A Social Return on Investment analysis on ESAF Microfinance operations in Kerala

ESAF Microfinance released report on Social Return on Investment (SROI) of its Income Generating Loan (IGL) Product in Kerala, physician the first of its kind initiative launched by an MFI in India. The project, diagnosis started in October 2011, physician was facilitated by Opportunity International, Australia. The primary objective of this analysis was to understand the degree of impact ESAF Microfinance was able to create on various stakeholders involved. A list of stakeholders, covering clients and their family, SHG Federation, loan officers and management, were identified, from which client perspective was analyzed in ‘Client Journey’, through different loan cycles. In consultation with all the stakeholders the major analysis was conducted on the impact of income generating loan products on the lives of the clients. Besides, an analysis of investor social returns showed that an investment of Rs. 4,900 Mn, including equity investment and interest paid by Clients, could potentially create Rs. 15,610.3 Mn of present value, resulting in an indicative SROI ratio of 3.19:1. That is, for the equivalent of every Rs.1 invested in ESAF Microfinance, Rs. 3.19 is returned in social value. The report concluded that the Organization is well positioned to continue implementing an SPM strategy given its strong commitment to the social mission and its competitive edge over the other MFIs on the topic.


Balancing Social Performance with Financial Growth

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ESAF Microfinance always believes in walking the talk. That’s what we really did by putting social performance into practice. The idea was to achieve social goals and find successful solutions for the sustainable development of our clients. To achieve the goals, online click sales employees are trained to adopt a problem solving approach, sickness sale by always extending support for the growth and development of the clients. For the top management, the approach has helped in improving measures towards client retentionafter careful consideration of client satisfaction and drop out studies conducted from time to time. The Social Performance Management Unit (now called Research and Development unit) of ESAF access reports and manages the social performance data. 
After understanding the credit-worthiness and needs / constraints of the clients, ESAF Microfinance has responded with a range of services, both financial as well as non-financial. The broad range of loan products developed to meet the client needs included, income generation loans, general loans for household consumption, short term loans for traders, house repair or construction loan and also environmental loans (for sanitation, water or solar energy light). Beyond micro credits, ESAF provides a combination of micro financial and non financial products to the bottom of the pyramid, with a focus on micro insurance, business development services, training, research and advocacy, consultancy, networking, community health, education, disaster management, rehabilitation and natural resource management.
Non financial services are mainly provided through the associate entities of ESAF microfinance like ESAF Swasraya Producers Company Limited (promoting capacity building and value addition), ESAF Healthcare Services Pvt. Ltd (affordable healthcare), ESAF Home & Infrastructure Pvt. Ltd. (affordable housing) and ESAF Retail Pvt. Ltd (selling and marketing).


ESAF Microfinancealways strove hard to meet its social goals by developing appropriate means to achieve social transparency and social accountability. The management has fully understood the importance of building Social Performance Indicators that focuses on closer understanding of the client needs. In other words, they are clear that financial portfolio alone could not help in making strategic operational decisions. Broader community development can be ensured byinvesting in social performance management and greater transparency can be gained in reaching and serving the target markets. Thus management has been taking deep interest in putting the ‘social’ into performance management so that the decisions are taken with considerable balance between financial and social objectives.
ESAF Microfinance strives to support economic and social empowerment of its members by organizing events related to children education, natural resource management, rural water and sanitation, and addressing public health issues such as HIV. According to the clients, “ESAF is more than credit”. The MFI has also developed a formal and transparent policy to allocate profit to the direct benefits of the clients via semi-annual review of interest rates. Finally, ESAF Microfinanceis bent on increasing its effort to reduce costs as much as possible, thereby decreasing interest rates. The importance given to allied services like promoting energy efficient products and tie-ups with other financial services / insurance companies, are efforts aimed in this direction. 
ESAF Microfinance also provides good working conditions to its employees along with systematic training and strong corporate values. In addition, the Organization strives to proactively promote local social and economic development of its communities. The “Microfinance for decent work” project launched recently in partnership with ILO is a good illustration of its community involvement. This project aims at promoting decent working conditions by supporting women clients to formalize their business through processes of identification, awareness building, information dissemination and training, and thus facilitate their access to government support schemes and market. Finally, ESAF Microfinance has developed a strong culture of fair behavior toward its clients, supported them to decrease their indebtedness, and developed effective grievance procedures. The Organization has recently signed the code of conduct of the Indian microfinance network with Sa-Dhan.

ESAF Microfinance’s approach towards social impact investing has the potential of being replicated in other areasdepending on the cultural appropriateness.It has not only invested in developing community enterprises by facilitating business development support but also ensures that the communities of low income households gain out of the health,education,water and sanitation, natural resource management programs offered to them for their holistic growth. These allied programs are offered by different entities of ESAF to provide maximum benefits to its clients. 
ESAF Microfinance has been open in experimenting with various social tools, for that it could be carefully used to measure social impact. ESAF was the first MFI to undergo the certification process for PPI implementation and get the ‘advanced’ status. Similarly it has used SPI –Cerise tool to do social audit along with the utilization of various qualitative and quantitative tools like PRA, Casestudy, Personal Interviews etc. to do impact assessment, client satisfaction studies, staff satisfaction studies etc.To give voice to the community women in the decision making nearly 61% of the stake is given to the Self Help Group members consisting of ESAF Microfinanceclients. Its representatives are on the board so that they are in a position to project the community needs which could be incorporated in the design of strategies meant for their development. Several leadership programs, awarenesscamps, women empowerment programs are regularly organized for the clients. In an effort to establish transparency, we have displayed the code of conduct stating the client protection principles in the vernacular language across all our branches and the amount to be paid towards the principal and the interest rate charged too are printed in the loan documents for the knowledge of the clients. We have endorsed the SMART campaign and have published the same in our in house print circulation. We have offered range of loan products to the clients after careful consideration of their credit worthiness and financial needs. We adhere to the principles of ‘do no harm’ by observing their status of over indebtedness.
ESAF has consciously taken a decision to put the social goals first and to meaningfully track the changes that the clients undergo. The management committee reviews the social goals setup for every year vis a vis the targets achieved. The results are shared at all levels including the board. The board members are bunch of committed and socially oriented bankers who were at the realm of affairs of various rural banks in India and therefore try to appreciate and push ‘microfinance plus’ activities. Nevertheless ESAF’s efforts demonstrate that a well thought out credit program with focus on betterment of clients apart from enabling them access to credit will definitely go a long way in bringing the true significance of ‘microfinance.’





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