Tracking Social Impact Against Global Poverty
By Vicki Escarra
Recent news that Princeton economist Angus Deaton was awarded the 2015 Nobel Prize in Economic Science has renewed the debate for how to best measure economic well-being, particularly in developing nations.
Traditionally, poverty has been defined using aggregate macroeconomic data, namely income, which Deaton believes offers limited insight into the world’s most vulnerable citizens, particularly because one’s quality of life at the same income level can vary dramatically depending on where they live. Deaton, a microeconomist, advocates that the starting point should be individual household data on consumption that includes examining life expectancy, calories consumed, health and education as key factors in living standards that make up entire economies.
As discussed in the October 12, 2015, Guardian article “Angus Deaton: a popular choice given the new focus on inequality,” Deaton believes “the key to greater wellbeing is to promote economic growth rather than to support consumption though western aid packages” directly to governments which, he thinks, makes governments less responsive to citizens. “Without effective states working with active and involved citizens,” he says, “there is little chance for the growth that is needed to abolish global poverty.”
So if, as Deaton illustrates, the criteria to define and solve global poverty is subject to great debate, how then do we track and measure the social impact of nonprofit organizations who must demonstrate a high rate of social return on investment from donors, philanthropists and other supporters? After all, no one in the for-profit sector would invest in a company that didn’t have a way to track customers, sales or the performance of their business model.
The answer in the microfinance sector is Social Performance Management (SPM), which collects information across a wide range of social indicators to track financial and operational metrics and more precisely determine the success of a nonprofit’s mission and identify areas for improvement.
Our mission at Opportunity International is to help people in the developing world break the cycle of poverty and transform their lives. Consistent with Deaton’s belief, we work at the micro level to eliminate poverty—one person at time. We’re on the ground in 24 countries providing loans, training and other financial and community services based on the individual needs of millions of clients—95 percent of whom are women—to launch and expand businesses that not only support their families but strengthen the economies and social fabric of entire communities and nations.
We implemented SPM in 2013 to better assess the effectiveness of our education, agriculture and other initiatives, and promote a higher level of transparency and accountability. As part of this process, our entire network—including our partner non-governmental organizations—has adopted the Universal Standards for Social Performance Management, a set of industry best practices that help us continually define, monitor and improve our social goals in five key areas: income and job creation; health and sanitation; school attendance; client vulnerability and decision making; and, spiritual growth.
For example, through SPM, we have data that supports education as a sure way to lift families out of poverty. In Rwanda, 68 percent of our new clients have no education beyond primary school level. Of these, 70% live on less than $2.50 a day compared to 35 percent who continued beyond primary school. In Uganda, 37 percent of new clients have no education beyond primary school. Of these, 53 percent live on less than $2.50 a day compared to 29 percent who continued beyond primary school.
We also know access to microfinance can contribute to improved access for education. In Rwanda, for example, 92 percent of clients’ children attend school; in Uganda, 80 percent are in school. But what this aggregate data doesn’t tell us is the quality of the education and the learning outcomes that will be achieved by those children – crucial factors contributing to opportunities for their future. While many children have access to school, their individual experiences might be affected by large class sizes, poor teacher attendance and low literacy rates. Our EduFinance program is now using SPM to address these factors and identify opportunities for improvement to ensure our efforts have the maximum impact on lives.
Our client, Comfort Appiah, in Ghana, Africa, is an example of the power of going beyond the aggregate to the individual. Comfort noticed there were an abundance of children in her neighborhood who couldn’t afford to go to school. Instead, they wandered the streets all day. So she started a school on her front porch. Soon, the number of students outgrew her porch and she realized she needed a building—a real school. But local banks viewed her as just another woman living in poverty and wouldn’t give her a loan. So we did. Today, her Ahobrase Academy serves more than 8-800 students and employs 40 teachers in 23 classrooms from preschool through junior high. Through SPM, we know the social outcomes have been outstanding as the school has become an educational and economic engine that is driving transformation across the entire community.
Clients like Comfort provide hope and inspiration that SPM will help all nonprofit organizations fulfill their missions and demonstrate impact to supporters who truly want to change the world. Comfort recently joined Opportunity International Head of Education Finance Nathan Byrd for a segment on The Jeremy Vine Show on BBC Radio (Click here to enjoy the full BBC interview).
Click here to see Opportunity International’s 2014 SPM Report.
Vicki Escarra is Global CEO of Opportunity International, a next generation microfinance organization that invests philanthropic and social impact capital to spark and scale innovative solutions to global poverty. The organization works in 24 countries across Africa, Asia, Latin America and Europe, and has a goal to help clients create and sustain 20 million jobs by 2020, impacting 100 million lives worldwide. Previously, Vicki was President and CEO of Feeding America, the nation’s largest domestic hunger relief organization, for six years. Her leadership in the nonprofit sector followed a highly successful corporate career that included serving as chief marketing officer of Delta Air Lines.