“While access to finance for micro, small and medium enterprises (MSEs) is no doubt constrained in Indonesia, an equally challenging task is to ensure that services delivered by financial institutions really address the needs of MSEs and create value for the clients,” noted Owais Parray, the Chief Technical Adviser of ILO’s Promoting Micro and Small Enterprises through Improved Entrepreneurs’ Access to Financial Services (Promise Impact) Project. Owais was speaking at a one-day seminar on Inclusive Finance and Social Performance Management on December 14, 2016 in Jakarta.

The seminar was organized as part of PROMISE IMPACT Project which is funded by the Swiss State Secretariat for Economic Affairs (SECO). The seminar provided a platform to exchange knowledge in financial services to MSEs and measures to promote both economic and social development. The seminar was attended by over 50 participants including senior government officials, managers of financial institutions, representatives of financial associations and networks, academics, think-tanks, and practitioners from the finance industry.

While sharing global experiences on the importance of SPM, Frances Sinha from M-CRIL and an active member of the Social Performance Task Force (SPTF) explained that SPM is a framework that has been globally agreed to help financial institutions to develop systems and business processes to track both financial profitability as well as contributions they can making towards development outcomes. “SPM framework and indicators are not perfect. It took several decades for financial industry to develop indicators to assess financial performance. So, it is to be expected that it will take some time to further improve the measurement tools and indicators for SPM,” explained Frances.

“Many commercial businesses including the banking industry consider “customer satisfaction” and “customer demand” as an important part of doing business. So, providing client-centric services responsibly and with an explicit aim of creating value for the clients is, therefore, not a departure for financial institutions. But, they need to demonstrate that they are incorporating that in their management practices,” added Owais.

“SPM helps financial institutions to ensure healthy financial returns, but at the same time to look beyond short-term profitability. Many think SPM and corporate social responsibility (CSR) is one and the same thing. But that is not the case. SPM is a way to manage financial institutions to achieve a double bottom line,” explained Frances. She added that SPM provides a clear framework for financial institutions to adapt their business processes, realize their financial objectives, as well as contribute towards social welfare of their clients.

The seminar took a closer look at challenges and opportunities in Indonesia to mainstream SPM. A full session was dedicated to discussing SPM approaches and practices in Indonesia. Senior managers from Bank BRI, BMT ITqan, BPR UMKM Jatim, and Komida shared the results of their work. The underlying message from these initiatives was that providing services with the client at the center is in fact more profitable in the long-term. Client-oriented focus can enable financial institutions to minimize risks, ensure client retention, and improve outreach.

“Through this initiative, ILO hopes that more financial institutions will be able to adopt the SPM framework. In this regard, ILO will continue to support financial institutions and financial regulators to mainstream SPM,” concluded Owais.