The Pro-Poor Seal of Excellence – Setting a High Bar for Microfinance

Who are we?

The Pro-Poor Seal of Excellence (the Seal), is an exciting industry initiative that will ensure that microfinance achieves its poverty reduction mission. Steered by industry leaders who represent a range of perspectives, the Seal aims to recognize and certify those institutions doing the most to help families lift themselves out of poverty.

Why are we here?

The New York Times published an article by Neil MacFarquhar (4/13/2010) titled “Banks Making Big Profits from Tiny Loans.” It questioned whether microfinance institutions were staying true to their poverty-fighting missions or drifting off course. Under scrutiny were the high interest rates paid by very poor clients, and as the title states, the big profits certain MFIs were making. This article made a big splash and served to underscore a debate that had been simmering in the industry for a while about pricing transparency, profiting off of the poor (see the IPO debate in the State of the Campaign Report 2011), and a general feeling that mission drift was becoming prevalent. The Campaign and key allies have always argued that our movement is about more than money; it is about unlocking dreams.

The increasing debate over the effectiveness of microfinance to contribute to poverty reduction demanded a response. Then-Campaign Director Sam Daley-Harris began a dialogue with a small group of U.S.-based leaders to determine how the industry should respond, leading to the proposal of a “Seal of Excellence” for microfinance, to clearly identify institutions that are actually achieving their poverty reduction mission, enabling clients to transform their lives.

Collaboration and Building Buy-in

The initial group, an interim steering committee, brought in actors representing various stakeholders in microfinance. Together they developed the basic ideas for the Seal and then commissioned a concept paper and invited feedback, both through targeted outreach, through presentations at industry gatherings, and through public circulation and posting. “Beyond ‘Ethical’ Financial Services: Developing a Seal of Excellence for Poverty Outreach and Transformation in Microfinance,” outlined the Seal’s aspirational tone, to “set a vision for the sector in terms that highlight the potential of microfinance to serve the poor and to contribute to a positive transformation in the lives of clients and their families and communities”.

The steering committee established a dialogue with the Smart Campaign and the Social Performance Task Force (SPTF) to align our collective work and to ensure that the Seal builds upon the tools and standards already established by these bodies. (Learn More)

The Seal takes the additional step to set a high bar, certifying those institutions which not only follow the “do no harm” client protection principles and meet double bottom line commitments, but which also achieve results by demonstrating significant outreach to the poor and success in helping a portion of them transform their lives and move out of poverty.

The Way Forward

The Seal Technical Committee has drafted a set of indicators to evaluate organizations, and has conducted alpha and beta tests on those indicators. Based on the results of the beta tests, the technical committee has refined and will publish a methodology for conducting the assessment of institutions. The Seal methodology will also include in-depth analysis and case studies of good practice in deepening outreach and creating positive, lasting change for poor clients. Assessing organizations will likely take place in conjunction with ongoing social rating or social audit initiatives in order to limit additional costs and reporting burdens by microfinance institutions. According to the plan, the first Seal assessments will take place in 2013. By receiving the Seal, an MFI distinguishes itself to the community, its clients, and to socially minded investors and donors who wish to reward those institutions with increased investments.

Who are we? We’re an industry-wide initiative which in the end, will recognize institutions that are doing the most to create positive and enduring change for people living in poverty.

Visit our website to the learn more about the Seal and post your comments to this blog post.

 — Bridget Dougherty, Senior Program Associate, Seal of Excellence

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