> Posted by Jeffrey Riecke, Communications Assistant, CFI
Client protection needs to be at the core of the microfinance industry in order to maintain sustainable growth, a recent report from Deutsche Bank asserts. “Microfinance in Evolution: An Industry Between Crisis and Advancement” explores the current state of the industry—including its present challenges—and offers insight into how it can sustainably achieve its social and commercial goals.
The report is based primarily on individual MFI financial and social performance data from The MIX and concludes that a new balance between social development and a commercial approach is needed to “rehabilitate microfinance as a development tool.” A new approach is needed due to widespread MFI performance deterioration since 2008 (increases in client delinquency, declines in MFI profits, and decreases in asset growth), stemming largely from market growth, and changes in the MFI client base and lending methodology. To put the industry on the right track, the report’s authors call for an overhaul of practices that have proven to be unsuccessful and more specifically, instilling client needs as the focus of all MFI operations.
To incorporate this client focus, the report offers the following advice:
- Learn how clients live, and what they need and demand
- Design products with client needs in mind
- Constantly evaluate the social impacts of microlending
- Maintain a culture of social responsibility among MFI owners, managers, and staff
- Effectively train staff
The Smart Campaign—through the Client Protection Principles and Smart Assessments, among other efforts—works to ensure that clients are protected in the microfinance industry. The campaign’s new Certification effort enables microfinance institutions to demonstrate their adherence to the Client Protection Principles, as verified by objective third parties.
To read the full Deutsche Bank report, click here.
Image Credit: Ole Dahl Rasmussen
Have you read?
Straight Talk on Client Protection – Mechanisms for Complaints Resolution
Making the Case for the Universal Standards of Social Performance Management
Facebook
Twitter
2 comments
Comments feed for this article
December 4, 2012 at 10:37 pm
Paul Rippey
Isn’t this just greenwashing by the same Deutsche Bank that was packaging and selling collateralized debt obligations even while the market was collapsing and other parts of the very same bank were betting against them? Don’t you sense a bit of irony here when they talk about the importance of client protection? I’ve been working to protect clients for years, but I think that at the end of the day, for many people, the best protection is to urge them to keep some distance from commercial firms. The power asymmetries are too great and the banks are too clever.
And just to forestall the inevitable rejoinder, Yes, I do keep my money in a bank.
December 5, 2012 at 12:47 am
John Gitau
Paul, it is very easy to hear what you are saying and understand what you mean. Leopards are never known to shepherd sheep. And we cannot blame them. It is in their nature to lick blood and eat lean meat!