You are currently browsing the monthly archive for July 2012.
>Posted by Laura Galindo
One of the Smart Campaign’s major focuses is to provide institutions with a set of tools they can use to help them strengthen transparent, respectful and prudent financial services to all their clients. The Campaign currently offers tools 
in English, French and Spanish–all available on the Campaign website. Today, we are we are excited to announce the release of the first batch of tools in Portuguese, made possible with support from the Multilateral Investment Fund. Brazil accounts for an important part of the 700 MFIs that exist in Latin America and the Caribbean which together serve approximately 12.5 million clients. According to the Global Microscope on the Microfinance Business Environment 2011, Brazil is “amongst the best countries in the region for its innovation in agent banking, and has also benefited from strong financial inclusion programmes and reforms in recent years.” With the development and translation of more and more tools into Portuguese, we look forward to focusing and strengthening Client Protection practices in this growing region. Read the rest of this entry »
> Posted by Center Staff
Last week CGAP published post on their blog asking the question “Does Client Protection Matter to Clients?” The article highlights a recent study by MicroSave that asks clients for their opinions on the Smart Campaign Client Protection Principles. 
The post begins:
What do microfinance clients think about client protection? Do client protection principles really matter to them? In particular, how important are the seven client protection principles (CPPs) that the Smart Campaign has developed and are now adopted or endorsed by many microfinance stakeholders?
To answer these questions, MicroSave launched a study with 357 clients with seven financial institutions across three Asian countries- India, Bangladesh and the Philippines- between February 2012 and April 2012.
This study uses 2-6 questions to guide the discussion of each principle and rates the performance of the participating organisation on its adherence to the principles; and then facilitates the ranking of the client protection principles in the order of importance to clients. This post discusses the results from these three country studies and the way forward for client research on client protection.
1. ‘Fair and Respectful Treatment’ matters the most to clients, followed by ‘Transparency’. All the seven CPPs are considered important by clients in all three countries. However, when asked to rank them on their relative importance, the following were the top two ranked principles:
Please continue reading this post on the CGAP Microfinance Blog. The full report from MicroSave can be downloaded here.
Image credit: MicroSave
Have you read?
What the Smart Principles Can Teach Physicians about the Responsible Treatment of Patients
Client Protection in Honduras: Basic Infrastructure in Place
> Posted by Josh Goldstein
The Smart Campaign’s Client Protection Principles are all about insuring that microfinance institutions (MFIs) put their clients’ interests first. Therefore, product offerings must be designed to be understandable, pricing transparent, the dangers of over indebtedness made explicit. The loan officer must be incentivized to ensure that her customer truly understands the terms of the contract being entered into. In short, the client must be equipped to make a fully informed decision. But this is easier said than done, as the Campaign well knows.
But microfinance is not the only domain where these challenges occur. I recently co-authored a paper with a team of physicians and other healthcare professionals: “Best practice guidelines on surgical response in disasters and humanitarian emergencies: report of the 2011 Humanitarian Action Summit working group on surgical issues within the humanitarian space.”
It was matter of serendipity (and to me some amusement and trepidation) that I ended up in a working group of surgeons, anesthesiologists and rehab specialists at this summit held at Harvard, and I was nearly certain that I could add no value– as our discussions were to largely focus on medical questions involving amputation.
Read the rest of this entry »
> Posted by Ignacio Mas
Let me put it a bit brutally, using round numbers for effect:
- Many people are willing to pay an all-in cost of 70% for a microloan.
- Most people are willing to pay a fee of 7% for a (domestic or international) money transfer.
- Most people do not see much value in paying 0.7% in fees for a savings account.
Notice the order of magnitude reduction in willingness to pay. A savings account, viewed as an electronic receptacle of value, generates little willingness to pay – unless I need it to get a loan or make money transfers from/to it.
It would be much better if microcredit or money transfers were a lot cheaper, but the point is that if people are not able to get better terms, they still find sufficient value in these services to pay quite a bit for them. Not so with savings. Or, to be more precise, not so with the kinds of formal savings products that are being presented to them by formal financial institutions.
Read the rest of this entry »
> Posted by Dan Wang, China Association of Microfinance
This post is part of the Center for Financial Inclusion’s Expert Exchange: Building A Movement Toward Financial Inclusion by 2020, cultivating conversation around the goal of reaching full financial inclusion by 2020. For further questions about this series, write to , Fellow, Center for Financial Inclusion at Accion.
Bringing microfinance products to Northeast China’s rural communities requires innovative loan products. One of the China Association of Microfinance‘s members, Ewenke Baoshang Village & Township Bank (EBVTB), strives to reach two very underserved groups in China—rural farmers and nomads. They do this using what they call “the Lucky Three”—three loan products tailored to the needs of the rural poor. EBVTB’s success with these products lies in a deep understanding of what these groups need and want from financial services.
However, it is no small feat to figure out what these prospective clients do need and want. EBVT’s target clients live in China’s grasslands, far from urban centers and formal financial institutions. To get the relevant information, the bank interviews clients and conducts focus groups, supplemented with local statistics to understand the unique business activities of these rural farmers and nomads. We know that they are primarily involved in animal husbandry, as the conditions are often too harsh for growing crops. A client demand survey revealed that this group has difficulty with most lenders’ collateral requirements, short loan terms, inflexible repayment schedules, small loan sizes, and lengthy wait times.
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> Posted by Sergio Guzman
Many microfinance institutions are looking to provide a wide array of financial services to their clients. Financial service providers often bundle their products in order to strengthen the value proposition of that particular product by marketing them as additional included “benefits”. A common practice is credit-life insurance which, for a fee, pays off a borrower’s debt if that borrower dies.
Product bundling or cross-selling may provide the clients convenience of obtaining many products from the same provider and in fact may be less costly that purchasing the same product from another provider. Cross selling is also a way that providers raise more revenue from their customers. However, it’s a problem when providers bundle their products without the consent or knowledge of the client or without properly disclosing the costs, conditions or terms of the additional products or services.
Read the rest of this entry »
> Posted by Saydra Battersby Quintanilla
Honduras has the basic institutional and legal building blocks needed to protect the client of microfinance. In recent years, institutional governance and consumer protection have risen in priority as microfinance institutions (MFIs) have become more prevalent and information becomes more accessible to microfinance clients.
Institutional Landscape. The two primary banks that support microfinance clients in Honduras are Banco Popular and Finsol, who along with all other Honduran microfinance providers, offered $222 million in loans to 161,447 active borrowers in 2012. The Central Bank of Honduras and the National Commission for Banks and Insurance Companies share responsibility for consumer protection by overseeing good governance, fairness, and protection, while Organización de Desarrollo Empresarial Femenino (ODEF), a Honduran NGO focused on improving socio-economic conditions of Honduran women and their families through technical assistance and capacity building. ODEF and other organizations such as credit bureaus have also focused on delivering stronger consumer protection practices in their businesses.
Read the rest of this entry »
> Posted by Laura Galindo
Few international microfinance events aim to provide commercial MFI staff with guidelines and practical approaches for their professional development. The VI International Summit for Microfinance Staff, seeks to change that, and the Smart Campaign was fortunate enough to be a part of a select group of presenters.
Organized by Fundación Alternativa in Quito, Ecuador on June 20-21, the Summit was well attended by 172 loan officers, branch managers, coordinators, supervisors and office managers from 58 microfinance institutions from Guatemala, Ecuador, Bolivia and Perú.
Days before the summit, Rafael Correa, Ecuador’s president made a strong statement about over-indebtedness in his country. President Correa’s statement generated a strong reaction throughout Ecuador. He revealed that “41 percent of the families in Ecuador who asked for loans are over-indebted.” This amounts to approximately 400,000 families and could have serious consequences, not only for those affected, but also for the Ecuadorian banking system and economy. Correa blamed the excessive liquidity of banks and the increase in the minimum wage for the problem. Read the rest of this entry »
>Posted by Center Staff
Today we direct your attention to a thought-provoking post by Alex Counts, President and CEO of the Grameen Foundation. Alex has been in India reviewing the latest developments following the microfinance crisis in Andhra Pradesh (AP) in order to better understand the implications of that crisis on microfinance in Haiti (for his book on Fonkoze) and beyond.
An excerpt from the post:
…when I went to India I tried to free myself from preconceptions, and attempted to listen and observe with an open mind. I met with leaders of MFIs large and small, as well as other members of the ecosystem including consulting firms, industry associations, and the staff of Grameen Foundation’s wholly owned subsidiary Grameen Foundation India and our joint venture Grameen Capital India… Below is a list of eight things I learned that I did not know, or believe, before I arrived:
Read the rest of this entry »
>Posted by Kirsten Hansen
I once had a roommate who stored her credit cards in the freezer. When I asked her why she was hiding her Visa between packages of frozen peas and ice cream she explained that by “freezing” her credit cards, she would not be tempted to use them.
Unfortunately for lending institutions, many borrowers do not have the discipline (or perhaps the creativity) of my former roommate in confronting the temptation to overspend. In fact, the recently released 2012 “Microfinance Banana Skins: Staying Relevant”, a survey of practitioners, investors, regulators and observers in the field of microfinance, found that overindebtedness among borrowers is now seen to be the most urgent risk in the field of microfinance. Overindebtedness has replaced credit risk, which was ranked as the top concern in the 2009 and 2011 surveys. Although the overindebtedness and credit risk are very closely related, according to authors of the report, the shift to the former reflects new concerns about the state of microfinance. Read the rest of this entry »
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