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> 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:
> Posted by Lindsey Tiers, Communications and Operations, the Smart Campaign
#103296657 / gettyimages.com
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.
> Posted by Jeffrey Riecke, Communications Associate, CFI
A proactive step for client protection was recently taken in Laos when the country’s Microfinance Association (MFA) established an industry code of conduct focused on client protection. Laos’ code centers on the client protection principles and the accompanying Smart Certification standards, which designate how institutions can instill fair client treatment in their practices. The code was developed by the MFA following a Smart assessor training in late 2013, and was reviewed by the Campaign to ensure accurate reflection of the client protection principles and standards. In April, the code was presented at an MFA member meeting, where all members present committed to embedding it throughout their institutions. This new code fills an important gap, given that client protection regulation for financial services is not well developed in the country.
Established in 2007, the Microfinance Association and its members represent a growing share of the country’s industry. Members include MFIs, as well as donors, training institutes, and individual experts and advocates. The 32 MFIs that are members make up roughly 50 percent of Laos’ formal microfinance industry by number of clients.
> Posted by Jaclyn Berfond, Senior Associate, Network Engagement, Women’s World Banking
Women have long been the face of microfinance, a fact reflected by the mission and goals of the institutions that serve them. According to the Microfinance Information Exchange (MIX), most microfinance institutions (MFIs) claim to target women (74 percent) and just over half declare women’s empowerment or gender equality as an objective.
Big commitments are all well and good, but if we are going to espouse the importance of serving low-income women, we must be able to hold ourselves accountable. How do we do that?
For many years now, the microfinance industry has focused on financial performance, with sustainability and later profitability driving outreach. In the wake of crisis – often the consequence of rapid growth – the industry has re-focused on social performance, getting back to the basics of ensuring that financial institutions adhere to their mission of serving low-income clients. We strongly believe that there must be a balance between financial and social performance, and that in order to achieve either, the industry must take a good look at their clients – still predominantly women. By truly analyzing this client base, MFIs can both build the business case for serving women, and ensure that they are serving these women well. This is gender performance.
In 2011, Women’s World Banking launched the Gender Performance Initiative (GPI) to develop a framework that defines what it means to serve women and measures how effectively MFIs do so. We wanted to establish a set of indicators that would enable MFIs to consider not only how many women they serve, but how they can enhance their understanding of customers to tailor products, marketing strategies and delivery channels to meet women’s needs. The initiative also set out to demonstrate the benefits of financial inclusion for women and their households, as well as the benefits of gender diversity among staff, management, and board.
Developing the indicators. There is no easy place to start when it comes to measuring performance, and we wanted to be sure that the metrics we chose would truly tell us whether an institution was serving women well. First and foremost, we needed to start with the right questions, in the areas that matter most to women. Beyond outreach, we looked at product design and diversity, service quality, and client protection, as women have specific life-cycle needs and goals that must be considered. For example, women may need a convenient and confidential way to save for children’s education expenses, or an insurance product that offers cash benefits for hospitalization to cover lost income from time away from their business (and includes maternal health coverage). We also looked at the diversity of staff and management, because we believe that in order to be the best place for women customers, a microfinance institution should be a place that welcomes women employees and women leaders. Finally, we wanted to understand how serving women clients contributes to institutional financial sustainability, as well as outcomes for clients.
> Posted by Alexandra Rizzi, Deputy Director, the Smart Campaign
Over 165 investors and donors have endorsed the Smart Campaign and the Client Protection Principles. But our Campaign staff wanted to dig deeper: what does this support mean in practice? Are investors using the Client Protection Principles in their everyday work? How? Earlier this year, we embarked on a project to find out.
The Campaign worked with three Virtual Volunteers from Credit Suisse – Lloyd Yetton, Meha Jain, and Nicolas Vucekovic – to create a short survey aimed at understanding how investors incorporate client protection into their due diligence, post-investment monitoring, and reporting. The virtual volunteers spoke with representatives from 12 of the leading microfinance investors.¹ The findings, highlighted below, will help the Campaign shape its engagement with this pivotal stakeholder group.
Client Protection Universally Important But Not Uniformly Applied
All the investors interviewed stated that client protection was important to them from both a social perspective and for their bottom line. Most had seen first-hand the positive influence from strong client protection practices as well as the problems and instability that sprang up in their absence. Such universal recognition is an encouraging step forward from earlier days of the Campaign. In addition to understanding the importance of client protection, nearly all respondents said that client protection was already explicitly incorporated into due diligence. Investors are indeed scrutinizing a microfinance institution’s client protection practices before investing in it.
> Posted by Alyssa Passarelli, Communications and Operations Assistant, the Smart Campaign
Pro Mujer Mexico delegation at certification award ceremony held last week in conjunction with 2013 Foromic conference in Guadalajara
The Smart Campaign is pleased to announce that three Latin American institutions became Client Protection Certified at the close of September 2013. These three institutions are Crezcamos and FMM Popayán, both from Colombia, and Pro Mujer Mexico. These are the first institutions in the Latin America and Caribbean region to receive certification. We congratulate each of these institutions for their hard work and exceptional commitment to the fair treatment of their clients, as demonstrated in meeting the standards needed for certification.
The Smart Campaign launched Client Protection Certification in January 2013. The three new certified institutions bring the number of certified organizations to nine. The institutions that were certified earlier this year are:
- Cashpor, India
- Grameen Koota, India
- Ujjivan, India
- Partner Microcredit Foundation, Bosnia & Herzegovina
- Mi-Bospo, Bosnia & Herzegovina
- EKI, Bosnia & Herzegovina
When undergoing a certification mission, an institution is evaluated by one of the four licensed certifying agencies: M-CRIL, MicroFinanza Rating, MicroRate, or Planet Rating. To become Client Protection Certified, an institution must meet the 30 standards of care for client protection based on the seven Client Protection Principles.
> Posted by Alyssa Passarelli and Jeffrey Riecke, the Smart Campaign and CFI
One good deed often leads to another. Whether it’s by learning about new opportunities to do good or by an increase in peer pressure, positive changes are contagious. This also applies to business practices, including how financial institutions treat their clients. Still new on the microfinance scene, the Client Protection Certification program has certified six MFIs to date – three in India and three in Bosnia and Herzegovina. As more institutions become certified, it increasingly changes the expectations for how financial institutions are to serve the poor, especially the expectations in markets where groups of institutions have been certified, like those in India and Bosnia and Herzegovina.
Smart Campaign Director Isabelle Barrès recently traveled to Bosnia and Herzegovina for an event to publicly congratulate and recognize the country’s three MFIs that were certified earlier this year, EKI, Mi-Bospo, and Partner. Organized by stakeholders in the Bosnian market, in particular the IFC, the event also highlighted the significance of certification, for the institutions and for the market at large. Of the three Bosnian MFIs Isabelle said, “The three client protection certified financial institutions, EKI, Mi-Bospo and Partner, can distinguish themselves in a highly competitive market, as organizations that are meeting adequate standards of customer care. They deserve the spotlight, and the attention from responsible funders and from clients.”
> Posted by Alyssa Passarelli, Communications and Operations Assistant, the Smart Campaign
The launch of Client Protection Certification in January 2013 is a significant milestone for the Smart Campaign and for the financial inclusion community. As an initiative that is the first of its kind, it shifts awareness of client protection in microfinance to an industry standard. The Smart Campaign and the licensed certifiers have been working diligently to get the word out about certification to help build engagement and a market for this important program.
A frequent request from participants in the certification webinar series was to clarify the difference between a Smart Assessment and a Client Protection Certification mission. While they differ in purpose, the important message is how they work hand-in-hand. Both assessments and certification are based on the 30 adequate standards of care rooted in the Smart Campaign’s seven Client Protection Principles (CPPs).
- An assessment is a report for management. It used the standards as reference to give an in-depth-“diagnostic,” with a grade of the MFI’s practices. The Smart Campaign recommends Smart Assessments as an excellent way for an MFI to prepare itself for certification.
- Certification is aimed at the stakeholders of an institution. It applies the standards as a firm benchmark for achievement that merits certification. With certification, a financial institution can tell clients, investors, and regulators that it takes adequate care to ensure that its clients are protected.
A Smart Assessment typically lasts four to five days and is conducted by two trained assessors who examine an MFI’s policies and procedures, as well as interview staff and clients. After the assessment field-visit, the MFI receives a lengthy and detailed confidential report that presents the assessors’ comments on each indicator, grading, and supporting evidence. As such, a Smart Assessment is a very useful opportunity for an MFI to see which areas of operations are in adherence with the standards and which need improvement. The cost of an assessment will vary depending on the MFI and the partner with which it collaborates. To date, the Smart Campaign has conducted over 75 assessments across the globe. Most of the organizations that are now Client Protection Certified first underwent an assessment to make sure they were prepared for the certification mission. You can learn more about Smart Assessments from Sergio Guzmán, Lead Specialist for the Smart Campaign.
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