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> Posted by Isabel Whisson, Deputy Manager, Microfinance Programme and Ultra Poor Graduation Initiative, and Onindita Islam, Management Professional Staff, Microfinance Programme

This year BRAC in Bangladesh became the largest microfinance institution, in terms of number of clients, to be Smart Certified, signifying to our country market and to the industry writ large that we treat our clients with adequate care.

As a non-profit dedicated to poverty reduction, client welfare has been central to BRAC’s mission since its inception in 1972. In Bangladesh in general, almost all microfinance institutions are non-profits, and so microfinance has always been seen as a tool for alleviating poverty in the country.

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

The following post was originally published on the Accion blog. 

Accion client Ma San Htwe selling fish in Myanmar, one of the key areas discussed at European Microfinance Week 2016.

European Microfinance Platform is celebrating 10 years of supporting inclusive finance innovation, and hosted European Microfinance Week 2016 (EMW) in Luxembourg a few weeks ago. At the conference, I joined discussions about key organizations and challenges in the industry. Here are five of the main takeaways from the week:

1. The Underserved Refugee Population

The Social Performance Task Force (SPTF) is helping to provide financial services to the refugee population, which is now approximately 20 million people. In reality we don’t know very much about the socioeconomic needs of refugees, and much of the research is focused on humanitarian efforts. SPTF is working to research and provide guidelines to financial service providers to better serve the financial needs of this population. The guidelines will be published on SPTF’s website in the coming months. Learn more about leading organizations supporting refugees from CFI’s blog series on refugees.

2. Opportunity in Myanmar

Representatives from VisionFund, Advans, UNCDF, and M-CRIL provided a look at the economic landscape of Myanmar and the future of financial inclusion there. In Myanmar, 70 percent of the population was excluded from formal financial services until 2011, when microfinance rapidly expanded. After 2011, 267 licensed Monetary Financial Institutions (MFIs) opened. This opportunity comes with many barriers to inclusion, such as a lack of government regulation and funds and capacity-building issues. However, there is widespread optimism with an adoption of regulations proposed by the Smart Campaign, as well as further demand for microfinance in Myanmar. Investors should consider moving into the region for long term impact.

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> Posted by Haset Solomon, Communications and Operations Associate, the Smart Campaign

La Banque Centrale des Etats de l’Afrique de l’Ouest (BCEAO), the common central bank of eight West African countries (Benin, Burkina Faso, Cote d’Ivoire, Guinea-Bissau, Mali, Niger, Senegal, and Togo) has prioritized financial inclusion in the region. A recently announced financial inclusion strategy led by BCEAO in partnership with the several national Ministries of Finance aims to include 70 percent of the adult population by the year 2020. Financial access rates range from 7 to 34 percent across the region, according to the Global Findex.

BCEAO is expanding its financial inclusion efforts, including in mobile and e-money, and financial inclusion is slowly progressing in the region, but the opportunities and challenges of the member countries vary significantly, and serious client protection issues remain, particularly among unregulated institutions and in countries with weak national supervision and enforcement. A recent IMF spotlight on Senegal calls for steps to strengthen the sector’s governance through technical assistance to improve supervisory capacities and training to improve reporting standards and practices.

Weak supervision can lead to problems like those the Smart Campaign uncovered during its Client Voice research in Benin, where illegal microfinance institutions collected and disappeared with clients’ savings.

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> Posted by the Smart Campaign

When most microfinance clients start out they’re first-timers at a formal financial institution. Like anything unfamiliar, a first foray with banks can be intimidating. You don’t want to be duped or make a mistake and lose precious savings. Peace of mind was granted to clients of two microfinance institutions, one in Paraguay and the other in the Dominican Republic recently as the first Smart Certifications in those countries were awarded. Fundacion Paraguaya and Banco ADOPEM were certified as meeting all the standards needed to treat their clients with adequate care. This certification demonstrates to prospective clients as well as investors and other industry stakeholders that their institutions are operating responsibly.

Fundacion Paraguaya and Banco ADOPEM are both market leaders in their own right. Banco ADOPEM is one of the largest microfinance institutions in the Dominican Republic. According to the MIX, 351,000 depositors in the Dominican Republic bank with Banco ADOPEM. When Banco ADOPEM pursues and achieves Smart Certification, that sends a message to MFIs and other stakeholders in the country that client protection is a key priority. In 2014 ADOPEM was named “Most Innovative Microfinance Institution of the Year” by Citi, in part because of ATA-Movil, a portable electronic application that allows credit advisers to assess customers in their businesses or in their homes. The mobile information system also allows for convenient and direct communication with clients.

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> Posted by the Smart Campaign

The Smart Campaign is thrilled to announce that a new milestone for client protection in microfinance has been reached: there are now 50 financial institutions that have been awarded Smart Certification, recognizing their commitment to fair client treatment and responsible practices. In total, these institutions serve roughly 25 million clients.

The threshold was crossed with a handful of recent certifications – Fortis Microfinance Bank and Grooming Centre in Nigeria; Banco ADOPEM in the Dominican Republic; Fundacion Paraguaya in Paraguay; Pro Mujer in Nicaragua; and AgroInvest in Serbia. Each of these institutions worked over a several month process to assess and upgrade their operations to meet every one of the indicators signifying strong consumer protection practices.

Grooming Centre and Fortis Microfinance Bank collectively reach over a half million clients. Founded in 2006, Grooming Centre operates in 22 states in Nigeria with a network of 376 branches. Grooming Centre offers a range of financial services, including savings and credit, small business loans, agricultural loans, and clean energy financing. Fortis Microfinance Bank, along with offering financial services, provides clients with business support in areas including management, marketing, and administration.

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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.

> Posted by Elisabeth Rhyne, Managing Director, CFI

Sub-Saharan African countries may be leading the world in mobile money and growth in access to accounts, but the state of financial consumer protection in Africa is in urgent need of attention.

In the EIU Global Microscope’s 2014 overall rating of the policy environment for financial inclusion, African countries scored very close to the global average (44 SSA vs. 46 Global out of a possible 100). However, these countries were substantially below the average on consumer protection indicators – market conduct (27 SSA vs. 43 Global) and grievance redress (35 SSA vs. 45 Global).

These numbers have human consequences. The Smart Campaign commissioned research in two African countries – Benin and Uganda – which revealed the frequently harsh environment in which microfinance is conducted. In Uganda, research on what happens to clients who default showed that, lacking regulatory oversight and the calming influence of credit reference bureaus, lenders in Uganda feel compelled to resort to practices such as rapid confiscation of a borrower’s assets. They are afraid that if they do not act quickly, the borrower may flee. In the research on client experiences from Benin, clients reported major gaps in trust and transparency. For example, many reported being surprised by fees that were not explained or expected, having no place to turn when problems arose, or being publicly shamed for late payments.

The research pointed to very low trust on both sides between providers and customers. In fact, in Smart Campaign conversations with African microfinance institutions about consumer protection, one of the most frequently asked questions is, “Who will protect us (the lenders) from them (the borrowers)?”

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> Posted by the Smart Campaign

Today we’re excited to announce that Alalay Sa Kaunlaran (ASKI) is the first financial institution in the Philippines to be certified by the Smart Campaign. Clients of financial services can face risks. They can get into too much debt, be taken advantage of, or sold the wrong services. Financial institutions can minimize harm to clients by implementing the Client Protection Principles, a common, global framework for client protection. By becoming Smart Certified, an institution demonstrates that it puts the principles into practice.

The non-profit institution earned its Smart Certification in late July following a mission conducted by Microfinanza Rating, and is being publicly recognized today in conjunction with the Asia-Pacific Financial Inclusion Summit 2015, in Manila.

Established in 1987 in central Luzon to serve and empower the poor through microenterprise development, ASKI today serves more than 136,000 clients through 72 branches and 7,794 solidarity groups in 234 cities and towns.

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> Posted by the Smart Campaign

Smart CampaignToday, the Smart Campaign released for public comment new draft Client Protection Standards – which will be the basis for what we term Certification 2.0. The new standards streamline the previous Client Protection Standards, and reflect the evolving financial inclusion industry. They incorporate client risks pertaining to insurance, savings, and digital financial services. The standards operationalize where the financial inclusion industry sets the bar in terms of the minimum behaviors clients should expect from their financial service providers. Now open, the public comment period extends through November 30, 2015.

We’d love your feedback!

The new standards build off of the first set of Client Protection Standards, released in January 2013, as the basis for the introduction of Smart Certification. The standards and their corresponding indicators, which put the Client Protection Principles into practice, are used to benchmark institutions seeking Smart Certification.

Like the first iteration, the development of Certification 2.0 standards has been a highly collaborative process. Over the past 18 months, the campaign consulted a wide array of stakeholders and up to 30 experts to strengthen and update the standards and indicators.

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> Posted by James Militzer, Editor, NextBillion Financial Innovation

The following post was originally published on NextBillion, in two parts, here and here

The Smart Campaign was born in the midst of extraordinary upheaval in the microfinance sector. Its launch in 2009 was sandwiched between the 2008 global financial crisis, repayment crises in several microfinance markets, and the 2010 debtor suicides in Andhra Pradesh. Yet the turmoil served to amplify the campaign’s main point: that microfinance needs to focus on customer protection. In the succeeding years, it has labored to unite microfinance leaders and practitioners around this goal – most notably through its efforts to convince microfinance institutions (MFIs) to undergo the process of Smart Certification, in which independent evaluators verify that they are “doing everything [they] can to treat [their] clients well and protect them from harm.”

Over time, these efforts have started to gain traction. The campaign – which is steered by a group of prominent leaders in the industry and housed at Accion’s Center for Financial Inclusion – has certified 39 microfinance institutions. (Note: Accion is a NextBillion Content Partner.) Certified institutions include a number of leading MFIs in markets around the world, from Equitas in India to Kompanion in Kyrgyzstan. And the campaign calculates that certified MFIs now serve slightly more than 20 million clients. In a recent interview with NextBillion, its director, Isabelle Barrès, called the 20 million client mark “an exciting milestone, recognition of the fact that there is momentum growing in the industry for client protection –  not just paying lip service to it, but actually working hard to improve practices.”

But achieving this momentum hasn’t been an easy task for the campaign – or for the industry whose practices it’s trying to improve. Barrès discusses the challenges it has faced – and the controversy it has sparked – in this two-part Q&A.

James Militzer: Do you have any data on which markets have the highest percentage of Smart Campaign-certified MFIs?

Isabelle Barrès: I think Kyrgyzstan probably is the one where we currently have the most right now – 60 percent of microfinance clients are served by organizations that have been certified. This shows that when there are some substantial efforts that are put towards improving client protection – whether it’s at the market level or at the regulatory level, or through market infrastructure, such as supporting a good credit bureau – it can make a difference for the entire industry.

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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.