Beyond Codes: Accomplishments and Preliminary Findings of the First Year

>Posted by Cara Forster
How well do MFIs implement client protection principles?  Are there identifiable performance trends relating to MFI characteristics (e.g. size, age, or type)?
Beyond Codes, the research arm of The Smart Campaign, is helping to make sense of these and other questions through the systematic assessment and analysis of MFIs’ performance in implementing consumer protection practices.  During the first year of Beyond Codes the team conducted structured assessments at ten institutions within five countries—Bosnia and Herzegovina, Kenya, Mexico, Philippines, and India.  The MFI sample contained both regulated and unregulated institutions of various sizes.
The Beyond Codes team has identified some clear trends as a result of their preliminary assessments:

  1. MFIs were strongest on appropriate collections practices (100% of sample had good practices in this area) and avoiding client over-indebtedness (at least 80% of sample MFIs’ practices were adequate or better).  Regulated MFIs generally showed stronger performance on both principles than unregulated ones, although MFI size was not a factor influencing performance.
  2. Performance on transparent pricing and ethical staff behavior was mixed, with 50% of sample MFIs demonstrating strong or good practices on each respective measure and the remaining 50% scoring fair or inadequate on each.
  3. MFI’s performed weakest overall on mechanisms for redress of client grievances with 60% of the sample demonstrating weak practices.  More mature MFIs had stronger practices than newer institutions, but MFI size was not a relevant factor.

These trends were similar to the preliminary findings of the MIX Social Performance reporting framework.
The Beyond Codes team revised assessment indicators throughout the process by integrating participating MFIs’ experiences and feedback.  The team will continue to hone the assessment toolkit going forward to ensure that indicators are meaningful, verifiable, and universally valid.
A notable outcome of the first year of Beyond Codes assessments has been to increase the awareness of MFIs’ senior management regarding the importance of client protection principles.  The assessment team reported that support from MFI senior management was a valuable addition to the process, leading to more fluid assessments and more comprehensive and useful results.  MFIs’ management teams reported positive externalities resulting from the assessment process including a better understanding of the business case for client protection and the opportunity to examine their own operations comprehensively in order to improve adherence to client protection principles.