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> Posted by Sergio Guzmán, Lead Specialist, the Smart Campaign, CFI
In preparation for the launch of its Certification Program, the Smart Campaign’s Straight Talk blog series highlights standards that may be overlooked by microfinance institutions but that are an important part of client protection. This seventh post in the series by Sergio Guzman describes what aggressive sales practices are and makes a call to industry practitioners to help further identify practices we’d like to see disappear.
“You know, Sergio, I strive to do what is best for my clients, but the competition makes it very difficult for me to be transparent. They use very aggressive sales techniques,” said a microfinance provider in a country that I won’t disclose. “What are these aggressive sales techniques?” I inquired with curiosity.
Sadly I have had similar discussions during many of the Smart Assessments I have done throughout my time at the Campaign. There appears to be a unified consensus among providers that they are treating their customers adequately, but that the competition behaves badly. Sometimes I think that aggressive, non-transparent practices may be everywhere!
> Posted by Juan Carlos Izaguirre, Financial Sector Specialist, World Bank
In preparation for the launch of its Certification Program, the Smart Campaign’s Straight Talk blog series highlights standards that may be overlooked by microfinance institutions but that are an important part of client protection. This sixth post in the series by guest blogger Juan Carlos Izaguirre highlights a very specific practice at the heart of the client protection principle on transparency—and essential for certification: client contracts.
Can you imagine renting an apartment, an office, or a farm, based on a purely verbal agreement? Centuries ago codes of honor and verbal agreements may have been the norm, but not anymore. People want to avoid misunderstandings and forgetfulness by having written contract agreements, especially for long-term transactions. Now, can you imagine signing a rental agreement but then not receiving a copy of that agreement? In practice, not having a copy is almost like trusting in a verbal agreement. To be honest, I would not feel comfortable signing a document without receiving a copy. I would be suspicious of that transaction. Why would the owner not want me to have a copy of the contract? What is there to hide? I have a sense that you would feel similarly uneasy.
> Posted by Sergio Guzmán, Lead Specialist, The Smart Campaign, CFI
The Smart Campaign will soon launch its Certification Program on client protection for microfinance institutions (MFIs). In this fifth post in a series, Sergio Guzmán uses his experience from the field to shed light on standards that are often overlooked by MFI managers but that are a crucial part of client protection.
A friend of mine has a very interesting saying that I’ve found myself repeating recently: “The common sense is the least common of senses.” I think this saying applies to microfinance organizations especially when it comes to setting adequate behavioral standards for staff, especially in collections. Most microfinance organizations assume good intentions in their staff. There is a good reason for this. MFIs have to deeply trust their loan officers. They are often the organization’s only connection to its clients.
Loan officers are one of the microfinance industry’s greatest assets, but also one of its biggest risks in terms of brand and reputational management. They have great power vis-à-vis the clients MFIs serve. This is why MFIs need to set standards of professional conduct that are expected of all staff and spell these out clearly in a Code of Conduct, Code of Ethics, or Staff Rules. My point goes double for standards regarding debt collection practices.
> Posted by Alex Rizzi and Leah Wardle, Deputy Director and Tool Development Specialist, The Smart Campaign, CFI
The Smart Campaign will soon launch its certification program on client protection for microfinance institutions (MFIs). In this fourth post in a series, Smart Campaign members Leah Wardle and Alex Rizzi discuss how experience from the field sheds light on standards that are often overlooked by MFI managers but are a crucial part of client protection.
A Dominican loan officer once told me that if I really wanted to know what clients thought of the institution, I should ask a client who had already exited the program. These are the only people, he told me, who speak honestly about the institution’s failures.
In some ways, he was right about exit clients. They have little to lose, and can freely complain about their former lender without repercussion. But I think MFIs should also expect to hear from current clients, and to address problems before they lead to client exit. The key is to have a complaints system that is easy for clients to use (so they’ll actually complain if they need to) and to respond quickly to issues (so the concern is addressed). Increased client satisfaction is one of those fantastic “win-win” achievements, and the effective handling of client complaints is one way to get there.
At a high level, the Smart Campaign Certification standards require that an institution a) has policies and procedures that provide a straightforward way for clients to submit complaints, b) teaches clients (and staff) how to use the system. The institution should also c) have a protocol for resolving complaints in a fair and timely way, and d) should ultimately analyze trends in the complaints data to improve their operations.
> Posted by Leah Wardle, Tool Development Specialist, The Smart Campaign, CFI
The Smart Campaign will soon launch its certification program on client protection for microfinance institutions (MFIs). In this third post in a series, Leah Wardle uses her experience from the field to shed light on standards that are often overlooked by MFI managers but that are a crucial part of client protection.
Living in Kenya, I’ve had the opportunity to work in one of the most dynamic microfinance markets on the African continent. Given the variety and number of providers in this country, I often wonder if MFIs in Kenya and their clients will soon contend with over-indebtedness—the situation where clients are taking more loans and/or bigger loans than they can repay.
It’s my sense that Kenyan MFIs—like MFIs everywhere—should at least be aware of the potential for an overheated market, and should regularly monitor the indebtedness levels of clients. But here—as in many places—monitoring this risk does not seem to be a priority. Here are some common responses that I get when I ask MFIs: “Why don’t you regularly monitor the indebtedness levels of your clients?” Read the rest of this entry »
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