1. The Smart Campaign – Evolution of Client Protection Principles Isabelle Barres, Director, the Smart Campaign Center for Financial Inclusion at ACCION April 19, 2011

2. 2 Timeline of the Development of Principles 2008 & 2009 Center for Financial Inclusion’s Beyond Codes project and dialogue groups produce learning on client protection 2008 Pocantico Declaration from microfinance leaders emphasizes client protection failures 2004 ACCION adopts a statement of principles developed by the MicroFinance Network (MFN) 2010 The Smart Campaign defines six client protection principles 2011: Discussions on how principles should be refined and/or broadened are ongoing

3. 3 The Client Protection Principles Revised (Proposed)Original 1. Appropriate Product Design Prevention of overindebtedness becomes a lead issue under credit 1. Avoidance of Overindebtedness This principle was initially appropriate product design (though generally cited as avoiding overindebtedness) Products and delivery channels will be designed with the intent to provide value to clients. Providers will analyze the appropriateness of products and channels with a high expectation that responsible use will not cause clients harm, and in particular will not lead to over- indebtedness. Core elements include: suitability; simplicity; affordability; suitable product delivery; no waivers of client rights; and minimum changes.

4. 4 The Client Protection Principles Revised (Proposed)Original 2. Transparency2. Transparent and Responsible Pricing Separated in order to highlight the importance of transparency as a basic principle while retaining the focus on responsible pricing. Providers will communicate clear, sufficient and timely information in a manner that clients can understand, so that clients can make informed decisions. The need for transparent information on pricing, terms and conditions of products is highlighted. Core elements include: clear use of language; complete cost information; timely provision of information; advising clients of their rights; and transparency issues when using banking agents.

5. 5 The Client Protection Principles Revised (Proposed)Original 3. Responsible PricingSeparated from Transparent Pricing. Pricing, terms and conditions will be set in a way that is affordable to clients while allowing for financial institutions to be sustainable. Providers will strive to provide positive real returns on deposits. Core elements include: price-setting process, fees and setting returns on deposits.

6. 6 The Client Protection Principles Revised (Proposed)Original 4. Responsible Treatment of Clients Collections practices are highlighted Ethical staff behavior is included here Introduces a new item: non-discrimination 3. Appropriate Collections Practices This is credit-focused and so needed to be subordinated to a more inclusive item. 4. Ethical Staff Behavior Moved to Responsible treatment of clients Financial service providers and their agents will treat their clients fairly and respectfully. They will not discriminate. Providers will ensure that adequate safeguards are in place to detect and correct corruption as well as aggressive or abusive treatment by their staff and agents, particularly during the loan sales and debt collection processes. Core elements include: commitment to a code of ethics; non- discrimination; appropriate sales techniques and staff incentive structure; preventing corruption; and client feedback.

7. 7 The Client Protection Principles Revised (Proposed)Original 5. Effective Complaint Resolution Unchanged except for new name 5. Redress of Grievances Providers will have in place timely and responsive mechanisms for complaints and problem resolution for their clients and will use these mechanisms both to resolve individual problems and to improve their products and services. Core elements include: complete policy and procedures for managing complaints; ensuring effectiveness; and advising clients of their rights.

8. 8 The Client Protection Principles Revised (Proposed)Original 6. Privacy of Client Data Unchanged 6. Privacy of Client Data The privacy of individual client data will be respected in accordance with the laws and regulations of individual jurisdictions. Such data will only be used for the purposes specified at the time the information is collected or as permitted by law, unless otherwise agreed with the client. Core elements include: information security; information provided to clients about their rights and responsibilities; waivers of privacy rights; data that could be used for discriminatory purposes; and sharing client data.

9. 9 The Client Protection Principles – Summary Revised (Proposed)Original 1. Appropriate Product Design Prevention of overindebtedness becomes a lead issue under credit 1. Avoidance of Overindebtedness This principle was initially appropriate product design (though generally cited as avoiding overindebtedness) 2. Transparency2. Transparent and Responsible Pricing Separated in order to highlight the importance of transparency as a basic principle while retaining the focus on responsible pricing. 3. Responsible Pricing 4. Responsible Treatment of Clients Collections practices are highlighted Ethical staff behavior is included here Introduces a new item: non-discrimination 3. Appropriate Collections Practices This is credit-focused and so needed to be subordinated to a more inclusive item. 4. Ethical Staff Behavior Moved to Responsible treatment of clients 5. Effective Complaint Resolution Unchanged except for new name 5. Redress of Grievances 6. Privacy of Client Data Unchanged 6. Privacy of Client Data

10. 10 What’s next? April 2011: public comment period May 2011: incorporate feedback June 2011: present to Smart Campaign Steering Committee July – December 2011: develop roll-out plan for new principles; add indicators

11. 11 To comment on the proposed principles, go to: www.smartcampaign.org > “What’s happening” > Download Revised 2-page CPP Document Please let the Smart Campaign know if you agree with these revisions by April 30, 2011, by sending an email to comments@smartcampaign.org > Download CPP Guidance Document If you wish to comment on or contribute to this document, please send an email to comments@smartcampaign.org www.smartcampaign.org comments@smartcampaign.org Thank you!