NB Financial Health

Thursday
December 19
2013

Jaclyn Berfond and Gayle Gatchalian

The Double Bottom Line of Microfinance Must Become a Triplet: Why MFI performance measurement needs a gender lens

If the stated mission and goals of microfinance institutions (MFIs) are to be believed, then women are undoubtedly the face of microfinance.

Indeed, according to the Microfinance Information Exchange (MIX), most MFIs claim to target women (74 percent) and just over half declare women’s empowerment or gender equality as an objective. Nevertheless, gender has not been recognized as one of the pillars of MFI performance, unlike financial performance (sustainability and scale) and, more recently, social performance (serving low-income clients well).

We at Women’s World Banking strongly believe that there must be a balance between financial and social performance, and that in order to achieve either, the industry must take a good look at its clients. This is where gender comes in. Because microfinance clients are still predominantly women, all performance measurement must have a gender lens. Only by truly analyzing this client base can MFIs both build the business case for serving women, and ensure that they are serving these women well. This is why gender matters.

But defining a new pillar is not enough; the industry must also have a standard by which it can be held accountable. That’s why, in 2011, Women’s World Banking launched the Gender Performance Initiative (GPI) to establish a set of indicators that would enable MFIs to consider not only how many women they serve, but how they can enhance their understanding of these customers to tailor products, marketing strategies and delivery channels to meet women’s needs. The initiative was also intended to demonstrate the benefits of financial inclusion for women and their households, as well as promote gender diversity at the organizational level, as we know that gender-diverse institutions perform better.

How we developed the indicators

Creating any new set of metrics is not easy. It’s hard to choose a single “right place” to begin measuring performance, a difficulty compounded by the fact that we wanted to be sure that the indicators we chose would truly tell us whether an institution was serving women well. We needed to start with the right questions, in the areas that matter most to women. Based on Women’s World Banking’s 30 years of experience studying the lives of low-income women worldwide, we came up with the following approach:

  1. Because women have specific life-cycle needs and goals that must be considered, we looked at product design and diversity, service quality, and client protection, apart from the straightforward metric of outreach. For example, we know that women need financial services beyond credit, such as savings and insurance. Further, women value confidentiality, and therefore products need to be designed to ensure that women can access them in a secure and private manner.

  2. We also looked at the diversity of staff and management, because we believe that in order to be the best place for women customers, an MFI should be a place that welcomes women employees and women leaders.

  3. Finally, we wanted to understand how serving women clients contributes to institutional financial sustainability, as well as outcomes for clients.

After we compiled a list of indicators that could be used to measure performance in each of these key areas, we tested both the feasibility of MFIs collecting and reporting on these metrics, as well as the “explanatory power” of the indicators. The full framework of indicators was piloted with three of our network member institutions over a two-year period: Finance Trust in Uganda, Fundación de la Mujer in Colombia, and Ujjivan Financial Services in India.

After the pilot phase and a comprehensive review of the tested metrics by our team, 25 key performance indicators emerged. These indicators include:

  • Operational metrics such as growth in women clients (percent of new women clients)
  • Women’s market penetration (percent of un-/under banked women)
  • Product diversity (percent of women accessing two or more products)
  • Client retention by gender
  • Outcome indicators such as economic improvement (percent change in business/household income)
  • Advancement of family well-being (percent of women clients with improvement in housing conditions)

As a result of this work, we are excited to launch a comprehensive tool for microfinance practitioners to track – and improve – gender performance: the Gender Performance Indicators manual.

What’s next?

Since nearly three quarters of the microfinance industry targets women, it is high time that we bring a much-deserved focus to gender, along with a way to truly measure performance of serving women. As an innovation in performance measurement, gender indicators are only the first step. Ultimately, the double bottom line of microfinance must move to become a triplet: of financial, social and gender performance.

Jaclyn Berfond manages knowledge and capacity building programs for Women’s World Banking’s network of microfinance institutions, and leads its Gender Performance Initiative.

Gayle Gatchalian is a digital marketing associate, developing the organization’s online and social media strategy.

Categories
Education, Impact Assessment
Tags
financial inclusion, metrics, microfinance, research, Women