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>Posted by Robin Ratcliffe
I am writing at the end of Day One of the VIII National Conference on Microfinance organized in Moscow by the Russian Microfinance Center. Inaugurated last night by Princess Maxima of The Netherlands (who is the UN Secretary General’s Special Advocate for Financing for Development) and Professor Mohammed Yunus, along with a number of representatives of the Russian Ministries of Finance and the Economy, the conference brings together some 400 microfinance players from across Russia.
As the director of The Smart Campaign I’ve been invited to moderate a panel on Consumer Protection in Microfinance, a topic that I am not quite sure is so much on the minds of those in the Russian setting as it is in so many other parts of the world. Why? The sector is very young (10 years at most) and reaches just 600,000 clients. Much of the activity is dominated by small business lending carried out by national and regional government development funds at prime plus 1% at most.
> Posted by Cara Forster
How do MFIs implement client protection principles? Until now, we have only been able to guess at the answer to this important question. But thanks to the MIX, we now have some preliminary data, giving us a first glimpse of what is going on inside MFIs.
The MIX is testing its Social Performance reporting framework, a self-reporting survey covering various social performance issues. Question 8 of the survey focuses on client protection, and is based upon the Six Principles of Client Protection of The Smart Campaign. The MIX has received responses from over 200 MFIs so far, but has only processed and posted publically the results from the first 53 MFIs. The information in this post is based on an analysis of these first 53 institutions, which represent 29 countries and about 10 million total borrowers.
1. Nearly all of the surveyed MFIs have multiple strategies for avoiding client over-indebtedness.
- 91 percent of MFIs evaluate repayment capacity and 85 percent have explicit written guidance on borrower debt thresholds. A majority (57 percent) obtain information on existing client debt levels.
- Almost 40 percent of the MFIs reported on the percentage of their borrowers who also borrow from other financial institutions. Among the countries with a high incidence of multiple borrowing were Read the rest of this entry »
> Posted by Elisabeth Rhyne
I’m blogging from the annual meeting of the MicroFinance Network hosted this year by Equity Bank in Nairobi. Bob Annibale of Citi Microfinance led the group of CEOs from 25 leading MFIs around the world in a discussion of the impact of the global financial crisis on their institutions.
It’s no surprise that a challenge at the top of everyone’s list was avoiding overindebting clients, especially when clients can borrow from several MFIs in the same location. This is something I saw first hand on a field visit to the large settlement of Karangwari, where not only Equity Bank but also K-Rep Bank, Kenya Women Finance Trust, Faulu, and Jamii Bora were active. Carlos Labarthe of Compartamos noted that in Peru, with a very competitive microfinance market, the highly proficient credit bureau plays a key role in keeping overindebtedness down. Other network members contrasted this with Morocco, which lacks credit reference services, leaving lenders with no reliable way to find out about the existing debt of their clients. Carlos made a strong appeal to Microfinance Network members: “We have to help build the credit bureaus in our countries.” Read the rest of this entry »
>Posted by Amanda Powell
We re
cently introduced the Smart Campaign as a global effort to unite microfinance leaders around instituting client protection practices in all that we do. Today, Slate Magazine cited the Smart Campaign as a method to implement client protection standards across the microfinance industry. The article also encourages readers to support organizations that put clients first, including Smart Campaign endorsers. Read Slate’s article here on how client protection benefits industry members and clients alike. You can also read more about the Smart Campaign and the principles our endorsers support at http://thesmartcampaign.org/.
>Posted by Amanda Powell
After months of research, planning, and collecting feedback from microfinance industry leaders, we are ready to introduce The Smart Campaign (formerly known as the Campaign for Client Protection in Microfinance). This campaign is a global effort to unite microfinance leaders around a common goal: to enhance client protection in all that we do – to better serve our clients, increase employee satisfaction, and strengthen the microfinance industry overall. We want to see the microfinance industry be a leader in responsible finance and an example to “mainstream” finance.
As part of our official introduction to the campaign, we will be hosting an international teleconference with top industry leaders. It will take place on Wednesday, October 21st, at 10:00 a.m. (Eastern Standard Time, US**). Click here to RSVP for the teleconference. (Please take note that the phone call will take place in English)
On the call, we will:
- Present the Campaign’s new look
- Update you on our activities since the 2008 Clinton Global Initiative announcement
- Provide you with an inside look at upcoming initiatives from The Smart Campaign, and
- Learn about emerging trends in client protection from top industry leaders
As we present the new look of The Smart Campaign we hope you will join us for this teleconference.
Please continue to follow the development of the Campaign as we strive to keep clients first in microfinance and bring full financial inclusion to people around the world.
** Seattle, 7:00a.m.; Mexico, Colombia, 9:00a.m.; Bolivia, Washington, DC, 10:00a.m.; Burkina Faso, 2:00p.m.; Switzerland, South Africa, 4:00p.m.; Egypt, Uganda, 5:00p.m.; India, 7:30p.m.; Cambodia, 9:00p.m.; Philippines, 10:00p.m.
> Posted by Sergio Guzmán
After almost four months since I initially complained about the privacy of my information required by an insurance company, the company’s defensor del cliente, or client ombudsman (an office required by Colombian law), has determined to admit my complaint. I had previously protested about one clause that required me to give the company permanent and irrevocable rights to my information. You can read all about it here.
You’re probably thinking, wasn’t this complaint lodged about 4 months ago? Well, it turns out that after I sent my original complaint to the insurance company, they did nothing with it for about 3 weeks, then had someone from their customer service department call me. After that the company’s client ombudsman contacted me asking for me to submit my complaint in writing.
After I submitted my complaint, they took a few days Read the rest of this entry »
> Posted by Cara Forster
Here at the Center, we’re working to unite the microfinance industry behind the Six Principles of Client Protection. We believe these principles can stimulate practices that are good for both consumers and providers of financial services. We believe that treating your customers fairly is not only the right thing to do, but also good business for any MFI.
Recently, I moderated a webinar on Transparent Pricing for a number of MFIs from the ACCION Network. This webinar was part of a series of presentations we’re conducting with these MFIs on the Six Principles. As in previous webinars, we heard from both microfinance practitioners and thought leaders on best practices and what works in the field.
One practitioner shared with us the set of practices that her institution uses to implement its commitment to transparency. She explained that this commitment to behaving transparently toward clients was good for the institution’s financial bottom line. Among the benefits she listed were lower exit rates, increased customer loyalty, increased repayment rates, and stronger relationships between clients and loan officers. She explained that her institution had even developed several indices to track customer satisfaction, service quality, and adherence to standards. Read the rest of this entry »
> Posted by Kelley Mesa and Sergio Guzmán
As the Campaign for Client Protection revves up to officially launch this fall, we stepped out in Colombia to meet with and interview MFI leadership, staff, and clients and learn about what’s being done to ensure that client-protection practices at the heart of the six principles are making their way into everyday client interactions.
Client showing amortization schedule to Sergio.
During all of our interviews, one principle specifically stood out—transparent pricing. Here in Colombia the institutions we’ve visited have worked diligently to ensure that clients have the knowledge and access to resources to understand the terms and conditions of their loans.
In addition to a clear table of interest rates posted on the wall was a point-by-point description of the loan, applicable taxes, and applicable fees. One institution showed clients their requested amount, followed by the required deductions and their costs—taxes (in Colombia, they tax 4 pesos per 1,000 transaction—although the government allows for a person to exclude one savings account from this tax), credit check costs, etc—and then listed the exact amount that the client would receive. The funds are distributed ONLY after the client signs and fingerprints this document. Read the rest of this entry »
> Posted by Charlotte Connors
I’ve just read today’s Wall Street Journal article about Microfinance ‘Bubbles.’ Having recently entered the field of microfinance myself, it occurred to me that while the Journal called attention to an important issue, there is one crucial point that the they overlooked. The microfinance industry is tight. It’s like a large extended family – one that acknowledges challenges and deals with them. One such challenge is that of how to keep clients as the central focus of this fast-growing industry, and the industry has addressed this challenge in a collaborative and proactive way.
Twenty-seven industry leaders and more than six hundred MFI’s, Investors, Donors, Networks and Associations have gotten behind the Campaign for Client Protection in Microfinance. First announced at the Clinton Global Initiative in September 2008, the Campaign, under the leadership of the Center for Financial Inclusion at ACCION International and the Consultative Group to Assist the Poor (CGAP), seeks to unite microfinance providers worldwide to develop and implement standards for the appropriate treatment of low-income clients, based on six principles, which the Campaign aims to embed within the fabric of the microfinance community. The first of these principles is avoidance of over-indebtedness (which has the subject of the WSJ article). Read the rest of this entry »
> Posted by Kelley Mesa
The Campaign for Client Protection’s Self Assessment Guide is now available in Spanish. You can download it here.
La guía de auto-evaluación de protección al cliente está ahora disponible en español. Puede descargarla acá.
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