Here, here Laura Foose! First let me say that you have that rare and inspired sort of patience that was instrumental in the brilliant cat-herding and consensus building you and your team achieved with the SPTF. I am grateful to have had a short stint in Microfinance to see you work as exactly what you suggest it is in this article - an example and a cautionary tale for the Impact Investing and Financial Inclusion work parading about like sliced bread. 😊
Several Asset Managers in Impact Investing have built up their case by pointing out at the crisis in Microfinance Industry and specifically underlining on the fact that Microfinance story is pretty wage in terms of actual social impact achieved. To a large extent, it seemed true, as there was hardly any standard reporting on impact of Microfinance, during pre-crisis time.
If the Impact Investment sector ignores the importance of standard definitions and proper tools for measurement and reporting of impact right from the beginning and keep focusing on scale, it would be simply the repetition of mistakes made by the Microfinance industry at its early stage.
Excellent article Laura and Anne. You’ve clearly articulated something I think to myself everytime I go to conferences or hear talk about impact investing outside the microfinance world - why aren’t they learning from microfinance? why arent’t the sectors talking? Well done.
Great article Laura and Anne. I would like to share my impression as with you and your readers with slightly different observations.
While, Impact investing has grown to $6.57 trillion in the U.S. While in any other commercial industry such a large funding cannot escape without measurement, we see a little evidence of true impact measurement in impact investment today! While interest in impact investment is going mainstream, without a real understanding of an impact, we are likely to repeat a fiasco of Microfinance industry from a decade ago. While there is substantial evidence from international development agencies requiring 5% or more budget toward Measurement & Evaluation and funders asking for a better impact evidence during their grant proposal, a closer look at them shows a completely different picture. While, aid agencies, foundations and impact funds defines success metrics and receives regular Excel or PDF based results, a closer interview with them finds a different picture. We found at that many regulatory projects collected results from program agencies mostly for compliance reasons. They simply didn’t have means to aggregate data in such way that can provide them a comprehensive view. In fact, a situation is not any different for foundations or impact funds.
What a timely and significant article, Laura and Anne. I can’t believe how often I feel like I’m in some sort of “time capsule” when talking with impact investors. Thanks so much for such an articulate and clear explanation of why impact investors should learn from the microfinance industry about measuring social returns.
The parallels are striking—thanks for highlighting Laura and Anne. Early on, I believe our Social Performance Task Force suffered a degree of self-delusion about the veracity of social performance data coming from a select group of microfinance institutions we viewed as positive deviants (including my own). In my view, rather than view the handful of microfinance institutions striving to demonstrate and report on social performance as evolving laboratories for a nascent industry’s learning, we assumed their social performance and sought to codify their practices prematurely. Numerous rigorous studies later, I think it’s clear we overestimated social performance and underestimated the gravity of market forces to make profitability primary. I remain skeptical that impact investing can, likewise, defy gravity.
Just seeing this article now and couldn’t agree more! In addition to the experiences and lessons learned from the microfinance sector, are the actual principles, processes and tools developed by SPTF that can be easily adapted to other “impact investing” sectors. The Universal Standards for Social Performance Management are useful for investors outside of financial inclusion and can easily be applied to investments in health, renewable energy, education, etc. Let’s not reinvent the wheel on the amazing set of resources that have been developed.
Very timely and good article at a time when the Industry is back on its wheels, reminding them to continue to balance on the double/Triple bottom line, Keep up the good work
COMMENTS
BY Steve Wright
ON February 17, 2016 03:35 PM
Here, here Laura Foose! First let me say that you have that rare and inspired sort of patience that was instrumental in the brilliant cat-herding and consensus building you and your team achieved with the SPTF. I am grateful to have had a short stint in Microfinance to see you work as exactly what you suggest it is in this article - an example and a cautionary tale for the Impact Investing and Financial Inclusion work parading about like sliced bread. 😊
BY Sachin S VANKALAS
ON February 18, 2016 02:16 AM
Very well described Laura.
Several Asset Managers in Impact Investing have built up their case by pointing out at the crisis in Microfinance Industry and specifically underlining on the fact that Microfinance story is pretty wage in terms of actual social impact achieved. To a large extent, it seemed true, as there was hardly any standard reporting on impact of Microfinance, during pre-crisis time.
If the Impact Investment sector ignores the importance of standard definitions and proper tools for measurement and reporting of impact right from the beginning and keep focusing on scale, it would be simply the repetition of mistakes made by the Microfinance industry at its early stage.
BY Cristian Shoemaker
ON February 18, 2016 09:54 PM
Nice article Laura and Anne. Thanks for sharing.
BY Mike McCreless
ON February 19, 2016 06:49 AM
Couldn’t agree more. Thank you for getting the word out.
BY Julie Peachey
ON February 23, 2016 09:53 AM
Excellent article Laura and Anne. You’ve clearly articulated something I think to myself everytime I go to conferences or hear talk about impact investing outside the microfinance world - why aren’t they learning from microfinance? why arent’t the sectors talking? Well done.
BY Unmesh Sheth
ON February 24, 2016 05:59 PM
Great article Laura and Anne. I would like to share my impression as with you and your readers with slightly different observations.
While, Impact investing has grown to $6.57 trillion in the U.S. While in any other commercial industry such a large funding cannot escape without measurement, we see a little evidence of true impact measurement in impact investment today! While interest in impact investment is going mainstream, without a real understanding of an impact, we are likely to repeat a fiasco of Microfinance industry from a decade ago. While there is substantial evidence from international development agencies requiring 5% or more budget toward Measurement & Evaluation and funders asking for a better impact evidence during their grant proposal, a closer look at them shows a completely different picture. While, aid agencies, foundations and impact funds defines success metrics and receives regular Excel or PDF based results, a closer interview with them finds a different picture. We found at that many regulatory projects collected results from program agencies mostly for compliance reasons. They simply didn’t have means to aggregate data in such way that can provide them a comprehensive view. In fact, a situation is not any different for foundations or impact funds.
Read more here: http://www.sopact.com/customers/social-impact-measurement-not-expensive-ignorance
BY Anne Hastings
ON February 25, 2016 10:46 AM
What a timely and significant article, Laura and Anne. I can’t believe how often I feel like I’m in some sort of “time capsule” when talking with impact investors. Thanks so much for such an articulate and clear explanation of why impact investors should learn from the microfinance industry about measuring social returns.
BY Sean Kline
ON April 15, 2016 07:27 AM
The parallels are striking—thanks for highlighting Laura and Anne. Early on, I believe our Social Performance Task Force suffered a degree of self-delusion about the veracity of social performance data coming from a select group of microfinance institutions we viewed as positive deviants (including my own). In my view, rather than view the handful of microfinance institutions striving to demonstrate and report on social performance as evolving laboratories for a nascent industry’s learning, we assumed their social performance and sought to codify their practices prematurely. Numerous rigorous studies later, I think it’s clear we overestimated social performance and underestimated the gravity of market forces to make profitability primary. I remain skeptical that impact investing can, likewise, defy gravity.
BY Ellen Carey
ON April 21, 2016 08:50 AM
Just seeing this article now and couldn’t agree more! In addition to the experiences and lessons learned from the microfinance sector, are the actual principles, processes and tools developed by SPTF that can be easily adapted to other “impact investing” sectors. The Universal Standards for Social Performance Management are useful for investors outside of financial inclusion and can easily be applied to investments in health, renewable energy, education, etc. Let’s not reinvent the wheel on the amazing set of resources that have been developed.
Keep up the great work SPTF team!
BY John Alex
ON May 10, 2016 02:14 AM
Very timely and good article at a time when the Industry is back on its wheels, reminding them to continue to balance on the double/Triple bottom line, Keep up the good work