From Social Rating to Social Auditing

This note describes and contrasts social rating and social audit, demonstrating why the latter is a necessary complement to the former. The note discusses the limitations of social rating and the need for a complementary assessment tool. It lists lessons from social rating and explains the process of developing a social audit.

The USAID 'Accelerated Microenterprise Advancement Project - Knowledge Generation' has developed and tested a social rating tool for MFIs. This tool for measuring social performance is useful for external users, but its usefulness for guiding institutional reform is limited. The social audit is a social performance assessment tool designed to compensate for the gaps in the social rating. In contrast to social rating, social audit is targeted primarily at internal users. The primary purpose of the social audit tool is to inform and guide institutional reform in the area of social performance.

The paper concludes that assessing and managing the social performance of MFIs is an important and challenging task. Although developed outside the microfinance sector, the general concept and methodology of social audit are equally appropriate to microfinance.