How Wisrod Investments is measuring social impact in Zimbabwe
According to the Global Impact Investing Network’s survey, over 50% of investors who responded to the survey made their first impact investment after 2010. With the rise of impact investing, industry leaders have developed innovative ways to measure the impact of financial inclusion, such as Cerise’s social audit tools. Financial service providers in emerging markets are now quantifying their social impact and tracking their progress towards their missions in order to fulfill impact investors’ requirements.
Measuring social impact through demand for social impact loan products
As impact investors plan to increase the amount of capital they invest at a rate of approximately 8% per year, reporting the social impact of access to financial services is becoming more important for financial service providers. However, questions about how to do this effectively remain:
- What are the most appropriate metrics?
- What level of detail should financial service providers aim for?
- What is best practice for tracking progress?
While there are many metrics to choose from as well as methodologies to track these metrics, Wisrod Investments is an example of a financial service provider that improves its communities and is measuring social impact metrics in a straightforward, meaningful way.
Wisrod Investments is a for-profit microfinance institution in Zimbabwe with a mission of improving their clients’ long-term well-being. Wisrod provides financial and social services to 35,000 individuals, 89% of whom are women. Their loan sizes range from $100-$500. Wisrod’s 35 branches serve communities with limited access to financial services, people at the bottom of the economic pyramid.
Wisrod’s CEO explains their unique way of measuring social impact
As Mr. Madafi, the co-founder and CEO of Wisrod Investments, said, “We don’t have a quantitative way of measuring our social impact. Yet we measure the impact of our services on the individuals we serve in our communities and our progress towards our mission through product demand.”
Wisrod Investments is measuring social impact by tracking the success of their products. There are ongoing debates whether metrics like repayment rates on loan products are sufficient indicators of social impact. However, Wisrod designs their products to meet a specific social objective and then measures the demand and success of the product.
“We are in the market. The moment you understand the impact you want to make, you can come up with a product. Many MFIs do it the other way around. They make the product and then measure the impact. We start with the impact and what outcome we want to have. Then we work backwards and make the product.”
Changing households through education and employment
Wisrod’s school fees product is one of their most successful objective-focused products. Wisrod’s customer experience officers noticed that despite more loans being disbursed to parents, graduation rates remained low. To change this pattern, Wisrod started by asking themselves the following questions:
- What are parents using their loans for instead?
- What are the barriers that prevent parents from paying school fees?
- How can we enable parents to pay school fees without creating additional steps?
- How can we prioritise school fees without creating a financial burden for our clients and without leading to a financial loss for Wisrod?
- How will we know if our school fee loans are leading to better graduation rates?
To answer these questions, Wisrod’s leadership relied on their customer experience officers, interviews with parents, field officers’ interactions with clients in the field. With inputs from these three stakeholders, Wisrod uncovered answers to their initial set of questions.
- Parents are using their loans to continue or grow their business’ operations with the hope that their business will profit enough in a given time period to cover daily expenses and basic needs. School fees do not take priority of food, water, shelter and health concerns. Parents also prioritise repaying their business loan to ensure their eligibility to take out another loan of the same or greater amount.
- Paying school fees requires going to the school and delivering cash by hand for the invoice for the school term on a scheduled date. This requires a parent to take time away from their job or their small business.
- The school fee loan must be disbursed to existing clients at the same time that they are visiting one of Wisrod’s branches or meeting with their field officer. Wisrod must be an intermediary between parents and the schools’ accountants.
- The school fee loan must have an interest rate, but the interest rate must be lower than a business loan because the return on having a child graduate will realise in the future, without generating any revenue as a business would.
- Wisrod must track which parents used their school fee and what the graduation rate of their children is. The school fee loan and the correlated graduation rate must be higher than the graduation rate is for children whose parents did not without the school fee loans.
With this list of must-haves in place, Wisrod designed their school loan product to change this by increasing attendance in primary and secondary school and graduation rates from universities.
Wisrod’s school fees product is proving effective because of the following key factors:
- When parents take out a business loan, they automatically have the option to take a school free loan at the same time.
- Wisrod’s field officers go to the schools and pay the fees directly, acting as an intermediary and paying multiple students’ fees at one time.
- The disbursement and repayment schedule for the school fee loan matches the schedule for the parent’s other loan, eliminating multiple trips to the branch or multiple meetings with field officers.
- The interest rate is less than two percent.
- By tracking graduation rates over the course of ten years, Wisrod is able to document steadily improving graduation rates among the group of children whose parents actively participated in Wisrod’s school fee loan programme.
Approximately 30% of Wisrod’s clients take advantage of the school loan product. The customer experience officers are seeing more kids going to school all the way through university. As part of Wisrod’s recruitment process, they give preference to kids who have gone through this programme when we recruit.
Through the design of this product, Wisrod is taking an active role in helping parents send their kids to school — starting with primary school and ending with graduation from university. With an education and potentially employment, the face of a household is dramatically changed.
Measuring social impact without unnecessary complications
Wisrod Investments serves as an example of a microfinance institution that is successfully fulfilling its mission with a for-profit model. The leadership of Wisrod will be publishing a book sharing best practice for their objective-focused product design.