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> Posted by Maria May, Senior Program Manager, BRAC

Babita Akhtar, BRAC customer service assistant, Kawalipara branch, Bangladesh

Babita Akhtar, BRAC customer service assistant, Kawalipara branch, Bangladesh

Even when introducing herself, Babita’s enthusiasm is contagious. “Maybe you think that you can’t change how you manage your money. It’s too hard. Well, I used to think that I could never get up in front of a group of people and give a presentation. But here I am. BRAC taught me how. So if I can do this, then you can do anything.”

Babita Akhtar is one of 900 women recruited by BRAC as a customer service assistant. She greets every person who walks into the branch office—people coming for loans, seeking support from BRAC’s legal aid clinics, teachers or community health promoters coming for training, and even visitors. Before loan disbursement begins, she runs a short orientation session for all borrowers that covers important information about the loans, BRAC’s services, and good financial practices. The branch manager comes in at the end to answer any questions and greet the clients personally.

The messages provided in this orientation are timed for maximum impact. Pranab Banik, who heads BRAC’s Financial Education and Client Protection Unit, said, “The time when clients are waiting at the branch to take a loan seems the best moment to deliver basic financial awareness at scale and cost effectively. Our pre-disbursement orientation is an integral precondition for comprehensive client protection; it is intended to empower all clients to better understand their options and manage their finances responsibly.”

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

Last June, in my hotel room in Delhi, I read in the Sunday edition of the Times of India that hiring white girls to work wedding parties is the new status symbol in Bangalore. Though this might sound surprising, alabaster skin as the ideal of beauty (and the status that goes with it) is neither new to nor specific to India. This is not a trivial matter but a deadly serious business.

One need only look at skin whitening products, like Unilever’s “Fair and Lovely”, which are great sellers in the beauty product category in India, Bangladesh, and Thailand—indeed, in 30 countries around the world. The Unilever Sri Lanka website reads: “Today, 250 million consumers across the globe strongly connect with Fair and Lovely as a brand that stands for the belief that beauty empowers a woman to change her destiny.”

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> Posted by the Smart Campaign

It’s been an exciting few months for client protection in the microfinance industry. FINCA Kyrgyzstan, MBK Ventura in Indonesia, SKS Microfinance in India, and a number of other MFIs around the world demonstrated that they successfully integrate the client protection principles into their practices and joined the rapidly growing list of institutions that are Smart Certified. Today, we’re pleased to share that the number of clients across all the Smart Certified institutions surpassed the 15-million-client benchmark.

To date, 28 microfinance institutions, from Latin America to Eastern Europe and South Asia, have achieved Smart Certification, including some of the world’s largest and best-known MFIs. These institutions are not only ensuring that their clients are equipped and best positioned to effectively use financial services, they’re also demonstrating to their respective markets and the global industry the good business that is responsible microfinance.

“Momentum to improve client protection is accelerating, with scores of MFIs across the globe improving their client protection practices, and being recognized for it through certification,” stated Isabelle Barrès, director of the Smart Campaign, in a press release. In Eastern Europe, there are certified institutions in Azerbaijan, Tajikistan, Bosnia, Serbia, and Kyrgyzstan. In Kyrgyzstan, with the certification of the nation’s network of FINCA MFIs, the country’s market crossed an important threshold. “As measured by MixMarket data, more than 50 percent of all microfinance clients in Kyrgyzstan do business with certified MFIs,” noted Barrès. The certified MFIs in Kyrgyzstan include the first formal financial institution serving low-income entrepreneurs in the region, as well as a relatively young institution, and encompass a range of service offerings like individual, group, and agricultural loans. Elsewhere in the region, the proportion of clients in certified institutions by country market is about 45 percent in Bosnia, and 40 percent in Tajikistan.

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> Posted by Alexandra Rizzi, Deputy Director of the Smart Campaign, and Jami Solli, Independent Consultant and Founder of the Global Alliance for Legal Aid

When clients are facing loan default, they’re often in the most precarious financial position of their lives. As we detailed on this blog last week, navigating the default process can be exceedingly complex for clients. It can be complex for providers, too. No doubt, on both ends the stakes are high. In a new Smart Campaign research report released last week, What Happens to Microfinance Clients who Default?, we examined how providers behave at this juncture and the factors informing these practices.

The research team selected three very different markets to compare – Peru, India, and Uganda.¹ An analysis of three markets does not represent the entire sector. However these three countries represented great diversity in legal and regulatory systems, market infrastructure, in particular credit reporting, and use of group versus individual loans, among other factors. These three countries are also locations where the Smart Campaign has cultivated supporters and partners, which persuaded providers to share information on sensitive debt collection practices.

In total, we conducted interviews with 44 providers. In addition to MFIs, the most helpful interviews were with credit bureaus. Fonts of information, they helped us understand the topography of market debt as well as the information MFIs have when making decisions. And, as we came to understand, information was a critical determinant to what actions MFIs took when a client defaulted.

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> Posted by Alexandra Rizzi, Deputy Director of the Smart Campaign, and Jami Solli, Independent Consultant and Founder of the Global Alliance for Legal Aid

Imagine you are a new microfinance loan officer in a rural area of your country and extremely proud to have found a stable, well-regarded job. Your sales territory, while requiring significant travel, is familiar – this is where your father’s extended family is from, and in fact, a few of the borrowers in your portfolio are distant cousins. You manage a portfolio of just under 300 borrowers, most of whom you see on a weekly basis.

This week, at one of the repayment meetings, you are approached by a client in distress and near tears. She apologizes that she is unable to pay back the outstanding balance on her loan due to circumstances out of her control, and asks for an additional six months to repay. Her fellow group members have been covering for her for the past two weeks and seem to be losing patience with her. Given that this was the woman’s first loan and that your country’s credit bureau covers only five percent of the microfinance market, you have no information on her credit history or current debt burden.

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> Posted by Juan Blanco, Associate, Financial Inclusion 2020, CFI

In the client protection section of the FI2020 Roadmap to Financial Inclusion, a specific recommendation was made for financial providers to embrace consumer protection as part of their professional identity, and applying a “financial consumer bill of rights” was identified as a key action point.

Looking into the state of this industry area for our upcoming FI2020 Progress Report on Financial Inclusion, I came to realize that the subject of consumers’ bills of rights is not as straightforward as it seems. Although the recommendation from the roadmap was aimed specifically at providers, the truth is that this is an area where a diversity of players is getting involved. I found a range of approaches: codes of conduct, codes of ethics, charters of rights, and bills of rights, coming from a wide spread of stakeholders, from MFIs to global associations to governments. At the heart of each of these initiatives was the same objective: for service providers to operate ethically and responsibly.

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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 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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> 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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Credit Suisse is a founding sponsor of the Center for Financial Inclusion. The Credit Suisse Group Foundation looks to its philanthropic partners to foster research, innovation and constructive dialogue in order to spread best practices and develop new solutions for financial inclusion.

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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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