1. Principle # 5 – Fair and respectful treatment of clients This presentation is made possible by the Smart Campaign www.smartcampaign.org

2. 2 1.Client protection principles 2.Principle #5 in practice 3.Participant feedback 4.Tools for improving practice 5.Conclusion and call to action Agenda

3. 3 1. Appropriate product design and delivery 2. Prevention of over-indebtedness 3. Transparency 4. Responsible pricing 5. Fair and respectful treatment of clients 6. Privacy of client data 7. Mechanisms for complaint resolution Client Protection Principles

4. 4 1.Client protection principles 2.Principle #5 in practice 3.Participant feedback 4.Tools for improving practice 5.Conclusion and call to action Agenda

5. 5 Fair and respectful treatment of clients The Principle in Practice: Providers and their agents treat clients fairly and respectfully. They do not discriminate. They will ensure safeguards are in place to detect and correct corruption. Consider this: Most abuses happen during the loan sales and debt collection processes—these need special attention by providers.

6. 6 Collections Policy PAR Policy Collateral Policy Employee recruitment and training Create a policy on the specific standards of professional conduct expected of all employees involved in collections (including third party staff). Do not endorse a policy of zero tolerance for PAR. Create a policy guaranteeing clients receive a fair price for any confiscated assets; create procedures to ensure collateral seizing is respectful of clients' rights; offer an explanation of the role of guarantors. Keep collateral secure, when stored at the FI. Recruit and train employees in line with the Code of Ethics. The Principle in Practice

7. 7 Train Staff on Code Train on Collections Non- discrimination Policy Rescheduling Policies Train staff on the Code of Conduct, and discuss with new employees the situations where the compliance with the Code might be a challenge. Train staff on collections practices, in particular, on acceptable and unacceptable practices. Create a non-discrimination policy toward clients. Apply rescheduling policies are applied in a consistent and fair way across the financial institution. The Principle in Practice

8. 8 Train Third- parties Inform Clients on Code Inform Clients on Collateral Inform Clients on Rescheduling Train third party collections staff on the same policies and hold them to the same standards as the institution’s employees. Inform clients of the main aspects of the Code of Conduct, including their right to complain and how to submit a complaint. Inform clients about procedures on collateral seizing. Document and communicate to clients about loan policies and procedures for rescheduling credit. The Principle in Practice

9. 9 The role of management Create a Code of Ethics for the institution. Communicate the importance of ethics to staff on a regular basis. Train staff to respond to ethical dilemmas tailored for their position. Empower managers to follow up on ethical complaints. Establish an Ethics Committee that rewards ethics and sanctions violations. Training today: Handling delinquent clients

10. 10 The code at the center Code of Ethics Management Internal Audit Human Resources

11. 11 Credit staff uses offensive or abusive language. Collections agents threaten clients or harass them at work, home, or their place of worship. Examples of inappropriate practices Offensive language and threats Collections agents enter a client’s home and/or seize property without a judicial order. The institution accepts collateral that may deprive borrowers of their basic survival capacity. Unethical seizure of property The institution subcontracts collections to businesses that are not subject to the same ethical standards as the institution. Subcontracting to unethical businesses Careless debt extension The institution issues automatic debt extensions.

12. 12 Effects on the client and the institution Clients mistrust the institution, and tell others. Inappropriate Collections Practices Clients mistrust the institution, and tell others. Staff rely on coercion for repayment, rather than good portfolio management. To avoid humiliation, clients go to extremes to repay their loans.

13. 13 Good Practices from Around the World One MFI includes “ethical behavior” in its annual performance reviews in order to give employees feedback on their behavior and find out how successful the organization has been in building an ethical culture. Another MFI designed a training program on ethical behavior that includes specific ethical dilemmas for different job functions. The training modules are based on experiences that employees face at work.

14. 14 1.Client protection principles 2.Principle #5 in practice 3.Participant feedback 4.Tools for improving practice 5.Conclusion and call to action Agenda

15. 15 Feedback from participants Have you received training at your institution that highlights ethical staff behavior? Appropriate collections practices? Can you describe an ethical lapse or ethical success at your institution or elsewhere? What kinds of collections practices have you seen at your own (or other) MFIs?

16. 16 1.Client protection principles 2.Principle #5 in practice 3.Participant feedback 4.Tools for improving practice 5.Conclusion and call to action Agenda

17. 17 Technical Tools Getting Started Questionnaire: Self Assessment for MFIsGetting Started Questionnaire: Self Assessment for MFIs and Guide on Smart AssessmentsGuide on Smart Assessments How to Develop a Code of EthicsHow to Develop a Code of Ethics and ExamplesExamples Smart Operations Smart Lending- Individual and GroupIndividual Group Smart SavingsSmart Savings and Smart MicroinsuranceSmart Microinsurance Samples and Case Studies Essential Documents for New Clients Essential Documents for New Clients (see Pledge) Collections Guidelines Code of Conduct for Collections from Swadhaar Smart Note: Collections with Dignity at FinComun Activities for Training Staff on Customers’ Rights Code of Conduct E-Learning Module Tools available from the Smart Campaign

18. 18 An institution's corporate culture should value and reward high standards of ethical behavior and service. What is considered appropriate/inappropriate behavior should be specified in advance and staff should be trained regularly. Clients must be treated with dignity at all times, and collection efforts should never be abusive or coercive. Conclusion Call to Action: What next steps can your institution take to create a corporate culture that values high ethical standards among staff? What next steps can your institution take to improve collections practices?

19. 19 Feedback from Participants Endorse the Smart Campaign. Visit www.smartcampaign.org Sign up to receive news and information. Download the Getting Started Questionnaire and conduct a client protection self-assessment.Getting Started Questionnaire What’s next? Email us! comments@smartcampaign.org