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In the era of digital credit, we need not just new laws, but also new mental models for responsible digital credit provision.

> By John Owens, CFI Fellow

Responsible Digital_Credit Report CoverAs digital credit providers have grown exponentially over the past few years, and as digital products and models have proliferated, so too have concerns around consumer protection. In the recently published report, Responsible Digital Credit, I argue that ensuring that digital credit customers receive responsible treatment requires more than enhanced consumer protection laws and regulations. It also requires strong commitment from the digital credit industry. Finally, it needs consumers who are empowered to play a more proactive role in managing their digital credit responsibly.  Read the rest of this entry »

> Posted by Sarah Samuels, Global Operations Manager, the Smart Campaign

This is the third in a series of blog posts exploring the impact of Smart Certification on the financial inclusion industry

When financial service providers approach Smart Certification, they often have a number of questions. Many want to know if certification is worth the investment in terms of their financial bottom line. The answer we’ve heard from Smart Certified institutions is an unequivocal “yes.” As the Smart Campaign celebrates the recent milestone of 100 Smart Certifications, we’d like to explore the value of certification as Smart Certified financial service providers see it.

In partnership with Deutsche Bank, the Smart Campaign recently conducted a survey of certified institutions to understand how they view their experience with Smart Certification. (You can find the full survey findings in the Consumer Protection Resources Kit.) In an affirmation of Smart Certification’s value, 82 percent of institutions surveyed believe the cost of certification (in terms of both the servicing fee and internal staff time) was compensated by the value the institution received in return. This finding aligns with research from the European Microfinance Platform, which determined that consumer protection practices, such as price transparency, respectful collection practices and effective complaint resolution, are linked to higher financial returns and have a positive impact on the provider’s bottom line.

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> Posted by Sonja E. Kelly, Director of Research, CFI

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As we have watched events unfold in Iran, it has become increasingly clear that major problems with stability and security of funds in the financial system is a driver of civil unrest and political instability.

Over the last few weeks more than a dozen people have been killed and thousands have been arrested in demonstrations across the country. These demonstrations have involved tens of thousands of people in the most significant public display of opposition that the government has seen in a decade. The magnitude of this unrest is significant, and global concern is growing.

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> Posted by Center Staff

2017 was certainly an eventful year. And our year at CFI was no exception. Through our CFI Fellows Program and partnership with the Institute of International Finance, Mainstreaming Financial Inclusion, we produced thought-provoking research on fintech partnerships, the role of human touch in a digital age, breakthroughs in insurance and more. In the client protection area, 24 financial institutions were Smart Certified, bringing the total number of certified institutions to 94. The Africa Board Fellowship Program continued to make a difference at the governance level of financial institutions across Africa, and now roughly 200 CEOs and board members have participated in the program. And more…

Before we celebrate the New Year, we wanted to pause and look back at some of our favorite moments of 2017.

Financial Health as a Global Framework

We developed a new model for assessing financial health. The financial health framework was developed through a project led by the Center for Financial Services Innovation (CFSI) with CFI and Dalberg as partners. The framework offers a globally applicable model for financial health that includes six indicators of financial health and four contributing factors that are particularly relevant to the developing world.

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> Posted by Lizzy Bolze, Analyst, Investing in Inclusive Finance, CFI

How does a microfinance institution know what transformation will be like from an NGO to a formal financial institution? In an increasingly complex industry with competition from commercial banks and the entrance of fintechs, many microfinance NGOs are considering transformation to realize their growth potential and help attract investment. However, the road to transformation can often be bumpy, as noted in the Center for Financial Inclusion’s publication Aligning Interests: Addressing Management and Stakeholder Incentives During Microfinance Institution Transformations.  Regulatory compliance issues, information technology hurdles, and aligning with the needs of the NGO and investors can often complicate the process. For Enda Tamweel, the largest and oldest microfinance organization in Tunisia, the decision to transform has come with external pressures, operational challenges, and a focus on maintaining their mission. Read the rest of this entry »

> Posted by Daniel Balson, Lead Specialist for Eurasia and MENA, the Smart Campaign

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Smart Certification requires a substantial commitment from the financial institutions that choose to seek it. These institutions face a thorough audit by an independent third-party and may be required to improve client-related policies and practices at multiple levels, drawing in staff from the executive suite to the field offices.

In short, is it worth it? Why would a financial institution elect to participate in such a program – especially if the institution is operating smoothly?

A new survey conducted by Deutsche Bank and the Smart Campaign captures the perspectives and experiences of over 24 Smart Certified institutions and yields insights on why nearly 80 financial institutions around the world have achieved Smart Certification, with many more on the path to be certified.

The surprising result is that in addition to the benefit of publicly affirming that financial institutions treat their clients well, Smart Certification helps energize corporate culture and shift it toward client-centricity.

First off, Smart Certification allows financial service providers to distinguish themselves from the competition by demonstrating to their market and the industry that they provide a higher level of service to their clientele. Smart Certified institutions have to exhibit to independent auditors that at every stage from product design through customer acquisition and service delivery, they are governed by standards that ensure clients are treated fairly. Financial institutions have found a wide audience for their newly certified status. Half of all certified institutions reported that their regulators took positive and formal notice of their certification. Additionally, the majority reported positive media attention.

Respondents agreed that the biggest benefit of Smart Certification was in helping them see the world from their clients’ perspective and infuse client protection into the DNA of their operations. Over 90 percent of certified financial institutions agreed that Smart Certification has helped them prioritize their clients’ rights and reshape their institutional culture around client protection.

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> Posted by Daniel Balson, Lead Specialist for Eurasia and MENA, The Smart Campaign

The following is the second post in a four-part blog series on the financial inclusion of refugees and the internally displaced. The first post can be found here.

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In 1992, sporadic clashes between ethnic Armenians and Azerbaijanis in the mountainous region of Nagorno Karabakh erupted into full scale war. By the time a ceasefire was reached two years later, the territory lay under Armenian control, and between 800,000 and 1 million Azerbaijanis were displaced from their homes. Since the end of hostilities, ethnic Azerbaijani internally displaced persons (IDPs) who fled from Armenian-controlled to Azerbaijani-controlled territory have continued to face difficulties accessing economic opportunity. However, a financial sector inclusive to IDPs is emerging, lessening these difficulties and demonstrating that IDPs can be a bankable client segment.  Read the rest of this entry »

> Posted by MFIN

In 2013, the Reserve Bank of India (RBI) announced a significant policy move in the form of Self Regulatory Organization (SRO) guidelines for the microfinance industry. An SRO is an organization that has been authorized by a regulator to exercise control and regulation on its behalf over certain aspects of an industry. In the case of Indian microfinance, an SRO supports the RBI in ensuring compliance with statutory regulations and the Industry Code of Conduct, while also taking up research, training, data analytics, and capacity building of the sector. The SRO architecture has dramatically altered the landscape of the Indian industry, providing stability to the industry, with more robust market discipline and customer protection.

MFIN, whose membership consists of 52 NBFC-MFIs which account for over 90 percent of India’s microfinance business, was recognized as an SRO by the RBI in June, 2014. Since then, MFIN has worked towards putting in place an effective SRO framework, with borrower protection as the focal point. One of the important obligations of the SRO in line with the RBI guidelines is to have an independent redressal mechanism for addressing the grievances of microfinance clients. In order to standardize the grievance redressal mechanism and to ensure a common minimum benchmark, MFIN drew on the existing grievance redressal mechanisms (GRMs) of 45 MFIs and worked in partnership with the Smart Campaign to cull out the good practice from these models. The idea was to put in place a three tier mechanism based on the capacity of the MFI concerned, and the Smart Campaign was asked to work on such a model whose aim was to standardize and ultimately strengthen the practices of the member institutions.

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> Posted by Micol Pistelli, Social Performance Director, MIX

Customer retention is a key objective for any business, and microfinance institutions (MFIs) are no exception. Whether you are a shareholder, board member, CEO, or head of operations at a microfinance institution, your strategy must rely on retaining most of your clients that still need financial services. But what happens when many of your clients stop using your services? How do you determine whether they left because they no longer need financial services or because they prefer a competitor? How do you know whether they were dissatisfied with your customer service?

Answering these questions can be difficult. Some organizations conduct exit surveys over the phone or in-person through their customer service departments. However, due to the expense and time required to conduct such research, many MFIs are only able to reach a small number of clients, which may not be representative of the whole. Additionally, the quality of the data collected can be lacking due to inaccuracies because clients may not feel comfortable being candid with representatives of the MFI they are leaving.

Of the thousand-plus institutions reporting consumer protection data to MIX, 65 percent of them have set-up complaint mechanisms that offer some form of redress for clients, such as hotlines, call centers, or customer service representatives. However these feedback tools are functional only when clients proactively use them and when MFIs manage to gather data and solve issues in a timely fashion. What often happens is that MFIs are left with questions about their clients’ satisfaction and can only guess at the root causes for their drop-out.

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> Posted by the Smart Campaign

To date, 44 financial institutions around the world have been certified as meeting the Smart Campaign’s standards for consumer protection. Those institutions, which adhere to the Campaign’s Client Protection Principles including transparency, fair and respectful treatment, responsible pricing, and prevention of over-indebtedness, collectively serve more than 22 million low-income clients.

Recently, the Campaign invited the heads of certified institutions to share their experiences with certification. In a series of video interviews, the CEOs discussed why they elected to engage in the process, what they learned, how and why it improved their business, how investors have reacted, and what it has meant for their customers.

We invite you to take a look at the video, above or here, to learn first-hand about their rationale for undergoing certification and what it has meant to their operations. And of course feel free to share it with your network.

For more information about the Campaign, please visit the website.

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Credit Suisse is a founding sponsor of the Center for Financial Inclusion. The Credit Suisse Group Foundation looks to its philanthropic partners to foster research, innovation and constructive dialogue in order to spread best practices and develop new solutions for financial inclusion.

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The views and opinions expressed on this blog, except where otherwise noted, are those of the authors and guest bloggers and do not necessarily reflect the views of the Center for Financial Inclusion or its affiliates.