Ten Lessons on Tracking Changes in Clients’ Lives

Some financial service providers (FSPs) operate with a double bottom line in mind: achieving both financial success and social progress. In a recent brief we argued that FSPs that implement strong social performance management (SPM) practices, including defining and tracking indicators to measure the changes in the lives of their clients (in other terms, client-level outcomes), are better placed to actually achieve their social goals. Without reliable data on how customers’ lives are enhanced or affected by products/services, businesses cannot track progress against their social goals. By clearly defining and systematically tracking specific outcome indicators, such as poverty level, assets, health, and women's empowerment, FSPs can do a better job of measuring how they are doing.

Data collection can be complicated, and FSPs have limited resources and many competing priorities. With these constraints in mind, the Social Performance Task Force (SPTF) reviewed reports on the experiences of dozens of different microfinance institutions that have attempted or are attempting to track client-level outcomes. We also interviewed over a dozen financial services providers, investors, and rating agencies who have experience with collecting and analyzing client-level outcomes data. Ten "lessons learned" emerged from this research, which serve as a model for other FSPs seeking to integrate social goals into their business models.

1. Randomized Control Trials are not the whole answer. RCTs are complex, require a large sample, and can simply be too expensive for the typical FSP to undertake on its own. We should make better use of the whole range of available methodologies to understand whether and how an FSP's products and services are helping clients.

2. Collect data that are credible and relevant but affordable and simple to gather. We need to better understand if and how products and services are making a difference in the lives of our clients. For that purpose, data quality must be good and the data must provide information that helps the institution better design its products and services, or better manage its operations, toward achieving its social goals. However, the data collection process must not overburden the institutional capacity. It should be affordable and relatively easy to execute.

3. Ask field agents for input. One study found that answers given by field agents matched with high precision the household survey information from clients and bank records. Field agents are often able to suggest good outcomes indicators to track.

4. Use multiple tools to measure changes. Clients’ lives are multidimensional and most institutions should gather several types of information on different topics, such as poverty levels and health factors. Using different approaches –for example, a quantitative measurement tool such as the Progress out of Poverty Index or USAID's Poverty Assessment Tools, combined with client focus groups—helps the institution to understand more deeply how the lives of their clients have changed. You can find different tools in the SPTF Implementation Guide.

5. Self-perception can be an additional valuable source of data. Client self-perception can be a valid and inexpensive way to gain additional insights. These insights are an important source for designing better products and services.

6. Analyze outcomes by client segment. Different types of clients can be affected in very different ways by the same product or service. Averages are not as useful as an analysis of different types of clients, and within each group. We have to understand much better which services work for whom and in which context. You can read more on this in CGAP’s recent Focus Note.

7. Use data for both proving and improving. Reporting on social data (“proving”) keeps an institution accountable to its social mission and demonstrates the extent to which the institution is achieving its social goals. Analyzing who is benefitting from the use of a financial product and who is not, and what led to these changes, gives the FSP insight into adjustments it might make to its products and services to improve social performance (“improving”).

8. Use monitoring to increase employee satisfaction. Employee feedback shows that monitoring outcomes is important to employees because it helps them better understand clients and it motivates them to see the transformation in their clients' lives.

9. Report honestly. No institution can achieve positive outcomes for 100% of clients, and investors and donors know this. One investor reported feeling more comfortable investing in an FSP when it provided complete and accurate information on defaults, than previously when the FSP had shared only positive stories.

10. Educate external stakeholders. Many external stakeholders are unrealistic about how long it takes to impact clients and what changes to expect. FSPs and others should be clear on what is realistic in terms of both the percentage of clients that could experience positive outcomes and the magnitude of the change.

Quality outcome data help providers answer the fundamental question: are clients’ lives improving? FSPs should strive for an accurate understanding of client conditions. This knowledge is a powerful motivator for operational and product changes that can lead to improved client outcomes.