Face to Face with InFiNe.lu Members : Jurgen Hammer, Managing Director SPTF Europe

Face to Face with InFiNe.lu Members : Jurgen Hammer, Managing Director SPTF Europe

An interview with Jurgen Hammer, Managing Director of SPTF (Social Performance Task Force) Europe

How did you get involved in inclusive finance?

I started my professional career in banking after my studies in Paris and New York. I worked for 18 years in investment banking which I liked very much especially when it was related to the real economy. In 2006, I began looking for a professional evolution where I could apply my banking experience to something more impactful. It took me a year to reach that goal – because at the time it was difficult to get interest from the development world with an investment banking background.

In 2006-2007, with the Peace Nobel Price and the UN Year of microfinance, microfinance became the development darling, and at the same time the microfinance sector realised that if it wanted to reach its real potential it had to access the broader financial markets. I managed to get a connection with Frankfurt School and KFW who were looking for someone with an expertise in securitization for a large microfinance fund, EFSE. So, I took a sabbatical from Crédit Agricole’s Investment Bank CA-CIB for which I was working at that time and went to Frankfurt.

After about year, Crédit Agricole decided to create its own Foundation for microfinance, so I joined the team and we created the Fondation Grameen Crédit Agricole (FGCA). I spent over 10 years with the Foundation, where I was in charge of Risk and Social Performance. The Foundation operates like an investment fund, but we were expected to achieve both financial AND social objectives: microfinance is promising a social impact by integrating excluded people into the financial system, and we needed to be able to demonstrate to our Board of Directors, the bank, and the larger community if and how we achieve our mission.

How could we demonstrate this? My generation was never confronted with the issue of responsibility and impact during our studies— basically everything turned around “maximising financial performance under constraints.” Impact and responsibility were new concepts for me. At FGCA, I discovered what Cerise and SPTF were doing to provide our sector with a methodology and tools for a coherent, transparent, and exhaustive approach for demonstrating social performance.

In 2012, I became part of SPTF’s Board of Directors representing FGCA. That same year, SPTF launched the Universal Standards for Social Performance Management. We worked closely with CERISE who updated its social audit tool—the SPI–to measure performance on the Universal Standards. With the Universal Standards and SPI, our sector has a fully aligned evaluation tool that allows all organisations to assess their social performance, compare, measure evolution and benchmark. This is unique in the impact investment field so far.

In 2017, I became Chairman of SPTF. One of my preoccupations was to stabilise our financial situation. As a network organisation that develops public goods, SPTF depends on member contributions and subsidies. I like to see our sector as a laboratory of the financial services industry, in which we started to develop transparent reporting on responsible finance – it was now time for this experience to go larger. Luxembourg is the leader in Europe in terms of microfinance funds and innovative products for inclusive finance—there was a clear potential for a useful collaboration between SPTF and Luxembourg. Thanks to the interest and support by both the Ministry of Development Cooperation and the Ministry of Finance, the office of SPTF Europe opened in Luxembourg in 2019. We all share the conviction that there is a lot of potential learning from microfinance for the financial centre in terms of truly responsible finance.

 Could you describe the work done by SPTF Europe in inclusive finance? And what makes it different from other inclusive finance players?

We believe that social and environmental results are not automatically achieved by financial organisations—it must be a purposeful effort. We call this effort social performance management—the systems and people that work together to achieve positive outcomes for clients. We set standards and develop tools for SPM with our stakeholders—financial institutions, national and regional networks, investors, fund managers, and other service providers like raters and auditors. The majority of investors are based in Europe and that is the reason why SPTF wanted to have a presence in Europe. My function is to coordinate the investor community in Europe.

What makes SPTF different from other inclusive finance players? On one hand it is the fact that in its membership base it incorporates all stakeholders from the microfinance industry (with the exception of regulators where we cooperate with AFI). On the other hand, our focus lies on the implementation and the improvement of practices. SPTF has developed an incredible – and open source – library of guidance, trainings, tools, templates, and case studies that help organisations to improve what they are doing. SPTF and CERISE therefore do not only provide a reporting tool to assess practice but also work with the practitioners to understand where they stand in terms of responsible practices and accompany them in their efforts to improve.

Our Responsible Inclusive Finance Facilities in four regions of the world, with the support of the Luxembourg, French and Swiss Development cooperation as well as EIB, provide co-funding for FSPs to learn about social performance practices and to improve their management practices in order to understand their clients better and serve their needs.

 What projects are you currently working on?

With COVID19, we adapted our agenda to support our members dealing with this emergency. We made sure not to duplicate what was already going on in the market but to complement and promote lessons learnt for a responsible approach of crisis management. There were two proactive investor initiatives with COVID that had started right at the beginning of the crisis: one group with nine leading MIVs in Europe, driven by Triodos and Incofin, that cooperated and agreed on principles on how to responsibly cooperate among investors to help investees to manage the crisis; a second group initiated by FGCA that agreed on a common pledge for responsible investor action. The goal of SPTF was to be present in the discussions of these groups and to promote the agreements for the widest possible uptake in the investor community.

In addition, SPTF concretely worked with investors to agree on standardised indicators to be used during crisis, the Crisis Assessment Tool (CAT). SPTF also developed the COVID19 Client Interview Tool to understand the impact of the crisis on the clients, in order to propose the most value-driven solutions. The interview tool is a set of simple, standardized questions that provide actionable information for FSPs to understand the differences among clients and make informed, nuanced decisions about how to serve clients during and after the crisis.

In parallel, we are updating the Universal Standards, last updated in 2016. There are six dimensions in the Universal Standards and in the process of this update we will develop seventh dimension for environmental responsibility.

Among SPTF’s mission is to promote the learning of microfinance to the larger financial centre. We started a successful cooperation with the LHoFT to share the learnings on responsible, client-centric services from microfinance with fintech start-ups. The fintech world provides new channels of distribution and new products, but in the end it is about providing a financial service to a client – so we hope to avoid creating from scratch how to do this responsibly. I hope that in the near future we will also manage to develop a stronger cooperation with the banking sector in Luxembourg.

 What is your key interest in inclusive finance?

Cooperation and coordination. When I left the very competitive banking world and came to microfinance I (admittedly naively) thought that in the developing world everybody would work together because we have this big common goal of improving the lives of the excluded. This is too often not the case, so my key interest became to push for better coordination and collaboration – I believe that we are still by far under-recognising the values of shared learnings and building on what others have already experienced. Greater coordination would allow us to more quickly achieve our common goal of true social and environmental impact. To say it another way: we will get farther if we share our successes and failures than if we don’t. This is URGENT as we can see wherever we look. And that is what I have decided to defend for the rest of my professional life.

 What are the biggest challenges facing inclusive finance today? And how could InFine.lu and Luxembourg help tackle them?

Inclusive finance and impact finance have come a long way over the past decade, and have now become mainstream. There is almost no actor in the financial and in the larger economic sector anymore that does not speak about sustainability, responsibility and inclusion. That mainstreaming is an opportunity but can also be a big risk. If we are not able to demonstrate the real achievement of our promise, free riders will be able to claim a social mission without being held accountable. Our sector needs to be serious and work together to assess and report with transparency and reliability. That is for me the biggest challenge.

In this process, Luxembourg has a fantastic opportunity. It is somehow a small but highly innovative and reactive market with a robust financial infrastructure and actors. InFine.lu has that strength to connect auditors, accountants, lawyers, microfinance practitioners, fintech, academia, and others. We need to build more on each other. Luxembourg has the capacity to move fast because there are short hierarchies and great ideas. We need to capitalize on that strength. SPTF is fully committed to supporting and to coordinating within that infrastructure to continuously show the example of truly responsible finance.