> Posted by Center Staff
Big news from the Smart Campaign camp. Today, the Campaign, the global movement you’ve come to know for embedding a set of client protection principles into the fabric of the microfinance industry, is announcing enhancements to its Client Protection Certification Program designed to improve and accelerate the certification process.
The Smart Campaign’s Client Protection Certification Program contains a core set of standards against which institutions are evaluated by independent, third-party raters. Certification publicly recognizes those institutions providing financial services to low-income people whose standards of care uphold the seven Client Protection Principles. The certification process aids institutions in strengthening their practices, and becoming certified helps institutions demonstrate to industry stakeholders – including clients, investors, and other institutions – their commitment to responsibly serving their clients. The Client Protection Principles cover important areas such as transparency, fair and respectful treatment, privacy, and prevention of over-indebtedness.
The Certification changes will enable the program to better meet the growing global demand for certification among microfinance institutions, while ensuring that certified institutions demonstrate high standards and the program maintains strong governance and quality control. Several enhancements will take place immediately:
- Streamlined Certification Process. To reduce the time to Certification, institutions that pass most of the standards (and all the most important standards) will have the option of receiving Certification soon after their missions, with the understanding that they will come into compliance with all standards within a four-month period. If they do not comply fully within the agreed timeframe, the Certification would be withdrawn.
- Extension of Certification Validity. Originally set at two years, the revisions extend validity to four years, with a check-in after two. At the two-year midpoint, certified institutions must undergo a review in order to retain their certification. The extent of the review will depend on the scope of changes within the financial institution over the previous two years. After four years, a full Certification mission will be required for renewal.
- Appeals and Complaints System. A complaints system is now available to allow for the resolution of grievances that may arise during the Certification process. It will also serve as a mechanism for general feedback from the public.
In order to make Certification more accessible globally, and to maintain the quality of the Certification process, the Campaign is also developing a new accreditation system that will license both existing and new certifiers. The Campaign expects a number of newly accredited certifiers to be on stream by the end of 2015.
“We have listened carefully to the industry, and we hope these changes will encourage financial institutions to seek Certification,” said Isabelle Barrès, director of the Smart Campaign. “These improvements align with best practices in certifications such as environmental certifications and Fair Trade. Our goal is to make the program as cost-effective, and user-friendly as possible. We want microfinance clients everywhere to work with institutions that meet high consumer protection standards.”
To date, 30 MFIs have been certified as meeting the standards for consumer protection; together they serve more than 15 million clients worldwide,from India to Colombia, Kyrgyzstan, Bosnia, Botswana, Pakistan and beyond.
“We are proud of those institutions that have worked hard to qualify for Certification,” said Elisabeth Rhyne, managing director of the Center for Financial Inclusion. “They are industry leaders and have set a strong example for others to follow.These changes will strengthen the Campaign’s foundation, making the Certification seal a ‘must-have’ for the industry.”
To learn more about Certification, visit the Smart Campaign website, and check out the related blog posts listed below.
Have you read?
Smart Certification: Kashf Foundation Takes the Lead in Pakistan
Consumer Protection in Microfinance Exceeds 15-Million-Client Mark via Smart Certified Institutions
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April 2, 2015 at 1:09 pm
MFHeretic
I was excited to hear that Smart has been enhanced, particularly in light of the closure of MFTransparency, the NGO that actually published the interest rates charged by microfinance institutions. One might have expected that Smart would embrace MFTransparency, given that fair and transparent pricing are part of the principles they apparently promote. In fact Smart never included MFTransparency certification as a requirement for their certification. This would have been an incentive for MFIs to be transparent – they get the Smart certification as a reward, and Smart would actually accomplish a core stated goal. Alas it was never the case. It is hard to fathom why Smart would apparently promote fair and transparent pricing, and then fail to take the obvious steps to ensure this takes place.
The announcement of new enhancements likewise could have beefed-up the transparent pricing element of Smart. This is not the case. It could even have included the rights of children. A number of academic papers have detected increases in the use of child labour and reductions in school attendance amongst microfinance clients. One possible enhancement would be to include the rights of children in what is perhaps inappropriately named “client protection principles”. Isabelle Barres has explicitly refused to consider the rights of children in the Smart Campaign, despite the evidence that microfinance does, at times, have notable adverse impact on children.
Instead the enhancements appear to be designed to make obtaining Smart certification even easier, even quicker, and less onerous, further diluting the credibility of such certification. Needless to say the credibility took a nosedive when Smart awarded Banco Compartamos certification. Was this really a surprise? Not when one considers that the owner of Smart, and this blog, is Accion – key shareholders in Banco Compartamos!
April 3, 2015 at 10:24 am
Alex Rizzi
The previous comment states that the Smart Campaign does not encourage certified institutions to participate in MFTransparency. This is not true. In fact, one of the indicators that must be passed in order to be certified is to participate in MFT in any country in which MFT is active (check this by downloading the certification standards from http://www.smartcampaign.org) Given that MFT is ceasing to be active, it will be necessary for the Smart Campaign to develop an alternative approach to this indicator.