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> Posted by Andrew Fixler, Associate, CFI

“Cautious optimism” was the overriding sentiment towards the Indian financial inclusion investment space at the fall 2014 Financial Inclusion Equity Council (FIEC) meeting in Zurich. Four years after the Andhra Pradesh crisis, in financial year 2014 the regulated microfinance market in India saw its loan portfolio grow by 35 percent and client outreach increase by 4.7 million individuals, achieving a record 28 million clients. Although, as FIEC member Christian Etzensperger of responsAbility Investments AG noted, this is “catch-up growth” for India, where only 35 percent of the adult population has a bank account. On an institutional level, the remarkable growth of Bandhan Bank, India’s largest microfinance institution, illustrates the successful scaling up of MFIs. While Etzensperger noted the “dynamic revival of the microfinance sector…partly due to the inertia of the Indian banks”, he also alluded to the significant role played by the policies of the newly elected Prime Minister, Narendra Modi, as well as those of the recently appointed Raghuram Rajan, Governor of the Reserve Bank of India. Indian investor sentiment in general soared on the news of these leaders taking the helm, a trend that clearly resonates in the Indian financial inclusion equity community.

What have these leaders done to inspire confidence in the trajectory of microfinance?

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> Posted by Dan Balson, Lead Specialist, The Smart Campaign

Visionfund Azercredit

Readers of this blog are likely familiar with the Smart Campaign, a global initiative to embed client protection into the institutional culture and operating principles of the microfinance industry. Smart Certification, introduced last year, awards special status to microfinance institutions (MFIs) that can demonstrate that they meet strong standards of client protection.

Getting Smart Certification is not easy. A third-party certifier conducts a thorough desk review and extensive field visit where the candidate MFI’s policies and practices are placed under a microscope. To become certified, MFIs must be in full compliance with all the Smart Campaign’s indicators, both in letter and in spirit. These indicators are derived from the seven Client Protection Principles and touch on everything from appropriate product design to the existence of effective complaint resolution mechanisms. The certification process often requires an MFI to make significant adjustments to its internal policies and practices. But once certified, an MFI can affirm its responsible practices to investors, staff, partners, regulators, and clients alike. To date, 26 organizations worldwide have received certification, covering nearly 9 million clients.

VisionFund Azercredit became the first MFI in Azerbaijan and in the Caucasus region to acheive certification. The Smart Campaign sat down with Mehriban Yusifova, VisionFund Azercredit’s Head of Marketing & Product Development, to better understand the significance of certification from the MFI’s perspective.

Smart Campaign (SC): When and why did VisionFund AzerCredit decide to get Smart Certified? What inspired you to pursue your certification?

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> Posted by Tyler Aveni, Research, PlaNet Finance China


Peer-to-peer (P2P) lending is on the rise – as evident by the hundreds of articles on the subject that have sprung up just this year. However, P2P, generally defined as individuals bringing together small sums of money to lend to other individuals, is hardly a new concept. Moreover, this process of lending amongst communities of small businesses and friends has been moving online for a decade now. And while money is now most commonly transferred between strangers, interconnectivity online has allowed the process to feel almost as intimate as lending among friends and family.

The two earliest entrants into the P2P industry have gained steady followings since their beginnings in 2005: Zopa, a large commercial P2P platform in the U.K. boasts high returns and low interest rates for participants; the U.S. non-profit Kiva facilitates philanthropic P2P lending, wherein microentrepreneur clients of “field partners” or local financial institutions in developing countries are paired with those willing to lend at a zero percent return (i.e. indirect P2P). Through nearly a decade of innovations and new players emerging, P2P has slowly become a disruptive force. Total origination remains moderate with some $2.4 billion originated through P2P in the U.S. last year, but growth has recently skyrocketed.The U.S. market is estimated to swell to$32 billion by 2016. By 2025, the global figure could be as much as one trillion.*

Why such fast growth?

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> Posted by Susy Cheston, Senior Advisor, CFI

The Credit Reporting section of the FI2020 e-zine (click to read)

The Financial Inclusion 2020 Round-Up 2014 e-zine, found on the CFI website, takes a look at progress toward financial inclusion in the year following the FI2020 Global Forum. It was at the Global Forum that five Roadmaps to Financial Inclusion were presented after two years of being developed and debated by dozens of financial inclusion experts. Now, imagine the editorial challenge of collapsing a year’s worth of activity around each Roadmap into just two pages each.

While it’s a fun read, I admit to a little cognitive dissonance as I page through the Round-Up. The brief analyses of where we stand around each of the Roadmaps to Financial Inclusion can be summed up in the quote “we’re not as far along as we think we are.” While that quote was about the Technology Roadmap, it could just as easily be said of the other Roadmaps: Financial Capability, Addressing Customer Needs, Client Protection, and Credit Reporting.

Yet despite the clear-eyed look at the ongoing challenges, the e-zine also tells a story of intense and productive activity by a wide range of actors. Legacy financial service providers—the heavy hitters with big resources and even greater reach—are investing heavily in financial inclusion. It’s not just for corporate social responsibility any more; it’s part of a new business strategy inspired by the discovery of an untapped and (they hope) profitable new market. Sprinkled in and around those vignettes are stories of scrappy start-ups doing the social entrepreneurship thing. Some of those services may not make it past 2015, but some of them have a “why didn’t I think of that” inevitability about them. The diversity of actors and the energy are impressive.

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The following post was originally published on the Microfinance Gateway.

As the microfinance industry grows and becomes more complex, governance plays an increasingly important role in managing sound institutions and preventing crises. Corporate governance provides the framework through which an institution’s diverse stakeholders—investors, board members, management, and employees—set the strategic vision, monitor performance, and manage risks.

The Center for Financial Inclusion at Accion has recently announced a partnership with The MasterCard Foundation to launch the Accion Africa Board Fellowship program. The new program will promote peer-to-peer learning on governance and risk management practices at financial institutions that serve low-income clients in sub-Saharan Africa, a region with more than 6.6 million microfinance clients.

We spoke with Beth Rhyne (left), Managing Director of the Center for Financial Inclusion at Accion, and Ann Miles (right), the Director of Financial Inclusion at The MasterCard Foundation, to learn more about their vision for the program.

Good governance helps an institution fulfill its mission, increase efficiency, and improve its ability to attract customers and investors. Why do you think the microfinance industry in Africa needs such a program at this time?

Miles: Good governance begins at the top of any organization. The policies that are set, and the signals that are sent, by board members and CEOs permeate throughout an organization. They are a major component, perhaps the major component, in determining how an organization succeeds in its given mission. So, how a board does its work is critically important, and it’s something that we at The MasterCard Foundation care about a lot.

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> Posted by Sonja Kelly, Fellow, CFI

Last week in Mexico City, tens of thousands of people took to the streets to voice their hope for a better Mexico. In a hotel that overlooked the demonstration, members of the World Savings Bank Institute met to talk about how to make a safer and more effective financial system for those at the base of the pyramid. In terms of inclusive finance, in recent months we’ve seen significant progress. During the meeting, Vice President of the National Banking and Securities Commission (CNBV) in Mexico, Bernardo Gonzalez, opened his remarks by putting up a list of the top 10 countries in this year’s Global Microscope. Modestly, he pointed out that five of the 10 were from Latin America. Perhaps more emphatically, he highlighted Mexico’s place—fifth on the list.

As a regulator, he should be proud. Mexico’s score this year is in part a reflection of the regulatory reforms that the country has been moving forward, with attention to customers at the base of the economic pyramid. While Mexico’s microfinance sector has been under scrutiny in recent years because of notoriously high interest rates, concerns of over-indebtedness, and commercial banks hesitant to go “down-market”, a new set of microfinance regulations attempts to change things.

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> Posted by Jeffrey Riecke, Communications Associate, CFI

New data shows the Cambodian microfinance market disbursed $1.79 billion in loans over the first three quarters of 2014, amounting to a 51 percent increase over last year’s Q1-3 figures. The data comes from the Cambodia Microfinance Association (CMA) and includes loans issued by 45 of the country’s MFIs. Last year’s total for the same period was $1.18 billion from 39 institutions. In a country where fewer than 20 percent of the adult population has access to formal financial services, such expansion in activity might be exciting, but is it sustainable for borrowers and institutions?

Some individuals who are unfazed by the rapid growth point to the recent economic strengthening enjoyed by the country. Cambodia’s GDP increased annually on average 7.7 percent between 1994 and 2013, and it’s expected to maintain a nearly equivalent trajectory in the years to come. On distributing this wealth, the country achieved its Millennium Development Goal of halving poverty in 2009. Agriculture in Cambodia is big, constituting about 35 percent of the country’s GDP. About 90 percent of those who are poor or who are vulnerable to slipping into poverty live in rural areas. More small and medium sized entrepreneurs making investments in farming efforts, or other income-generating activities, aligns with an expanding economy.

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> Posted by Lindsey Tiers, Communications and Operations, the Smart Campaign

As successful business leaders know, regular evaluation is vital to ensure that improvements are made and growth continues. Here at the Smart Campaign, it is time to reflect on our impact and evaluate the Campaign’s global activities so that we continue to achieve the objective of embedding client protection into the fabric of the microfinance industry. For this reason, we are reaching out to all industry stakeholders for feedback via a short survey.

Launched in September of 2009, the Smart Campaign is already five years old. With over 4,200 endorsers—1,400 of which are financial institutions working to improve client protection practices—it’s clear the message is spreading, and support for keeping the industry on track is strong. Client Protection Certification, launched in January 2013, has already seen 24 financial institutions meet the requirements of adequate client protection. Across these institutions, over 8.7 million clients have access to quality services and treatment. In addition, dozens of other MFIs are in the pipeline working to become certified. With nearly 100 tools available in English, plus translations in Spanish, French, Russian, Portuguese, and Arabic, the Smart Campaign website has become a valuable resource for any institution looking to improve client protection practices. The Client Protection Principles have even been incorporated into legislation and regulations for financial service providers in some countries – such as the Industry Code of Conduct in India.

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> Posted by Joshua Goldstein, Principal Director for Economic Citizenship & Disability Inclusion, CFI

Last August, I visited Wilmington, North Carolina to roast a friend on his sixtieth birthday with every intention of not thinking about financial inclusion or my work. Pure escapism was the only agenda and my complete itinerary. But on driving from the Wilmington Airport to his seaside home, my senses were assaulted by a series of gaudy, often neon-signed pawn shops named with pizazz like “Picasso Pawn” and “Flash Cash Jewelry and Pawn.” My professional curiosity had been piqued and it was inevitable that before reaching the beach paradise I would be taking an unexpected detour from my vacation.

You see, where I live in Boston, pawn shops are a relative rarity, so I had to take advantage of this opportunity. (And I have never watched any of the cable TV shows on pawn – which may put me in the minority.) The next day, I stopped at Pawn South on Oleander Avenue, and the perky staff guy was more than happy to talk of the role pawns played in his community. He told me some basic facts about this regulated industry:

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> Posted by Sonja Kelly, Fellow, CFI

If there’s one thing we’ve learned in taking a close look at financial inclusion efforts around the world, it’s that context matters. That’s why we are excited to be part of the team releasing the Global Microscope 2014: The Enabling Environment for Financial Inclusion. The Microscope is carried out by the Economist Intelligence Unit (EIU) with sponsorship and guidance from the Multilateral Investment Fund of the IDB, CAF, and Citi. The Microscope evaluates the environment for financial inclusion in 55 different countries and provides powerful signals to policymakers in each country on their progress. Which countries topped the list and which have the most room to grow?

We’ll tell you, but first, it’s important to know what the results mean. Each country inspected in the Microscope is assessed on 12 indicators that consider best practices in national regulatory environments and institutional support for providers serving clients at the base of the pyramid. Indicators range from government support for financial inclusion, to supervision of microfinance and other financial products, the status of credit reporting, regulations governing mobile banking and, last but not least, consumer protection.

This year is an important one in the publication’s eight year history because the focus shifted from microfinance to the environment for financial inclusion, a process that involved adapting the framework to account for today’s diversity of providers and products. What we were surprised by, however, was just how little a difference this made in the rankings. We charted last year’s results on the microfinance environment against this year’s results on the financial inclusion environment and we found a very high correlation between the two (see figure below). Environments that are enabling for microfinance are often environments that are enabling for financial inclusion. Six countries from last year’s top 10 were in this year’s top ten. Read the rest of this entry »

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The views and opinions expressed on this blog, except where otherwise noted, are those of the authors and guest bloggers and do not necessarily reflect the views of the Center for Financial Inclusion or its affiliates.
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