Wednesday, November 23, 2011

Stakeholder Governance in Social Performance Management 

While social initiatives often come up with and nurture ideas with the potential to change the world, a healthy business approach is required to unleash the full potential of such ideas in the majority of cases. This also applies for microfinance - the response to the demand for financial services of micro-enterprises and poor households in developing and emerging countries, that otherwise would have no or only limited access to the formal financial sector.
Recent events in some of the most advanced markets for microfinance and the at times concomitant controversial media coverage have regrettably tarnished the sector’s reputation lately. They have thus drawn the attention not only of the microfinance community, but also the broader public, to the risks involved in this rapidly growing industry. These risks include increasing competition, governance and regulatory issues such as overindebtedness of clients, bad lending practices of the microfinance institutions and mission drift - to name but a few. Stakeholders at all levels of the value chain, from investors to end clients, are increasingly worried about the negative consequences of a unilateral commercialization of microfinance in pursuit of financial profitability.

The Social Performance Task Force (SPTF), brought together in March 2005 by the Consultative Group to Assist the Poor (CGAP), the Argidius Foundation and the Ford Foundation, has taken on the challenge of addressing the issues the microfinance sector is currently facing. Governed by a 16 member steering committee with members from every region and a fixed number of elected representatives from each of the major stakeholder categories, this multi-stakeholder initiative (MSI) has been initiated to come to an agreement on a common social performance framework and to develop an action plan to move social performance in microfinance forward.

Remarkable from a stakeholder-oriented perspective is the way in which SPTF attempts to reach these objectives. By engaging with diverse microfinance stakeholders, the initiative provides a platform for dialogue, learning and collaboration. Over 1,000 individual members, representing almost 600 different organizations, currently discuss and decide on new resolutions and agreements in annual or online conferences. Moreover, members of the task force are regularly being asked for their opinion and active participation in the development of a social performance framework and an action plan.
Such a deeply embedded stakeholder governance-approach seems to be most efficient and fruitful in a setting that is characterized by social objectives, global activities, and institutional complexity like microfinance. However, the SPTF may also serve as a positive example to learn from for the establishment of governance structures for multinational corporations embedded in complex stakeholder networks.

Marc Moser

Links and references:

Social Performance Task Force (SPTF) -

Consultative Group to Assist the Poor (CGAP) -
Argidius Foundation -

Ford Foundation -

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