We use existing data in innovative ways to help us better understand the experience of the fund’s beneficiaries.
There has been a shift in focus in recent years from general concern about poverty alleviation to a desire for more disciplined measurement of the direct outreach and inclusion of microfinance investments. Microfinance investors have also moved away from a unilateral and simplified view of the sector and have developed a more elaborate understanding of its shared profits and mutual social benefits in the current context of ongoing globalization.
In essence, the principal impact that microfinance is looking to achieve is to improve the economic wellbeing of microfinance clients: to help them grow their businesses, increase their incomes and create greater economic stability and security.
This has led investors and practitioners to increase the emphasis they put on the level of social responsibility in order to safeguard and ensure long term positive impact and sustainable wealth creation.
Transparent and credible communication is of utmost importance, and therefore Oxfam GB, as an objective third-party, has been appointed Impact Advisor to EMF. We do think that any Fund should be aware of and report on the immediate impact of the investments in terms of outreach and inclusion. Therefore, as a member of the Fund’s Advisory Committee, Oxfam’s focus is on understanding, measuring and ensuring the social impact of the Fund.
The Fund believes that reporting can be best served by the collection and reporting of indicators using a tiered system with different requirements for specific investments (senior loans vs. subordinated debt, etc.). All activities of the Enabling Microfinance Fund are then summarized in the yearly impact report which is prepared exclusively by Oxfam and are distributed to all our investors.
This report goes beyond the story of individual borrowers; it aims to give a deep and credible insight into the lessons learned and the social outreach of the portfolio.
Oxfam has a long tradition of supporting men and women build their livelihoods. It has supported small-scale farmers and other microfinance entrepreneurs with grants and loans for decades. Oxfam’s enterprise development work focuses on small and medium-sized enterprises (SMEs) that are vehicles for job creation and/or the development of affordable products and services for people living in poverty.
Oxfam recognises that a great way to create change is through investing in small enterprises that make a positive impact for social change by creating jobs and increasing income to change lives of marginalized groups including small-scale farmers, women and youth.
The best practice standards of the Smart Campaign are required for all microfinance institutions we do invest in.
Responsible financial inclusion encompasses core Client Protection Principles to help financial service providers practice good ethics and smart business. The Client Protection Principles are the minimum standards that clients should expect to receive when doing business with a microfinance financial service provider.
All out investment institutions must be fully transparent in the pricing, terms, and conditions and work with clients to prevent them from borrowing more money than they can repay or using products they do not need. Responsible financial inclusion protects clients, businesses, and the industry as a whole. And therefore, one key criterion of the Enabling Microfinance Fund is that all microfinance institutions in the portfolio must adhere to those best practice standards set by the Smart Campaign.
Appropriate Product Design and Delivery
Products are designed to be appropriate to client needs; client feedback is sought for product design and delivery.
Robust processes are used to verify repayment capacity of clients; credit bureau data is checked systematically (when applicable).
The total cost of the loan, including all charges, is communicated to clients both verbally and in writing.
Prevention of Over-indebtedness
Market-based, non-discriminatory pricing is applied and excessive fees are not charged
Clients are informed of their rights; both in-house and third-party collection staff are trained on fair and responsible treatment of clients.
Fair and Respectful Treatment of Clients
Client confidentiality is protected with appropriate technology systems.
Privacy of Client Data
Clients are aware of how to submit complaints; the complaints resolution system is active and effective.
Mechanisms for Complaint Resolution
While our fund is the main instrument for achieving this goal, the revenues of Enabling Microfinance AG as the promotor as well as the operating company of the Fund are, in addition, used to launch new projects to improve the conditions along the microfinance value chain, such as a microfinance training program for women.
The Enabling Microfinance Foundation oversees the operating company and acts as a guarantor for projects to strengthen access to finance in low income economies through capacity building work. Working along the value chain to establish and strengthen financing institutions is an important driver of qualitatively and quantitatively sustainable sector development. This dual approach is an important factor in strengthening the sector as a whole, supporting norms and standards to protect the interests of the various stakeholders in this new investment value chain, so as not to introduce counterproductive overflows, misuse or abuse of capital into unaccustomed populations.
The EMF Fund in combination with the support work of the EMF Foundation aims to catalyse access to capital where it is needed most by reinforcing the financial intermediation infrastructure and by promoting more inclusive financial policies. At the same time, the Fund demonstrates the commercial viability of investing in micro, small and medium-sized enterprises in low- and middle-income countries and aims to inspire a new generation of investors to address the wider financing gap.