Central Bank of Jordan Social Performance Indicators Guide

1 Central Bank of Jordan

2 Introduction The Central Bank of Jordan has adopted a set of Social Performance Indicators to assess the extent to which financial institutions contribute to achieving national development goals and promoting financial inclusion. This initiative aims to enhance the transparency and accountability of financial institutions regarding their social role, thereby encouraging them to integrate social considerations into their strategies and operations.

This document outlines two main components of the Social Performance Indicators: 1) Defining the social objectives that financial institutions should adhere to, aligned with national priorities and international best practices; and 2) Specifying the metrics and tools used to measure and evaluate these objectives.

Given the importance of assessing the social performance of financial institutions in Jordan, this document provides a comprehensive framework for evaluating their social performance through standardized metrics and tools. It includes a set of indicators covering various aspects related to the social dimension and its impact on individuals and communities. The evaluation tool aggregates individual indicator scores into an overall score, providing a holistic view of the institution's social performance across all stakeholders.

The evaluation tool also assigns weights to different indicators based on their relative importance, allowing for a balanced assessment that reflects the diversity of social impacts. It considers both quantitative and qualitative data, ensuring a comprehensive understanding of the institution's social contributions.

Adopted Indicators Set The indicators are designed to cover the two main components of the Social Performance Indicators. They are categorized into three main social objectives:

• Objective "Who" (relating to target groups and beneficiaries).
• Objective "How" (relating to the types of financial services provided).
• Objective "Why" (relating to the outcomes and impacts achieved).

These objectives consist of 25 indicators in total, divided as follows: 5 indicators under the "Who" objective, 3 indicators under the "How" objective, and 17 indicators under the "Why" objective. These indicators cover various dimensions including gender, youth, persons with disabilities, and other vulnerable groups.

First Social Objective – Who The five indicators defining this objective are:

• Number/percentage of women and men served.
• Number of new clients acquired.
• Number of clients reached through digital channels.
• Number of clients reached through mobile money or agent networks.
• Number of clients served who are from marginalized/disadvantaged groups.

These indicators are measured by comparing the number of clients served against the total number of clients, specifically focusing on the social dimension and targeting underserved segments. The data is collected from the institution's client database and reported annually.

The indicators are calculated based on the following formulas:

• For "Number/percentage of women and men served": (Number of women/men served / Total number of clients served) * 100.
• For "Number of new clients acquired": Total number of new clients acquired during the reporting period.
• For "Number of clients reached through digital channels": Total number of unique clients who accessed services via digital platforms.
• For "Number of clients reached through mobile money or agent networks": Total number of unique clients who transacted via mobile money or agents.
• For "Number of clients served who are from marginalized/disadvantaged groups": Total number of clients identified as belonging to vulnerable groups (e.g., low-income, rural, refugees, etc.).

Second Social Objective – How The three indicators defining this objective are:

• Percentage of products/services offered that are socially inclusive.
• Number of branches/offices located in underserved areas.
• Number of partnerships established with community-based organizations.

These indicators are measured by analyzing the product portfolio and distribution network. Specifically:

• "Percentage of socially inclusive products": (Number of socially inclusive products / Total number of products) * 100.
• "Number of branches in underserved areas": Count of branches located in designated underserved regions.
• "Number of partnerships": Count of active partnerships with NGOs or community groups.

Third Social Objective – Why The outcomes and impacts are categorized into: Business Impact, Environmental Impact, and Social Empowerment, defined as follows:

• Impact on Business: Increase/decrease/stability in revenue/profit margins due to social initiatives.
• Environmental Impact: Reduction in carbon footprint/waste generation through green banking practices.
• Social Empowerment: Improvement in clients' income levels, education access, and living standards.

These outcomes are measured using a combination of quantitative financial data and qualitative surveys. For instance, business impact is assessed by comparing pre- and post-initiative financial statements. Environmental impact is measured by tracking energy consumption and waste management records. Social empowerment is evaluated through client satisfaction surveys and longitudinal studies on client well-being.

In addition to the above, the document emphasizes the importance of monitoring and evaluating the social performance indicators regularly. Institutions are required to submit annual reports detailing their progress against each indicator. The Central Bank of Jordan will review these reports and provide feedback to ensure continuous improvement.

Furthermore, the guide encourages institutions to engage with stakeholders, including customers, employees, and local communities, to gather diverse perspectives on their social performance. This participatory approach helps identify areas for improvement and ensures that the indicators remain relevant and impactful.

Social Performance Indicator Tool First Social Objective "Who"

• Number/percentage of women and men served.
• Number of new clients acquired.
• Number of clients reached through digital channels.
• Number of clients reached through mobile money or agent networks.
• Number of clients served who are from marginalized/disadvantaged groups.
• Percentage of clients who are women/men.

Second Social Objective "How"

• Percentage of products/services offered that are socially inclusive.
• Number of branches/offices located in underserved areas.
• Number of partnerships established with community-based organizations.

Third Social Objective "Why" Impact on Business

• Increase/decrease/stability in revenue/profit margins due to social initiatives (↑↓→).
• Reduction in operational costs associated with social programs.

Environmental Impact

• Reduction in carbon footprint/waste generation through green banking practices.

Social Empowerment

• Improvement in clients' income levels, education access, and living standards.

• Increase in the number of clients accessing educational/healthcare services through bank partnerships.

• Enhancement of financial literacy among clients.

• Improvement in clients' credit scores/access to credit.

• Reduction in poverty rates among served clients.

• Increase in employment opportunities created by bank-supported businesses.

• Mandatory collection of key indicators starts from the end of 2024.

• Full reporting of all indicators, including those related to the SDGs, begins in 2025.

The Central Bank of Jordan will monitor compliance with these requirements and may impose sanctions for non-compliance.

Indicator Data Sources The primary source of data for social performance indicators is the institution's internal systems. Secondary sources include external audits and third-party evaluations. Institutions must ensure the accuracy and reliability of their data by implementing robust data management practices.

Data Collection Methods Institutions are required to collect data on a regular basis, typically monthly or quarterly. The data should be stored securely and made available for audit purposes. Institutions should also maintain detailed records of their social initiatives and their outcomes.

Definition of Social Performance Indicator A social performance indicator is a metric used to measure the effectiveness of an institution's social initiatives. It provides insights into the institution's contribution to societal well-being and its alignment with national development goals.

Reporting Frequency Institutions must submit annual reports on their social performance. The reports should include detailed information on each indicator, along with supporting documentation. The Central Bank of Jordan will publish aggregated results to promote transparency and benchmarking.

Questions Regarding Social Performance Criteria and Answers The evaluation tool uses a scoring system to assess performance. Each indicator is assigned a score based on predefined criteria. For example:

• "Did the institution serve underserved populations?" (Answer: 0 = No, 1 = Partially, 2 = Yes).
• "Did the institution improve clients' financial literacy?" (Answer: 0 = No, 1 = Somewhat, 2 = Significantly).

Standardized Indicators The standardized indicators are designed to facilitate comparison across institutions. They are based on international best practices and adapted to the local context. Institutions are encouraged to adopt these indicators to enhance comparability and transparency.

Reliability The reliability of the indicators depends on the quality of the underlying data. Institutions must implement strong data governance frameworks to ensure accuracy and consistency. Regular audits and validations are recommended to maintain data integrity.

Level of Difficulty in Data Collection Collecting data on social performance can be challenging, especially for smaller institutions. To address this, the Central Bank of Jordan provides guidance and support to help institutions build their capacity. Simplified reporting formats are available for smaller entities.

Calculation Mechanism The calculation mechanism involves aggregating individual indicator scores to produce an overall social performance score. The formula for calculating the score for the "Number/percentage of women and men served" indicator is: Score = (Number of women/men served / Total number of clients served) * Weight.

Reports Institutions must compile comprehensive reports on their social performance. These reports should include narrative explanations alongside quantitative data. The reports should highlight achievements, challenges, and future plans. The Central Bank of Jordan will use these reports to inform policy decisions and regulatory adjustments.