World Bank Inclusive Growth and Sustainable Finance Hub in Kuala Lumpur launched a report on “Tracking Progress: Impact Monitoring of Social Finance”. The report examines the benefits of monitoring the impact of social finance in Malaysia to drive positive social progress. It provides specific recommendations to develop the necessary architecture for financial institutions' disclosure and impact monitoring of social finance in Malaysia. I was part of a panel session organized with the report launch.
This article captures my sharing at the panel session as a social entrepreneur who has utilized various social financing mechanisms ranging from programmatic grants, matching grants, convertible loans, investments, etc. It provides a comprehensive understanding of Malaysia's evolving social finance landscape, with insights into its various components, the significance of impact measurement, and the benefits of technology integration. It includes practical examples and considerations for designing effective social interventions and enhancing impact reporting mechanisms.
Understanding Social Finance in Malaysia
In the Malaysian context, Bank Negara Malaysia has defined social finance as all financial services that mobilize philanthropic capital using instruments such as donations, endowments (including cash, waqf), or alms (zakat) to deliver tangible social outcomes1. Bank Negara also sees social finance as a catalyst for social progress, complementing public sector finance and market-driven financial mechanisms to promote greater social resilience. Social finance is poised to advance financial inclusion because of its structure which includes:
(i) flexibility of funding instruments;
(ii) integrated business and financial management education; and
(iii) embedded impact monitoring mechanisms2.
The diagram below outlines the various components of social finance offerings in Malaysia3. It categorizes funding, business model, and supporting infrastructure. Funders include contributors, donors, investors, government grants, financial institutions, and corporate CSR funds. There are two types of funds used: (1) Philanthropic funds such as donations, waqf and endowment, and zakat; and (2) Commercial funds such as impact investment. These funds are distributed using two business models, either a model that provides seed capital and microfinancing or a model that provides safety net protection.
Regardless of the business model, training in the form of upskilling and mentoring is a crucial aspect of social financing. The financiers base their business model on a supporting infrastructure comprising digital tools (apps, e-wallets, QR codes, and payment gateways) and network partners (social enterprises, NGOs, foundations, State Islamic Religious Councils, government agencies, and fintech providers). The diagram also notes the prevalence of impact-based monitoring, a central data repository, a diverse implementation network, and platform interoperability in social finance offerings in Malaysia.
Source: Bank Negara Malaysia. Financial Sector Blueprint 2022-2026.
The Evolving Landscape of Social Finance in Malaysia
Overall, the social finance ecosystem is maturing year by year. In recent years, social finance providers' impact measurement focus has shifted from measuring outputs to measuring outcomes and impacts. This shift in focus is fuelling increased appetite among social finance providers to finance long-term projects and allocation of funds for impact monitoring, especially among those with specific impact development mandates. Financing longer-term social projects enables network partners such as social entrepreneurs and development professionals to design, implement, and learn from various interventions and experiments. While long-term financing (larger amount of funding) empowers social entrepreneurs to tackle complex challenges holistically, it also creates an increasing demand for comprehensive impact monitoring and reporting methods.
Currently, the approach to managing social finance needs to be improved. Each social financier has distinct fund management practices and impact tracking mechanisms. While some funders require meticulous details of each transaction and proof of payments, others grant great flexibility to social finance recipients. In Mereka’s experience, those long-term funders that grant greater flexibility empower entrepreneurs and development professionals to design and re-design interventions based on the latest insights they gain in real-time while implementing projects.
For example, in 2021, we developed the Digital Entrepreneur Program through funding received from Futuremakers by Standard Chartered (SCF). The intervention program design, designed during the pandemic, proved obsolete once the lockdowns ended and economic activities resumed. As SCF’s reporting mechanisms were focused on outcome and impact rather than activities themselves, we were granted greater flexibility to redesign activities based on the latest insights - with the commitment to achieve the previously agreed-upon outcomes and impact. This flexibility has also allowed us to carry out multiple mini-experiments within the larger project that advised better future intervention designs.
The Cost and Time-Intensive Nature of Impact Data Collection
Impact washing is a growing concern. Hence, it is important to have external or third-party validation on reported impact data. In 2022, the Biji-biji Initiative engaged Social Value Malaysia to conduct a Social Return on Investment (SROI) analysis of Beyond Bins’s Komuniti Lestari BBR Program. The SROI model found that every RM1 invested in the program in 2020/21 created RM7.32 in social value. While this finding validated the project impact and led to more funders joining to fund similar projects, the analysis conducted in partnership with Social Value Malaysia cost RM 40,000.
However, it is pertinent to note that the actual cost would significantly exceed this amount, as the fee did not encompass project management and other ancillary costs. We reduced the cost by assigning our team members to work alongside Social Value Malaysia. Yayasan Hasanah graciously funded this SROI analysis on the Beyond Bins Program as part of the project financing. Social financiers who fund longer-term projects do recognize the need for allocating funds for impact data collection and impact data validation, however, many smaller programs lack funding for impact monitoring.
Collection of impact data is time and cost-intensive mainly due to the time taken for the impacts of an intervention to emerge. While project outputs can be measured immediately upon completion of the intervention/activity, it can take weeks or months to see outcomes and months to years to see impacts generated from that particular intervention/activity. Hence, there’s a need to track beneficiaries for weeks, months, and years after program completion.
For the Digital Entrepreneur program we ran, typically, it took an unemployed youth 6-12 months to find employment post-program. In this case, we made phone calls monthly to learners to track their progress and provide them with any additional support they needed in their journey towards employment. As our programs reached youths across the nation virtually, we had to rely on the learner's continuous engagement with the program for 12 months post-program to ensure our ability to track their progress and collect quality impact data. Thus, for quality impact monitoring, we need to allocate funding for implementing interventions and beneficiary engagement for the duration of the impact monitoring period.
Role of Impact Models in Impact Monitoring and Reporting
Developing an impact model, such as a Theory of Change framework, before designing and implementing a social intervention program is crucial. These impact models encourage intervention designers to validate their ideas and thought processes on how the proposed interventions/ activities will and can affect desired short-term and long-term changes. They also open up discussions on risks, assumptions, and limitations within the proposed interventions/activities, contributing to further finetuning and solidifying the social intervention program.
Utilization of an impact model ensures the program focuses on the outcome and impact to be achieved rather than the activities to be conducted or outputs to be achieved. Impact models help better communicate the logic and value proposition of the program to the funders and stakeholders and foster a culture of evidence-based decision-making and continuous improvement.
By demonstrating the effectiveness and viability of social interventions through solid impact models, intervention designers and implementers can make a compelling case for scaling and replicating proven approaches to other regions with analogous economic and social fabrics facing similar challenges. Thus, the meticulous development and implementation of impact models are essential for successful social finance models' broader adoption and adaptation.
Leveraging Technology for Efficient Impact Measurement
Once an impact model is developed, intervention designers should determine the mechanisms to monitor and measure the outputs, outcomes, and impact. The mechanisms most often involve data collection methodology and frequency. Utilization of real-time data collection methodologies has the potential to reduce the complexities in impact monitoring and measurement, saving time and cost associated with data collection. These savings can be channeled toward data modeling and data analysis efforts, which can reveal deeper insights and correlations.
Real-time data collection and reporting can increase transparency and accountability in impact measurement, especially when data is captured at source in real-time. By integrating technology in social intervention program design, we can automate data collection and analysis in real-time, eliminating the time lag caused by manual data collection processes like surveys, interviews, and observations. That being said, reviewing and validating the data captured at-source is still crucial, as there is still much room for data tampering.
MyKasih Foundation’s Food Aid Programme is the epitome of a technology-integrated social intervention program in Malaysia. MyKasih distributes monetary contributions from its donors to recipient families through MyKad or MyKasih smartcards. Food aid recipients can purchase food items from a pre-approved list of ten product categories at any of MyKasih’s extensive nationwide network of retail partners. With this cashless donation distribution and payment system, the data on how the end user (recipient families) uses the donation is captured at the source in real-time. Using these data, MyKasih can provide Donors with audit trails and analytical reports on demographics and consumption at any point in the transaction, which are made available through a Donor-specific Online Portal4.
This efficient, secure, and transparent process validates MyKasih’s impact model - seamlessly monitoring and measuring outputs and outcomes. Hence, social financiers and social finance recipients shall find ways, such as platform partnerships, to integrate technology into their social intervention programs to bolster transparency and efficiency of impact reporting.
The Need for Collaboration and Data Sharing
In the Malaysian context, social intervention programs are designed, developed, and implemented by various stakeholders, including donors, government agencies, financial institutions, corporate foundations, non-governmental organizations, and social enterprises. Malaysia also receives social financing from international foundations and foreign government agencies.
All these intervention programs reach various target audiences nationwide. However, there is no database consisting list of beneficiaries reached/supported by all these social interventions. Hence, these programs may reach the same beneficiaries and capture their impact data twice or more - leading to double-counting and impact washing.
Creative use of technology in social intervention programs, creation of standardized approaches for preventing double-counting, sharing of primary data, and collaboration between all stakeholders are crucial to ensure the success and sustainability of social finance programs; after all, they ultimately contribute to the nation's development.
The government's recent launch of Pangkalan Data Utama (PADU), a central database containing individual and household profiles for citizens and permanent residents in Malaysia, is aimed at distributing targeted subsidies, assistance, and social protection benefits to eligible citizens through the system. The profile information is being compiled by manual registration and integration of administrative data from various sources, enhancing the efficiency and effectiveness of government services and aid distribution5. With time, PADU could be enhanced to include data on beneficiaries reached/supported by various social finance mechanisms, collating data from various social financiers.
Conclusion
In conclusion, allocating resources towards measuring impact in social finance is imperative. The credibility and effectiveness of social finance initiatives rest on their impact measurement mechanisms. By ensuring that a portion of an intervention program’s funding is dedicated to monitoring outcomes, social finance can fuel effective intervention design and implementation.
Moreover, integrating technology in impact measurement presents opportunities to refine data collection and analysis efficiency and accuracy. Adopting digital tools and platforms can facilitate real-time data capture and analysis, enhancing the transparency and accountability of social finance interventions. This technological leverage streamlines the process and amplifies the potential to uncover more profound insights into the social impact, guiding more informed decision-making and strategy refinement.
Furthermore, the ethos of collaboration and data sharing is a pivotal pillar in the architecture of social finance. The synergy between various stakeholders, encompassing social finance providers, recipients, and intermediary agencies, is essential for cultivating a cohesive ecosystem. The collective endeavor to share data and insights can mitigate the risks of duplicity and impact inflation, ensuring a more accurate representation of the social value generated.
In essence, the strategic allocation of resources for impact measurement, the astute leverage of technology, and the fostering of collaborative networks form the triad of imperatives that will drive the evolution of social finance in Malaysia. Through these concerted efforts, social finance can truly realize its potential as a lever for sustainable social change, contributing significantly to the fabric of Malaysian society and beyond.
Reference:
1 Bank Negara Malaysia. (2021, March 31). Annual Report 2020. p. 38
2 Bank Negara Malaysia. (2022, January 24). Financial Sector Blueprint 2022-2026. p. 114
3 Bank Negara Malaysia. (2022, January 24). Financial Sector Blueprint 2022-2026. p. 115
4 MyKasih Foundation. (2023). Food Aid Programme.
5 Pangkalan Data Utama. (2024). Pangkalan Data Utama.
About Author:
With a decade-long journey marked by a rigorous quest for socio-economic impact, Ambika has emerged as a leader in designing and implementing interventions that span digital learning, educational programs, and social advocacy. As an architect behind the scenes, Ambika has also mastered the art of crafting efficient systems, optimizing processes, and driving operational excellence to fuel sustainable growth. Her contributions to Biji-biji's sustainability report, obtaining Malaysia’s first World Fair Trade Organization certification, and aligning with SDG standards are testaments to her expertise in impact measurement. Ambika’s versatility extends to exploring new domains, assembling top-tier teams, orchestrating award-winning campaigns, and forging strategic partnerships.
