A Study of Client Protection Practices in Latin America and the Caribbean

> Posted by Alyssa Passarelli, Communications and Operations Assistant, the Smart Campaign


The findings in the Study of Client Protection Practices in Latin America and the Caribbean (LAC), a new report from the Smart Campaign, are intended to help microfinance stakeholders reflect on the current state of practice among institutions in LAC and on how performance gaps can be addressed.

Over the past two years, the Smart Campaign conducted a study on the client protection practices of twelve Latin American microfinance institutions, examining their implementation of the Client Protection Principles. The study looked at an assortment of organizations such as NGOs, banks, and credit unions in different countries, analyzing their client protection performance from the point of view of practitioners, and offering recommendations to improve their client protection practices.

Overall, the MFIs studied in the report performed well in the principles of Preventing Over-Indebtedness, Responsible Pricing, and Ethical Staff Behavior, but there was (sometimes significant) room for improvement in the principles of Transparency, Appropriate Collections, and Mechanisms for Complaint Resolution. The report revealed that client protection performance is not easily generalized, and that it’s often essential that particular client protection areas be improved if clients are to be served responsibly.

A common gap across the principles is the lack of formalization and standardization of institution practices. We found that financial institutions (FIs) do not always have written policies to address client protection issues in operational areas, such as collections. In many cases in which policies do exist, there are no practices to implement the policies, such as staff training, monitoring, and sanctions. For example, in FIs with codes of ethics, managers were not designated to monitor if and how staff follows the code of ethics. Organizations that supplement strong written policies with practices tend to perform significantly better on most principles.

Although reaching the Campaign’s standards of care in client protection takes effort, we believe that it is possible for most organizations, with dedication for the sake of their clients’ wellbeing.

To download the paper, click here.

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