Responsible Finance Forum

Assessing Green Microfinance: Qualitative and Quantitative Indicators for Measuring Environmental Performance

01 November 2015
Source:  MIX
 
 European Microfinance Platform (e-MFP)
 
 Microfinance & Environment Action Group

This paper is the first attempt in the microfinance sector to address the area of environmental – or green – performance monitoring in a comprehensive way. It begins with an overview of the qualitative green performance indicators available to microfinance institutions (MFIs) that wish to assess their green management performance, track progress over time, and identify current and future trends. The tools that are presented here include MIX’s green performance indicators, the Green Index, the Green Performance Agenda, and the forthcoming Progress out of Energy Poverty Index.

The paper then sheds light on the fact that, while the sector abounds with a diverse set of qualitative tools for green performance monitoring, it falls short when it comes to quantitative measures. The second part elaborates on a survey designed by MIX and a subgroup of the European Microfinance Platform (eMFP) Microfinance & Environment Action Group that explores quantitative green microfinance indicators in the areas of environmental strategy, internal and external risk management, and green opportunities with the aim of assessing their ease of use and relevance for decision making. The findings from a sample of 87 MFIs that participated in the survey reveal that data on green loans is the easiest indicator to track, followed by the environmental footprint of an MFI’s operations. Tracking awareness-raising and training activities for clients and the community comes in third place, while monitoring the environmental risk of loans pre- or post-disbursement was identified as the most challenging area to track.

The paper concludes that (1) a comprehensive interpretation of quantitative figures often goes hand-inhand with qualitative information, (2) an important gap persists between the usefulness of an indicator and an MFI’s capacity to track it, and (3) institutions do not always have sufficient incentives to track indicators even when they have the capacity to do so. It also offers strategic recommendations for facilitating the integration of green quantitative microfinance indicators into reporting standards