> Posted by Center Staff
Last week witnessed a historic step forward for microfinance — perhaps not quite on the scale of Pocantico, but earth-shaking nonetheless.
Forty investors signed the new Principles for Investors in Inclusive Finance, which were launched at the second annual Responsible Finance Forum in The Hague.
“Investors in microfinance can’t act like absentee landlords, enjoying the returns but not fixing the plumbing,” said one investor at the forum.
The initiative to develop these principles began with Princess Maxima of the Netherlands, in her role as the United Nations Secretary General’s Special Advocate for Inclusive Finance, along with a group of Dutch investors. This explains the preponderance of Dutch investors among the 40 initial signatories: 23 of the founding signers are from the Netherlands, eight from the United States, five from Switzerland, and one each from India, Germany, Belgium, and Norway.
Two levels of investors are participating: microfinance investment vehicles (MIVs) that invest directly in microfinance institutions (Triodos, Oikocredit, and Calvert) and institutional investors that generally invest through MIVs (TIAA-CREF and a host of Dutch pension funds).
The Smart Campaign staff is proud to note that the Client Protection Principles (CPPs) feature prominently in the new investor principles. Principle 2 directly incorporates all the CPPs and calls on investors to ensure that their investee MFIs implement them. Beyond client protection, the investor principles also address the market conduct of investors, calling for fair competition, balanced social and financial returns, transparency, and commitment to the ESG (environment, social, and governance) agenda.
Promotion of the new principles, as well as work on standards and reporting, will be taken on by UNPRI, a small UN agency that oversees the Principles for Responsible Investing. UNPRI was created to guide the conduct of mainstream project investment. The agency will offer its expertise on standard-setting, monitoring, and benchmarking, and will help synchronize the inclusive finance principles with the host of other standards and principles frameworks now emerging in impact investing, project finance, and financial inclusion.
While some mumbling was heard about overlap with other initiatives and the proliferation of principles, the mood of forum participants clearly favored investors taking greater responsibility for the social side of inclusive finance. It’s easy to agree that these principles are in everyone’s interests, from the investors who put their own money into inclusive finance all the way to the clients who use the services.