> Posted by Anne H. Hastings, Manager, Microfinance CEO Working Group

As a member of the Smart Campaign Steering Committee, I had the pleasure last week of attending the first ever Certification Summit held in Turin, Italy. The CEOs of 24 client protection certified microfinance institutions (MFIs) came together to discuss with one another their experiences with certification, their practices for preventing over-indebtedness, collections and grievance redressal, and their thoughts on how the certification process could be made more valuable.

I tried my best to talk with each and every participant there in order to get their honest thoughts about certification. I was surprised but pleased to discover that, without exception, every one of them said how happy they were that they had gone through the process and achieved the recognition. Some examples of the types of comments I heard are:

  1. Client protection has always been part of our DNA. It’s who we are. The certification process helped us align our practices with our values – and come closer to what we aspire to be.
  2. It has allowed us to improve our relations with the regulators in our country more than we imagined. They now turn to us for advice!
  3. It was great for our employees. It was a truly motivating exercise for them . . . and the recognition that comes with certification made them feel very special. Our employees are proud to be associated with a responsible institution.
  4. There was a cost to it, no question – but the process convinced us that it was well worth the investment.
  5. We wanted third-party validation of our practices, and this gave us that validation.
  6. The process was excellent. I have tremendous respect for the rating agency that conducted our mission. It was far more rigorous than I anticipated, and it did result in our making some very significant changes, especially to our disclosure practices.
  7. Our customers have told us that they appreciate the changes we made that were clearly visible to them. They especially like the improvements we’ve made to our grievance redressal mechanism.
  8. Certification must be seen as a risk management tool because that’s what it is. We need more MFIs to go through the certification process in order to control risk in our market. We need to engage more closely with investors and regulators about what it means and how it acts to mitigate risks.
  9. The process helped us to get back to our fundamentals, for the reason we were formed. This was something we had needed to do, without really realizing it, for a long time.
  10. There’s no question that it contributed to our ability to get new capital from our local bank.

I was also surprised by the number of MFIs who told me that they were motivated to become certified by their investors. Some of the investors named most frequently were the IFC, OPIC, KfW, and FMO. On the other hand, many of the MFIs were disappointed that investors did not respond to successful certification by lowering their interest rates. This was a topic of much discussion on the day when a few investors were in attendance. Some of the investors felt that it didn’t make sense for them to lower their rates on debt, for instance, because the motivation to become certified should not be a financial one but instead should be the institution’s own desire to improve practices. The MFIs should consider the costs of certification to be their investment in their own institutions.

Some of the MFIs disagreed, saying that they wanted more MFIs to become certified, and the only way they would come on-board is if there is a financial motivation. Certainly there was no resolution to this debate, but the IFC representative, for one, said that this should be a point of continued discussion. (It should be noted that the IFC has been a leader in helping to support the cost of certification through their grants because of their interest in mitigating their own portfolio risk.)

When the MFIs were asked to tell the Smart Campaign leadership what it could do to improve the process, I was once again surprised to hear how short the list of suggestions really was. But one very concrete recommendation they had was that Smart should help them publicize the recognition they had received in their own countries. Some of the MFIs said it was difficult for them to have to write their own press releases; it would be stronger if it came directly from the Campaign or a recognized third-party. They wanted a bigger celebration, so the regulators, the other MFIs in their sector, and the public understood what it meant to be certified.

It was truly a great experience to hear from these MFIs. The gathering gave them the chance to get to know one another and to reflect on their journeys. They all expressed how grateful they were to be there and asked that these Summits continue into the future. Some were particularly interested in inviting other MFIs, who were not yet certified, to attend in larger numbers.

As of today, there are 39 certified MFIs covering more than 21 million clients. The pipeline is growing, so stay tuned for more announcements in the coming months. Smart may not have reached the tipping point yet, but there is definitely a critical mass of certified institutions today!

Have you read?

Smart Certification: Kashf Foundation Takes the Lead in Pakistan

Smart Certification Announces Enhancements to Client Protection Certification Program

Smart Certification: The View from Azerbaijan