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Client Protection: Are we there

Yet? The State of Practice, 2011

European Microfinance Week

November 3, 2011

Isabelle Barrès

www.smartcampaign.org


2008-2009• Center for

Financial Inclusion’s Beyond Codes project and dialogue groups produce learning on client protection

2008

2004

• Many organizations adopt their own statement ofprinciples

2009

• The industry comes together to start a client protection Campaign

• Smart Campaign defines 6 Client Protection Principles

• Pocantico Declaration from microfinance leaders emphasizes client protection failures

2011

• October: Smart Campaign officially launched

• Principles updated to 7 Principles

• Certification Program

Input from the industry on the

certification program

Timeline of the Smart Campaign


Do No Harm! Improve Clients’ Lives

Client Protection

MFT

CampaignSmart• Invest in systems to

manage double bottom line

• Measure social goals

• Tailor services to client need and vulnerability

Progress Out of Poverty Index

(PPI)

+ Social Commitment

Investor Principles for Inclusive Finance

Social Performance


Client protection: 3 pillars

4

Regulation for client protection and supervision RESPONSIBLE

FINANCE

RESPONSIBLE FINANCE

Financial education and capability

Standards and codes of conduct for the industry


The State of Practice Report

1. How is the microfinance industry moving from awareness to implementation of client protection?

2. How is the industry currently doing on the implementation of the Client Protection Principles (CPPs)?


Client Protection Principles

• Appropriate product design and delivery

• Prevention of over-indebtedness

• Transparency

• Responsible pricing

• Fair and respectful treatment of clients

• Privacy of client data

• Mechanisms for complaint resolution


Smart Campaign Activities

• Outreach• Partnerships with 30 national and regional

associations• Participation in major conferences and events where

client protection continues to be an important topic• Through endorsements and partnerships, touching

organizations that serve over 40 million low income people

• Website and many tools available in 5 languages


Strategic Partners

Network Name Country/Region Level of engagement**ACCESS -ASSIST India 2

AEMFI Ethiopia 1AFMIN Africa Region 1AMFA Azerbaijan 1AMFI Kenya 1

AMFIU Uganda 1AMIR Rwanda 1

AMSOFIPO Mexico 2APIM Burkina Faso 1APIM Mali 1

APSFD-CI Ivory Coast 1APSFD-Senegal* Senegal NA

CAM China 1CMF Nepal 1

Consortium Alafia Benin 1COPEME Peru 2

Emprender Colombia 1FAMF* Cape Verde NA

FINRURAL Bolivia 1GHAMFIN Ghana 1


Network Name Country/Region Level of engagement**MAMN Malawi 1MCPI Philippines 1MFC Eastern Europe and Central Asia 1

Pakistan Microfinance Network Pakistan 1ProDesarrollo Mexico 1

RADIM Argentina 2Red de microfinanzas del Paraguay Paraguay 2

REDCAMIF Central America Region 1RFR Ecuador 1

Russian Microfinance Network Russia 1Sa Dahn India 2Sanabel MENA Region 1

YMN Yemen 2ZAMFI* Zimbabwe NA

Strategic Partners cont.

* In discussion.

** Level 2 refers to associations that have committed to requiring their members to complete a client protection self-assessment with the Smart Campaign's Getting Started Questionnaire, report to the MIX annually, and participate in CPP trainings. Level 1 associations encompass all of the above, but additionally are conducting a number of in-depth, third-party client protection assessments.


Smart Campaign Activities Cont.

• Tool development and dissemination• Now 40+ tools on www.smartcampaign.org• 81,000 hits

• Trainings• 53 Trainers and 42 Assessors• 1000 managers and staff of MFIs

• Collaborations with key industry players• CGAP, MFTransparency, SPTF, etc.• Raters, Investors


Rank Tool Name No. of Hits

1 Getting Started Questionnaire: Client Protection Self-Assessment for Microfinance Institutions 6424

2 Client Protection Principles Training Series 42213 Responsible Pricing: The State of the Practice 23854 Microfund for Women: Client Business Evaluation Toolkit 20075 Building Institutional Culture around a Code of Ethics at Compartamos 20046 Smart Note: Collections with Dignity at FinComún 19357 Smart Lending: Client Protection in the Individual Loan Process 18408 Smart Note: Implementing an Industry Code of Conduct at PMN 18059 Client Protection and Financial Education Simulation 1751

10 How to Develop an Institutional Code of Ethics 167311 Conducting Client Protection Assessments: A Guide 159212 Smart Note: Facing Over-Indebtedness at Partner Microcredit Foundation 141013 Banco Solidario: Loan Officer Training Manual 139214 Complaints-Analysis Spreadsheet (FMMB) 130915 Complaints-Handling Manual (Tamweelcom) 1222

Top 15 tools – Campaign Site


CPP Implementation

1. Two streams of self-reported data submitted by MFIs: The Smart Campaign’s “Getting Started Questionnaire” and the MIX Social Performance Reports

2. Specific examples of client protection practices of MFIs around the world

3. Third-party assessment data, the CPP Benchmarks 0.1


Self Reported vs. 3rd party data


CPP Benchmarks 0.1


CPP Benchmarks 0.1, Cont.


CPP Benchmarks 0.1, Cont.


Prevention of Over-indebtedness


Transparency


Responsible Pricing


Fair/ Respectful Treatment of Clients


Privacy of Client Data


Mechanisms for Complaint Resolution


Case Studies

• Setting Standards to Prevent Over-indebtedness at AccessBank, Azerbaijan

• An Investor Investing in Client Protection, Oikocredit• Sushila and Revati Help Ujjivan Teach by Example,

India• Gatsby Shows All, Uganda• Arohan’s Clockwork Microfinance, India• Treating Defaulters with Dignity at FMM Popayan,

Colombia• Alo, Fonkoze? Haiti


In Short…

• Client protection in microfinance is still relatively new, but thriving

• Organizations are at different levels of implementation• The state of practice is improving


What Comes Next?

• Tools Trainings• Client Voice Task Force

• Client Education Resource Library focusing on rights and responsibilities

• Questionnaire to gather information from clients around client protection

• Certification• Public Comment• Testing• Pilot Phase


Certification Program

Main rationale for the Client Protection Certification program

Minimum standards for client protection How much will certification cost? What happens if a financial institution is certified? What happens if a financial institution is NOT certified? How often will the certification be done? How will the certification be used? Who will certify? Other intended outcomes from certification Tentative proposal will be presented


Timeline for Certification

June 2010 Task force launched

February 2011 First meeting of the Technical sub-committee of the Certification Task Force

October – November 2011 Public comment period on the certification program:Open webinars for Q&A Send your comments by email

November 3, 2011 Session on certification at EMW16:00-17:30

November – Early 2012 Testing period for indicators and benchmarks.

2012 Launch of Pilot Client Protection Certification Program with eligible specialized microfinance rating agencies.


Thank you!

Questions? Comments?Send us an email:

[email protected]

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