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24 Oct

Webinar on Social Performance Management: How to ensure that my organisation does not harm clients?

Event Webinar


The webinar is the second in a series of three webinars on social performance management. The objective of the webinar is to look at how to develop products that do not harm clients, to understand good practice standards to prevent clients becoming overindebted, to understand the importance of transparency, and to examine some examples from the field. 

Guest Speakers:

Kinga Dabrowska, Project Manager at the Microfinance Centre 


  • Download the presentation below the video
  • Did you miss the webinar? Watch the recording of the session below

How to ensure that my organisation does not harm

the client?

Tuesday 24 October


- Nicola Benaglio| EMN |

- Kinga Dabrowska | MFC |

• EMN has supported various SPM activities over the


 EMN Working Paper: “European microfinance and social

performance: where do we stand?”

 Workshops in previous EMN Annual Conferences

EMN-MFC Think Tank on SPM focusing on integrating a “more

social lens” into the Code of Good Conduct.

EMN and the initiative

Do you have any questions?

You can leave your comments or questions in this chat box. They will be visible to presenters and organisers only.

SP Fund, 24 October 2017

Social Performance Management How to ensure that my organisation does not harm the client?

Webinar objectives


Role in MFI

Good and bad



SPTF Universal Standards

Social ratings

Smart Campaign Client Protection



Do no harm

Improve Clients’

Lives EU code of

good conduct EU code of

good conduct

Standards and certification

Preventing overindebtedness

• Saturated markets – fighting for clients

• Field staff incentive system

• Design of product

Key issues

• Measures a clients ability to pay back a given loan

• Built on several factors

Capacity to repay





Repayment capacity analisys

• How to conduct client visit

• How to collect and evaluate non-financial data (eg. character, management capacity, family situation)

• How to collect and evaluate financial data (eg. income, expenses, assets, liabilities)

• How to draw up financial statements or do a cash flow analysis

• How to crosscheck data for accuracy

• Knowledge of calculating ratios and thresholds

• Knowledge of limits of size of loan approval amounts

Repayment capacity analysis - policy

A loan can be disbursed when:

a) Client cannot have any other loans with any other provider; a client can receive the second loan if the current outstanding loan balance is less than 1000 EUR.

b) Allowed debt burden stands for maximum 85% of household net income, measured as all sources of revenues after deducting expenditures on utilities, food, healthcare, education and installments repaid.

c) Client has no more than two loans outstanding and the total monthly installments will not exceed 50% of total income.

Which debt thresholds are most effective in preventing over-indebtedness?

• They must have awareness of overindebtedness • Board receives reports on potential over-indebtedness at

least quarterly • Management reviews and analyses portfolio quality

regularly • Management reviews products and practices if they carry

risk of overindebtedness

Management and board role


Zero interest Loan

Interest & fees and savings Interest only

Loan ammount € 1000 € 1000 € 1000 € 1000

Loan term 10 weeks 10 weeks 10 weeks 10 weeks

Annual interest rate

0% 15% „flat” 12% „flat” 40% declining

Upfront fee 5% 2% 1% 0%

Security Deposit

0% 0% 20% 0%

APR 49 % 46,5% 49% 40%

Source: MFTransparency

Total cost € 50 € 49 € 33 + €200 €42

Which loan would you choose?

Key issues

• Goal: informed decisions of clients

• Can clients understand APR?

• Who dares to disclose first?

Amortization schedule

Loan amount: $ 1 000

Nominal interest rate: 1,6 %

Annual interest rate: 14,24%

Effective interest rate: 14,24%

# Transaction date

Loan disburseme nt

Instalment Principle Interest Othe r fee

Loan balance


0 16.01.2009 0,00 Provision

1 16.01.2009 10 000 1000 Loan disbursement

2 10.03.2009 48,0 36,35 11,65 963,64 1st instalment

3 10.04.2009 48,0 36,77 11,22 926,87 2nd instalment

4 10.05.2009 48,0 37,20 10,79 889,66 3rd instalment

5 10.06.2009 48,0 37,63 10,36 852,02 4th instalment

6 10.07.2009 48,0 38,07 9,92 813,95 5th instalment

7 10.08.2009 48,0 38,52 9,48 775,43 6th instalment

8 10.09.2009 48,0 28,96 9,03 736,46 7th instalment

9 10.10.2009 48,0 29,42 8,58 697,03 8th instalment

10 10.11.2009 48,0 29,88 8,12 657,15 9th instalment

11 10.12.2009 48,0 40,34 7,65 616,80 10th instalment

Key facts statement


2. The MFI charges a small amount for an account balance check through the clients’ mobile telephone. However, the clients are not informed about the charge. As a result, a few clients nearly drained their accounts checking the account balance (as each time the balance was lower and lower).

3. Before signing the loan contract, the Loan Officers provides the client with a contract copy. Client is requested to take a break and leave the Loan Officer’s desk in order to read the contract alone. After 15 minutes the client comes back and the contract is signed without any further discussions. The audit revealed clients use the break for smoking the cigarette and chatting.

1. The MFI wants to make sure each client understands the contract. For this, the Loan Officer is required to explain and point out all the crucial conditions of the contract. Then, according to the check-list, the Loan Officer asks the client a series of questions, confirming the client has understood their obligations and rights.


• Total cost of the loan (interest, fees,)

• Installment amount and payment date

• Any other conditions

• Penalty fees and when they are charge

• What happens if they do not repay the loan

• Institution collection practices

• Who they can contact in case of questions, complaints

• Clients rights


What clients should know before signing an agreement.

SmartCampaign website

Resources from MFC & EMN

* Good Practices * Webinars

* Case Studies * Webinars


Next webinar:

23 Nov– 12.00: SPM from HR and internal audit perspective

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One of the many functions of the European Microfinance Network (EMN) is to organise debates and webinars addressing a wide range of subjects pertinent to microfinance in Europe. These activities are a chance to foster an exchange of ideas among different partners, and contribute to spreading knowledge of microfinance throughout Europe.
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