agriculture loans dominate which confirms primary interest to support clients in rural areas Agriculture Consumption Service Housing loans Trade Production 13378 6190 42290 38146 83278 88921 Other 3772 Education 327 Microleasing 321 0 10000 20000 30000 40000 50000 60000 70000 80000 90000 100000 *Based on information from 23 MFIs www.mfc.org.pl 10
Development of non-financial services 8 MFIs reported providing business development services, 1 MFI provides financial education and 5 MFIs other nonfinancial services. Business development Financial Education Other Non-financial services (clients outreach) 277 4402 47 566 0 10000 20000 30000 40000 50000 www.mfc.org.pl 11
Gender distribution Field and front office Management Board 48% 47% 38% 52% 53% 62% Women Men Women Men Women Men Gender distribution is successfully addressed among staff. Efforts to increase number of women in governance need to be undertaken. www.mfc.org.pl 12
Over-indebtedness prevention MFIs need to expend more effort in regular monitoring of indebtedness levels 100% 95% 90% 85% 80% Over-indebtedness prevention 75% Internal audit verification maximum percentage of a borrower's disposable income defined Repayment capacity analysis conducted Indebtedness monitored by board/management www.mfc.org.pl 13
Costs transparency Disclosing contract terms and conditions are a norm. Further disclosure is driven by national legislation. 100% 96% Transparency 80% 80% 60% 60% 40% 20% 0% The contract provides total cost of product, interest rate, APR(or EIR), fees (including penalties fees), Repayment schedule Product pricing displayed in branches Product pricing is displayed on website www.mfc.org.pl 14
Client complaint channels Significant majority have at least 2 channels to submit complaints. Majority of MFIs prefer complaints to be submitted in writing via email/web/fb/letter. 100% 98% 96% 94% 92% 90% 88% 86% 84% 82% 100% System to submit complaint Customer complaints mechanism 96% 88% Dedicated person Complaints are reccorded responsible for recording and cataloging complaints www.mfc.org.pl 15
Client research For the innovation sector, additional efforts need to be made to learn about clients needs and preferences. 100% 80% 60% 40% 80% Market research 40% 40% 40% 20% 0% Target client characteristics Clients Need/preferences for products Clients need/preferences for delivery channels Potential barriers to access products www.mfc.org.pl 16
Green agenda implementation 20 MFIs reported at least 1 initiative related to green microfinance. Green microfinance policies and processes Raises staff awareness on internal ecological footprint Offers loans for renewable energy and energy efficiency Evaluates environmental risks of clients' activities Has processes/mechanisms to reduce internal ecological footprint Has a formal environmental policy Offers loans for environmentally-friendly technologies/activities Offers loans to improve clients' environmental resilience Tracks achievement of quantitative objectives to reduce internal ecological footprint 3 8 9 10 11 11 14 14 Has an environmental manager 2 0 5 10 15 www.mfc.org.pl 17
Supporting local communities MFIs could more strategically link their community engagement with social goals as the supported group is often not related to MFI social goals Support for excluded population Youth Disabled people 5 Indigenous people or ethnic minority 4 Unemployed 4 10 17 MFIs reported financial and/or nonfinancial support to local communities. Migrants, internally displaced people, refugees Elderly Other 3 3 3 0 2 4 6 8 10 12 www.mfc.org.pl 18
Looking to the future With increased market saturation, competition and legal limitations, diversification of non-financial services may be the most effective way for future development of microfinance. Digitalization brings new opportunities to the sector but MFIs planning any new solutions should not forget about one of their key market advantages relationship with client and putting the client in the centre. Social aspiration is what makes microfinance sector different from other types of financial players. Therefore MFIs need to expend more efforts to monitor and report social outcomes to their stakeholders. www.mfc.org.pl 19
Respondents of the research 25 financial institutions reported social performance data for 2017: Albania: Noa Sh.a., AgroSocial Fund; BiH: EKI, Lider, Mi-Bospo, Partner, Sunrise; Bulgaria: Maritza Invest, Ustoi; France: Adie; Greece: KEPA; Hungary: Local Enterprise Agency Heves County; Kosovo: Agency for Finance in Kosovo, KEP Trust, KosInvest; Macedonia: Moznosti; Montenegro: Alter Modus, Monte Credit; Romania: good.bee Credit, Patria Credit, Vitas; Serbia: Agroinvest, Opportunity Bank; Spain: ACAF; UK: BCRS Business Loans www.mfc.org.pl 20
About microfinance sector in Europe Majority of the sector is registered as non banking financial institutions (40%) There is also a certain number of MFIs operating as NGOs (24%). Legal form 4% 8% 24% 24% Commercial Bank Cooperative/Cre dit Union NGO NBFI 40% Other www.mfc.org.pl 21
About microfinance sector in Europe European microfinance sector is relatively mature. 76% of MFIs were established between 1995 2004 Year microfinance operations began 32% 12% 4% 0% 8% 44% Before 1989 1990-1994 1995-1999 2000-2004 2005-2009 2010-2015 www.mfc.org.pl 22
About Microfinance Centre (MFC) MFC is an international financial inclusion resource centre and network www.mfc.org.pl 23
About Microfinance Centre (MFC) Our vision is for finance that is centered around creating benefits for clients and excels at delivering responsible financial services. Our mission is to empower people and communities through social finance. www.mfc.org.pl 24
Microfinance Centre services 1 2 3 4 5 6 7 Research Capacity building SPM & Customer Protection Financial Education Support for Networks Policy Work Regional Networking & Information Exchange
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