Six Principles of Client ProtectionThe Client Protection Principles are part of a microfinance-industry initiative to ensure that providers take steps to protect low-income clients from potentially harmful financial products and ensure that they are treated fairly. A growing number of microfinance providers, networks and associations, and donors and investors have signed on to an industry-wide set of principles that advance minimum standards for client protection. Those who have endorsed these principles are committed to an industry-wide process to translate them into standards, policies, and practices. The Client Protection Principles describe the minimum that microfinance clients should be able to expect from providers. These principles are distilled from the path-breaking work by providers, international networks, and national microfinance associations to develop pro-consumer codes of conduct and practices. Over the past several years, consensus has emerged that providers of financial services to low-income clients should adhere to the following six core principles: - Avoidance of Over-Indebtedness. Providers will take reasonable steps to ensure that credit will be extended only if borrowers have demonstrated an adequate ability to repay and loans will not put the borrowers at significant risk of over-indebtedness. Similarly, providers will take adequate care that non-credit, financial products,(such as insurance) extended to low-income clients are appropriate.
- Transparent Pricing. The pricing, terms and conditions of financial products (including interest charges, insurance premiums, all fees, etc.) will be transparent and will be adequately disclosed in a form understandable to clients.
- Appropriate Collections Practices. Debt collection practices of providers will not be abusive or coercive.
- Ethical Staff Behavior. Staff of financial service providers will comply with high ethical standards in their interaction with microfinance clients and such providers will ensure that adequate safeguards are in place to detect and correct corruption or mistreatment of clients.
- Mechanisms for Redress of Grievances. Providers will have in place timely and responsive mechanisms for complaints and problem resolution for their clients.
- Privacy of Client Data. The privacy of individual client data will be respected, and such data cannot be used for other purposes without the express permission of the client (while recognizing that providers of financial services can play an important role in helping clients achieve the benefits of establishing credit histories).
> To endorse The Smart Campaign and the Client Protection Principles, click here.
> Download a handout on the Principles here. Currently available in English, French, Spanish, Arabic, and Russian. |