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CRSMicrofinance Alliance for Global Impact (MAGI)

Accreditation Tool

History of the MAGI

The CRS Microfinance Alliance for Global Impact was first developed in 1999. TheAlliance was created to establish quality standards for CRS microfinance partners interms of financial performance, governance as well as adherence to the CRS povertylending principles. In order to become a member of the MAGI, institutions are required toundergo a MAGI Accreditation Assessment, or rating assessment. CRS developed thistool because at the time, there were no other tools that systematically evaluated thesocial mission of an institution in addition to financial and non-financial analysis. CRSalso felt there needed to be greater emphasis on human resources development andfinancial services analysis.

The results from the MAGI assessment help determine technical assistance needs andhelp steer partners towards growth and sustainability and possible transformation intoregulated institution. The benefits for partners include recognitions from CRS, CRSendorsement in attracting donors as well as priority for CRS funding for technicalassistance and loan capital. The benefits for CRS include the assurance of program andinstitutional quality and capacity, the means with which to encourage programs to excelin poverty lending and building sustainable institutions, and a systematic way foridentifying and addressing support needs.

Evolution of the MAGI Accreditation ToolAfter initial testing in 1999, CRS found that many partners were not mature enough foran accreditation assessment, rather several institutional weaknesses kept institutionsfrom scoring high enough to become accredited MAGI members. As a result, the MAGItool was divided into two separate processes. The Planning Assessment was developed

as a first step to help partners identify and address institutional weaknesses. Eachinstitution develops an Institutional Strengthening Plan, which then paves the way for thesecond phase, the Accreditation Assessment, to be conducted within 2-4 years after theinitial Planning Assessment. The Accreditation tool involves more rigorous evaluationtechniques including scoring for the individual areas of analysis which are combined toachieve the minimum Global Assessment score necessary to become an AccreditedMAGI Member.

CRS has been conducting MAGI planning and accreditation assessments for over 5years now (40 Planning Assessments, 6 Accreditation Assessments) and has recentlyfinished an extensive revision of the MAGI Accreditation tool with the goal ofincorporating new industry standards, including more areas of analysis as well as an

improved poverty scoring section that rates an institutions ability to target and servevery poor entrepreneurs.

MAGI Accreditation Process 2004 RevisionsThe Accreditation process includes a thorough document review, an 8-day visit to theinstitution, and a final report with scoring in 9 different areas. During the visit, a team of 3consultants conducts interviews with both field and headquarters staff and extensiveinterviews with clients, village banks and solidarity groups. Results from these interviewsas well as findings fromdocument reviews and data collection are then incorporated into

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the scoring matrix, which calculates the institutions final score. The score determinesthe final rating.

D C C+ B B+ A A+ AA AAA

GlobalAssessment

Score

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Goal of WorkshopWe have been working with Laura on these indicators and hope to take theopportunity to present our poverty lending indicators to the PAWG, and anyoneelse interested, to ensure consensus and to encourage participants to continuethinking about innovative ways to reach the very poor with appropriate financial

services.

The purpose of this 30-minute presentation is to gather feedback on the povertylending indicators section of the Accreditation Tool. I would specifically like topresent the three different areas we rate in the poverty scoring section:

Institutional Policyo Institutional commitment to serving the very poor (ie mission

statement)o Poverty targeting tools used

o Appropriateness of products for reaching the very poor

Outreacho Average loan size

o % Female clients

o % Of clients in rural areas

o % Of portfolio dedicated to agricultural activities

Accesso Type of guarantee

o Support in growing client savings

o Client Surveys to determine whether clients are moving out of

povertyo

Use of this information in management decisions

Lessons learned from case studies:

Cast Study 1:In Case Study 1, the Institution scored relatively poorly in all three areas.Findings revealed that the institution, although functioning in an area with a 70%poverty rate, was no longer serving its original client base of poor women. Ouranalysis revealed that the average loan size had grown 17% over the last yearwhile the number of clients remained the same. The institution was continually

losing its female clientele, which had dropped to less than 50%; and the averageloan size was significantly higher than the regional benchmark. We found that theinstitution, although equipped with a poverty focused mission statement, did notknow how to assess whether its clients were indeed very poor and was notinterested or didnt have the resources to be able to measure the social impact ofits services. These findings have reinforced the need to deal with mission driftand have specifically highlighted the potential disconnect between an institutionsmission statement and the reality of its activities. We have also learned that CRS

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must do more to educate partners in poverty lending and to ensure they areadequately trained in the use of poverty targeting tools.

Case Study 2:The institution scored very well on the Outreach indicators and scored relatively

low on Policy and Access. The institution works in an extremely poor regionwhere women make up 90% of the client base and rural areas are significantlyrepresented in the portfolio (94%). As a start-up NGO, the partner usedgovernment poverty maps to identify potential markets. Since converting into aregulated institution, however, the focus has been transferred to working ineconomically viable areas. There was also no effort to measure social impact.This led us to the conclusion that, despite the attractive indicators, there is apotential for future mission drift.

Conclusions

The analysis of both quantitative indicators and qualitative indicators helps todistinguish between an institutions core values and the reality of itsenvironment

The tool helps identify the areas within the poverty analysis section that maybe a result of external factors (ie high poverty rate) rather than internalfactors (ie institutional culture). This then helps to identify the risk of missiondrift in the future.

The tool has helped CRS identify institutional needs in terms of learning toidentify the neediest clients as well as measuring the social impact of

services.

Useful tool for helping to guide institutional development in terms of mission,objectives and product design.