Aban Haq is a research analyst at the Pakistan Microfinance Network.
The 26 of January 2009 was a proud day for the entire team of the Pakistan Microfinance Network (PMN)! It was the day all our member institutions came together to publicly commit and sign onto the PMN Code of Conduct for Consumer Protection. The launching ceremony was the culmination of the spadework done during 2008 in deepening the Network’s capacity and understanding of consumer protection, cultivating advocacy with member institutions, drafting and re-drafting the Code, and mapping the way forward.
Surprisingly, and yet not so surprisingly, PMN members supported this initiative from day one. Given their commitment to positively contribute to the lives of their clients, it makes sense to support any initiative that aims to protect the rights of the clients. From a purely business point of view, a satisfied client is a loyal client. Also, consumer protection for the PMN is not just about rights of clients, but their obligations towards their service provider – transparent pricing ensures a client understands her true obligations and thus makes an informed choice, ultimately affecting portfolio quality.
The values of the Code extend not only to those who directly interact with the clients in terms of fair and dignified treatment of clients, but to each staff member – every individual in their capacity has to strive to ensure they are doing their best to deliver services in the most efficient manner and abide by the highest standards of governance.
At the launch, we heard that is was easy to draft a Code, but what really matters is the implementation. Even during our background research, we came across many examples of Codes but few case studies on implementation. For PMN, launching the Code of Conduct was an important first step. Having a standard that the industry has formally agreed upon provides a solid foundation on which to build The road ahead is largely unexplored but we do have a plan – our implementation strategy revolves around a) ensuring the code is widely disseminated and understood by the clients and staff of MFIs, b) standardizing pricing formulae for transparency, c) putting monitoring systems in place through internal and external audit functions, and d) establishing an independent grievance redressal system for the sector.
The concern with issues of consumer protection at PMN’s level stems from a number of reasons. Given the low financial literacy amongst the target clientele of microfinance, intensifying competition coupled with the lack of any noteworthy legislation on consumer protection clients may be vulnerable to undesirable practices by service providers. State intervention in such scenarios often leads to regulations that stifle the industry, cap interest rates, and retard growth. But perhaps the most important reason is our commitment to a microfinance double bottom line – we cannot forget the social objectives in our pursuit of sustainability or financial returns. Our ultimate objective remains improvement in the lives of microfinance clients, and safeguarding their rights is our responsibility.