Principle #1 – Appropriate Product Design and Delivery This presentation is made possible by the Smart Campaign www.smartcampaign.org   [Introductions of facilitator(s) and participants]

Agenda Client protection principles Principle #1 in practice Participant feedback Tools for improving practice Conclusion and call to action This is the agenda for today’s discussion. We will begin by reviewing a summary of the Seven Principles of Client Protection. 2

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 [Each principle is listed, along with how the Smart Campaign defines the principle]: Appropriate product design and delivery Providers will take adequate care to design products and delivery channels in such a way that they do not cause clients harm. Products and delivery channels will be designed with client characteristics taken into account. Prevention of over-indebtedness Providers will take adequate care in all phases of their credit process to determine that clients have the capacity to repay without becoming over-indebted. In addition, providers will implement and monitor internal systems that support prevention of overindebtedness and will foster efforts to improve market level credit risk management (such as credit information sharing). Transparency Providers will communicate clear, sufficient and timely information in a manner and language clients can understand so that clients can make informed decisions. The need for transparent information on pricing, terms and conditions of products is highlighted. Responsible 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. Fair and respectful treatment of clients Financial service providers and their agents will treat their clients fairly and respectfully. They will not discriminate. Providers will ensure adequate safeguards 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. 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. Mechanisms for complaint resolution 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. 3

Agenda Client protection principles Principle #1 in practice Participant feedback Tools for improving practice Conclusion and call to action Now, let’s discuss how institutions put Principle #1 into practice. 4

Appropriate product design and delivery The Principle in Practice: Providers take adequate care to design products and delivery channels in such a way that they do not cause clients harm. Products and delivery channels are designed with client characteristics taken into account. Consider this: Appropriate products and services not only provide access to clients, but they also create value for clients. Financial service providers have a responsibility to exercise good faith in designing products and delivery channels that are suitable for clients and to not take advantage of client inexperience and/or underdeveloped markets. They should take active steps to consider the characteristics of target clients during the design process. Products should function as advertized, provide value for money, and not be deceptive in design. It is not enough to simply provide access to financial products and services. Providers should take steps to ensure that these products and services create value for clients.

Services are reliable, convenient, and function as advertised. The Principle in Practice Suitable Products Suitable Design Suitable Delivery Multiple and/or flexible loan products address different business and family needs. Repayment schedules are flexible and match cash flows. Loan size matches financial need. Services are reliable, convenient, and function as advertised. These are the good practices that the Smart Campaign has defined for this principle.

The Principle in Practice (Continued) Simple Products Affordable Products Minimum Changes Product terms and conditions are easy for clients to understand and compare. The product cost, size (or coverage), and frequency of payment fit within the client’s capacity to pay. Changes to the product (cost, terms, conditions) are minimal/ infrequent. These are the good practices that the Smart Campaign has defined for this principle.

Beyond credit Savings Payments Service provider covers costs but does not deplete small savings through excessive fees. Clients are not excluded from savings, nor are gradual savers penalized. Savings Service provider makes payments in a reasonable amount of time. Clients know when to expect the payment and have access to their money quickly. Payments This principle also applies to savings, insurance, and payments. Here are two examples.

Agenda Client protection principles Principle #1 in practice Participant feedback Tools for improving practice Conclusion and call to action Now, we want to hear from you. 9

Feedback from participants Does your financial institution offer multiple loan products or flexible ones that address different businesses and family needs? How do you know if clients think your products/services are convenient and easy to use? How do client characteristics (e.g. location, gender, access to technology) affect how you deliver your products? [At this point in the presentation, ask participants for their feedback on the information presented so far. Use these questions (or others that have come up during the presentation) to stimulate discussion.]

Agenda Client protection principles Principle #1 in practice Participant feedback Tools for improving practice Conclusion and call to action Now, let’s look at some of the tools that are available from the Smart Campaign to help practitioners improve on this principle. 11

Tools available from the Smart Campaign Technical Tools Getting Started Questionnaire: Self Assessment for MFIs Smart Lending Smart Savings Educating Clients About Client Protection A Technical Guide for Investors Samples and Case Studies How to Talk to a Bank: A Brochure for Consumers Client Protection and Financial Education Simulation Each of these tools is available for download, for free, on the Smart Campaign website. www.smartcampaign.org

Agenda Client protection principles Principle #1 in practice Participant feedback Tools for improving practice Conclusion and call to action 13

Conclusion Appropriate products and services are in line with client needs. Appropriate delivery channels offer reliability and convenience. Appropriate product design and delivery is essential for preventing over-indebtedness. The Smart Campaign is developing tools to help practitioners adhere to this principle. Credit, savings, insurance, and payments products should be designed with client characteristics taken into account. [Read the summary on this slide]   [Use the Call to action questions, and any of the questions below, to stimulate discussion among participants]. How could one or more of the “good practice” examples be implemented in your institution? What other solutions have you seen (or would like to see)? Have you seen a similar (or different) practice in your institutions or elsewhere? Call to Action: What next steps can your institution take to ensure that products and services are designed and delivered in an appropriate manner?

Thank you! Endorse the Smart Campaign. Visit www.smartcampaign.org Sign up to receive news and information. What’s next? Download the Getting Started Questionnaire and conduct a client protection self-assessment. Thank you! Email us! comments@smartcampaign.org