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Social Performance: Driving the Oikocredit Approach Ging Ledesma, Manager Social Performance Casa Xitla, Capilla, 28 October 2011 Who are we? • International Cooperative Society established in 1975 and registered in 2003 in the Netherlands • Loans (3-8 years), Credit Lines • Local currency of € or U$ • Equity Investment, Quasi-Equity • Guarantees • Capacity Building Support Regional/ country offices in 36 countries Africa Asia Latin America Eastern Europe and Central Asia East Africa Southeast Asia Mexico, Central Eastern Europe and Kenya1, Tanzania, Cambodia, Philippines1 America and the Central Asia1 Uganda Caribbean Bulgaria, Kyrgyzstan, Costa Rica1, Dominican Moldova, Romania, Republic, El Salvador, Russia, Slovak Guatemala, Honduras, Republic, Ukraine Mexico, Nicaragua, Panama and Haiti. West Africa India South America – Benin, Côte d’Ivoire1, India1 northern region Ghana, Mali, Senegal Colombia, Ecuador, Peru1 Oikocredit South America – International southern region Nigeria2, Mozambique2 Argentina, Bolivia, Brazil, Paraguay, Uruguay1 1 Country with regional office/RDC. Oikocredit International and the RDC for Eastern Europe and Central Asia are located in the Netherlands. 2 The country offices in Nigeria and Mozambique report to Oikocredit International. Worldwide presence 80 countries: Funding projects in 70 countries 70 countries; inflow in 16 countries Facts & figures At 30 June 2011 • 879 project partners in over 70 countries (169 projects in LAC) • 597 microfinance institutions (MFIs) • € 456 million outstanding • € 83.3 million approved • € 80.1 million disbursed • 29.3 million clients reached by Oikocredit’s microfinance partners • Regional and country offices in 36 countries Project funding outstanding by region At 30 June 2011 € 456 million outstanding Project funding outstanding by sector At 30 June 2011 € 456 million outstanding * including microcredit, SME finance and wholesale funding Social Performance Social Performance: translation of mission into practice in line with accepted social values SP Management : process of making sure mission is achieved Oikocredit Mission Promote global justice by challenging people, churches and others to share their resources through socially responsible investments and empower people with credit Selecting Partners • Core Criteria • Benefit poor and disadvantaged (employment, increased incomes, new markets, etc) • Benefits widely distributed • Contribution to community development • Respect for the environment, animal species • Women benefit and participate actively • Cooperative structure is favored One step further: ESG scorecard • 5 Dimensions • Outreach and Targeting (20%) • Client Benefit & Welfare (40%) • Governance (25%) • Environment (5%) • Responsibility to community & staff (5%) • 21 Questions Outreach & targeting Poverty screening 0,1 or 2 The organisation selects/targets incoming clients according to their poverty levels. Organisation does not use a poverty profiling tool as a standard practice or any system to determine poverty level of potential clients. (0) Organisation has a policy for targeting poor clients and either uses a poverty profiling tool to screen potential clients or assesses incoming clients' income level during the loan process. (1) The organisation meets criteria (1) above and in addition, its MIS captures and reports regularly on poverty profile of incoming clients. (2) Client benefit & welfare Prevention of 0,1 or 2 The credit application process includes a standardised evaluation of client's client over- ability to repay the loan including a check on client credit history and existing indebtedness debt. The capacity of the client to repay the loan is not assessed as a standard practice. (0) The capacity of the client to repay is assessed as a standard practice, the MFI has a formal policy on it. (1) The capacity of the client to repay is assessed as a standard practice, the MFI has a formal policy on it and has a formal system for regularly coordinating with other MFIs (e.g. in a credit bureau). (2) Client benefit & welfare Code of ethics 0,1 or 2 The organisation has an established code of ethics and defined policies to and staff prevent unethical treatment of clients, safeguard privacy of client data, and compliance disseminates policies to staff and verifies compliance through an internal audit process. Organisation has no established code of ethics/conduct nor policies dealing with treatment of clients. (0) Organisation has established code of ethics and policies on treatment of clients, client privacy and these are integrated in staff training and appraisal. (1) In addition to meeting the criteria for (1) above, there is a systematic and formal verification that staff comply with the code of ethics. (2) Client benefit & welfare Transparency 0 or 2 The organisation actively discloses and promotes client understanding of loan about costs to terms and all costs in a language that takes into consideration literacy levels of clients clients. The organisation does not disclose information on effective interest rates nor of all costs as a standard practice, but clients can be given information if they ask for it. (0) The organisation actively discloses information about effective interest rates and of all costs relating to the loan before anyone can get a loan. (2) Governance Monitoring 0,1 or 2 The organisation systematically monitors changes in lives of clients and reports Results on this. The organiSation has not identified indicators to be used in measuring change in clients lives. (0) The organisation has identified indicators to be used in measuring change and reports on this occasionally. (1) The indicators for measuring change in clients' lives are integrated into the organisation's MIS and the information is processed and reported regularly. (2) Environment Organisational 0 or 2 Organisational exclusion of harmful enterprises from financing. exclusion policy Organisation has no explicit policy excluding enterprises harmful to the environment from financing. (0) Organisation prohibits activities or the financing of activities with adverse environmental effects and monitors compliance with these policies. (2) Responsibility to staff Staff appraisal 0 or 2 The organisation appraises and rewards social performance. and incentives Performance appraisal and incentives focuses only on financial performance. (0) Performance appraisal looks at both financial and social performance and incentives if any, are related to both. (2) Scores and their consequence • Identify an organization’s strengths – best practices for sharing with others, reward partners’ exceptional social performance • Identify weaknesses, areas for improvement/monitoring or CB support/ identify red flags • Taken in combination with PVR = negative decision on an application Why is social performance important? • Oikocredit is a social investor • Social performance is good for the financial bottom line • Higher client retention • Higher staff retention • Funding What we look for, what we offer • A solid partnership with both social and financial goals - shared social objectives - transparency, accountability • Long term relationship, critical support - capacity building support Disclaimer This document was produced by Oikocredit, Ecumenical Development Cooperative Society U.A. (Oikocredit International) with the greatest of care and to the best of its knowledge and belief at the time of writing. The opinions expressed in this document are those of Oikocredit International at the time of writing and are subject to change at any time without notice. Oikocredit International provides no guarantee with regard to its content and completeness and does not accept any liability for losses which might arise from making use of this information. This document is provided for information purposes only and is for the exclusive use of the recipient. It does not constitute an offer or a recommendation to buy or sell financial instruments or banking services and does not release the recipient from exercising his/her own judgment. The recipient is in particular recommended to check that the information provided is in line with his /her own circumstances with regard to any legal, regulator, tax or other consequences, if necessary with the help of a professional advisor. This document may not be reproduced either in part or in full without the written permission of Oikocredit International. It is expressly not intended for persons who, due to their nationality or place of residence, are not permitted access to such information under local law. Every investment involves risk, especially with regard to fluctuations in value and return. It should be noted that historical returns and financial market scenarios are no guarantee of future performance. Investments in foreign currencies involve the additional risk that the foreign currency might lose value against the investor‘s reference currency. Oikocredit International is a cooperative society with limited liability (coöperatieve vereniging met uitgesloten aansprakelijkheid) under the laws of the Kingdom of the Netherlands.
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