Client Protection: Are we there Yet? The State of Practice, 2011 European Microfinance Week November 3, 2011 Isabelle Barrès

Center for Financial Inclusion’s Beyond Codes project and dialogue groups produce learning on client protection Many organizations adopt their own statement of principles 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 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 1 AFMIN Africa Region 1 AMFA Azerbaijan 1 AMFI Kenya 1 AMFIU Uganda 1 AMIR Rwanda 1 AMSOFIPO Mexico 2 APIM Burkina Faso 1 APIM Mali 1 APSFD-CI Ivory Coast 1 APSFD-Senegal* Senegal NA CAM China 1 CMF Nepal 1 Consortium Alafia Benin 1 COPEME Peru 2 Emprender Colombia 1 FAMF* Cape Verde NA FINRURAL Bolivia 1 GHAMFIN Ghana 1

Network Name Country/Region Level of engagement** MAMN Malawi 1 MCPI Philippines 1 MFC Eastern Europe and Central Asia 1 Pakistan Microfinance Network Pakistan 1 ProDesarrollo Mexico 1 RADIM Argentina 2 Red de microfinanzas del Paraguay Paraguay 2 REDCAMIF Central America Region 1 RFR Ecuador 1 Russian Microfinance Network Russia 1 Sa Dahn India 2 Sanabel MENA Region 1 YMN Yemen 2 ZAMFI* 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 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

RankTool NameNo. of Hits 1 Getting Started Questionnaire: Client Protection Self-Assessment for Microfinance Institutions Client Protection Principles Training Series4221 3Responsible Pricing: The State of the Practice2385 4Microfund for Women: Client Business Evaluation Toolkit2007 5Building Institutional Culture around a Code of Ethics at Compartamos2004 6Smart Note: Collections with Dignity at FinComún1935 7Smart Lending: Client Protection in the Individual Loan Process1840 8Smart Note: Implementing an Industry Code of Conduct at PMN1805 9Client Protection and Financial Education Simulation How to Develop an Institutional Code of Ethics Conducting Client Protection Assessments: A Guide Smart Note: Facing Over-Indebtedness at Partner Microcredit Foundation Banco Solidario: Loan Officer Training Manual Complaints-Analysis Spreadsheet (FMMB) 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. 3 rd 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 November 3, 2011 Session on certification at EMW 16:00-17:30 November – Early 2012Testing period for indicators and benchmarks. 2012Launch of Pilot Client Protection Certification Program with eligible specialized microfinance rating agencies.

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