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Resource Library / Combining social and financial performance: A paradox?

Author(s):
Florent Bédécarrats
Silvia Baur
Cécile Lapenu


Florent Bédécarrats, Research coordinator, CERISE, France Silvia Baur, Research fellow, CERISE, France Cécile Lapenu, Director, CERISE, France With Assistance from: Mathias André, PhD Candidate, Ecole Polytechnique-CREST, France Zlotowski Yael, International Affairs, Crédit Coopératif, France Micol Guarneri and Lucia Sparggiari, Directors, Microfinanza Rating, Italy From its origin, microfinance is driven by objectives that are both social and financial: contribute to the development of marginalized populations with sustainable financial services. And yet, we still know little about the relationship between these two goals. Is there a trade-off or are they compatible? This workshop article for the MicroCredit Summit will present the findings of an in-depth analysis based on the SPI database with 344 evaluations of 296 MFIs from 51 countries. SPI is a social audit tool that assesses social performance along four main dimensions: targeting of poor and excluded, adaptation of services, benefits for clients and social responsibility. The analysis suggests there is a trade-off between the proactive and direct selection of individual poor and operating expenses. But other social and financial aspects converge, such as pro-poor methodologies with higher staff productivity and lower operating expenses, and social responsibility with better portfolio quality. The analysis also includes results from other database coming from larger database but self-reported data (Mix Market) or smaller samples of high quality (social investor due diligence results or rating agencies analysis). The operational implication of these results gives a business case for Social Performance: with adapted strategies, microfinance can combine their financial and social objectives.



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