In the past few months, questions have been raised about the quality of microfinance debt collection practices in Cambodia. A damning recent <a href="http://www.licadho-cambodia.org/reports.php?perm=228">report</a> by LICADHO, a Cambodian human rights organization, concluded that MFIs in Cambodia have relied on “inadequate government regulation and the widespread complicity of local authorities” to unethically and illegally force indebted Cambodian borrowers to sell their land titles in order to secure repayment. Borrowers, unaware that land seizures are illegal, are intimidated into doing so. Interviewees in the report also indicated other lender abuses, including child labor, debt-driven migration and food insecurity – all because they couldn’t pay loans on time. The report, which the Center for Financial Inclusion recommends reading, raises serious concerns about human rights and consumer protection.

CFI has been an advocate of consumer protection in Cambodia for <a href="https://www.cgap.org/blog/supporting-client-protection-cambodia">many years</a>, working with a variety of stakeholders in the country, including donors, financial service providers, clients and the government. We believe that using threats as a means to extract repayment is unacceptable, and the allegations from LICADHO should be taken seriously and further investigated. Responsible practices should be reinforced by providers as needed.
<blockquote>We believe that using threats as a means to extract repayment is unacceptable.</blockquote>
However, as the report itself and the Cambodia Microfinance Association (CMA) <a href="https://www.construction-property.com/lichado-report-selective-and-misleading-says-cma/">point out</a>, the results need contextualization. The sample size is very small – only 28 interviews were conducted in four provinces and Phnom Penh – and is not meant to be statistically representative of Cambodia or all MFI clients. All interviews were conducted in a very short timeframe: spring 2019. Are a small number of providers concerned, or is the report surfacing issues that indicate an existing (and possibly increasing) general crisis amongst MFI providers? While the issues raised in the report merit attention, even if they affect a proportionally small number of clients, it is important to understand the scope of the problem in order to determine how to adequately address it.

The <a href="http://smartcampaign.org/about/smart-microfinance-and-the-client-protection-principles">Consumer Protection Principles</a> contain strict guidelines that deter providers from violating borrowers’ human rights. Consumer Protection Principle 5, which concerns the fair and respectful treatment of clients, strictly prohibits Smart-certified financial service providers from using abusive language, using physical force, limiting physical freedom, shouting at the client, entering the client’s home uninvited, publicly humiliating the client, violating the client’s right to privacy, mistreating a client based on any protected groups, using intimidation or threats, sexual or moral harassment. Guideline 5.3.3 explicitly states that “the provider staff may not force clients to sell their own collateral to pay off their debt.”

But it’s not about just setting principles and hoping providers abide by them. The <a href="http://smartcampaign.org/certification">Smart Certification</a> process requires financial service providers to demonstrate their adherence to the Client Protection Principles and corresponding standards. It represents a rigorous analysis of an institution’s policies, systems and practices, carried out by licensed third-party organizations. Recognizing that organizations, regulations and product offerings evolve, our 115 certified-organizations worldwide are required to be recertified every four years, with a two-year check-in, and a required recertification if the organization goes through material change. Certification is a measure of whether an institution has adequate systems in place to prevent client harm, ensuring that harm isn’t occurring, and mitigate it if it is. The Cambodian microfinance sector, with support from CMA, has worked hard over the years to improve practices in order to meet the rigorous bar set by Smart Certification. Eight Cambodian institutions are currently Smart-certified: LOLC, Acleda Bank Plc, AMK, Hattha Kaksekar Ltd., Amret Microfinance, Sathapana Bank, VisionFund Cambodia, and Thaneakea Phum.

Through the assessment and certification process, widespread client abuses come to light and the institution is given recommendations on how to address them. On the other hand, one-off poor and abusive decisions on the part of selected individuals may not surface. This is why complementary research of alleged abuse, and the presence of well-functioning recourse mechanisms for clients are critical.
<h2>CFI's Role in Cambodian Consumer Protection</h2>
CFI started its engagement with the microfinance sector in Cambodia in 2012, a time when the Cambodian market, a victim of its own success, was growing at a pace seen by many as unsustainable: between 2004 and 2014 the growth in the average household loan size <a href="https://cma-network.org/files/OIDWORKSHOP/MIMOSA Circular Cambodia Jun 2016.pdf">outpaced growth</a> in average client income by a factor of four. CFI convened key funders of the main MFIs and encouraged them to embrace Smart certification as part of their screening and due diligence process to ensure that providers had adequate policies and practices in place to prevent over indebtedness and poor client treatment. In the years that followed, and with generous support from the Agence Francaise de Développement (AFD), CFI supported an ambitious consumer protection program aimed at developing the country’s credit bureau, strengthening the capacity of the Cambodia Microfinance Association (CMA) and improving practices of the main financial service providers (FSPs) to the poor in the country.

FSP practices drastically improved as part of this work. Collectively, the eight Smart Certified institutions in Cambodia serve 1.6 million clients. This is an incredible achievement for the sector, as these clients are served by institutions that have committed (and demonstrated) that they have put in place systems and processes to protect their rights and treatment. Preventing over indebtedness is complex, especially in the context of fast-growing markets and an environment where lenders are not always required to report to the credit bureau.
<blockquote>The eight Smart Certified institutions in Cambodia serve 1.6 million clients.</blockquote>
<h2>Lending Guidelines</h2>
As concerns of over indebtedness have continued to <a href="https://mimosaindex.org/inexorable-growth-in-cambodia-like-a-rolling-stone-2/">rise over the years</a>, concerned players decided to go a step further and understand better the underpinnings of growth in the Cambodian market, as well as ways to ensure a responsible growth. Since 2016, the <a href="https://cma-network.org/">CMA</a>, <a href="http://www.incofin.com">Incofin</a>, <a href="https://mimosaindex.org/">MIMOSA</a>, the Credit Bureau of Cambodia, the Smart Campaign at CFI, and several other stakeholders have been developing and refining the CMA Lending Guidelines. The <a href="https://www.microcapital.org/special-report-a-model-from-cambodia-for-preventing-overheating-not-just-multiple-lending-to-be-presented-at-european-microfinance-week-november-14-16-2018/">project</a> was funded by Incofin, <a href="https://www.proparco.fr/en">PROPARCO</a>, BIO, <a href="https://www.fmo.nl/">FMO</a> and <a href="https://www.ada-microfinance.org/en">ADA</a>.

The Lending Guidelines, published in 2016 (overview <a href="http://www.e-mfp.eu/sites/default/files/resources/2018/11/Preventing overindebtedness in Cambodia_all speakers.pdf">here</a>), were developed because the industry in 2015 was growing at an average of 25 percent per year, even as the number of loans remained unchanged at 2.3 million. This meant that the same clients were taking more debt when their loans were renewed, even though their economic activities did not justify it. The average loan size had almost doubled, growing from close to $1,700 to a little over $3,000 with loan maturity of four to five years (the GDP per capita in 2017 stood at around $1,400). The Lending Guidelines have identified excessive and reckless refinancing as a key concern area for the lending sector, and recommend maximum thresholds for refinancing, above which lenders are bound to more scrutiny. They include a mix of indicators highly correlated to over indebtedness, such as multiple borrowing, loan to income ratio, and refinancing rates.
<blockquote>The Lending Guidelines have identified excessive and reckless refinancing as a key concern area for the lending sector.</blockquote>
The FSPs that have endorsed the lending guidelines have adapted their credit their underwriting policies and enhancing their risk management practices. The National Bank of Cambodia (NBC) has been supportive of the Lending Guidelines and has made public statements on calling FSPs to adopt them. The Central Bank of Cambodia issues a monthly dashboard that shows the FSPs level of compliance with the Lending Guidelines. The Lending Guidelines have been fully integrated into the Smart Certification process and not abiding to the Lending Guidelines can be one of the causes for not having a Certification renewal. The Lending Guidelines are reviewed to ensure that they are meaningful in curbing the risk of over-indebtedness. The Lending Guidelines are an example of a market defining precise recommendations to address a specific issue occurring in a market (here, excessive refinancing). As other issues surface and are demonstrated (i.e., intimidation and illegal land seizure), additional monitoring and mitigation strategies can be put in place at the market level to address systemic issues and complement the individual work of responsible providers.
<h2>Next Steps: Improving Regulation and Learning From Clients</h2>
I recently traveled to Phnom Penh to attend a closed meeting of regulators, hosted by the NBC and supported by Asian Development Bank, to discuss how authorities can improve oversight. There were a few key takeaways from this. Even though the NBC is actively working on draft consumer protection regulation, current financial consumer protection regulations are weak. The National Bank of Cambodia is dependent on the CMA to mitigate the risks that are looming over the sector. There is, however, an initiative in an initial phase to create a registry of collaterals, assets, and fixed values. Overall, it’s encouraging to see that there’s consensus on the necessity for more sensitization of regulators on consumer protection, as the national financial inclusion strategy is more heavily focused on credit report sharing. The CFI is excited to work with the NBC, drawing from the <a href="https://www.smartcampaign.org/tools-a-resources/1210-handbook-on-consumer-protection-for-financial-inclusion">Handbook on Consumer Protection for Financial Inclusion</a> (recently updated to reflect the risks to consumers in a digital financial world) to improve the Cambodian regulatory framework.
<blockquote>It’s encouraging to see that there’s consensus on the necessity for more sensitization of regulators on consumer protection.</blockquote>
In addition to improving the regulatory framework, we must have better and more frequent ways to hear from clients directly.

With this in mind, we ask: is collateralized debt seizures a troubling and growing trend, or was the LICADHO study reflecting isolated incidences of mistreatment? We hope that a new study initiated by CFI will help shed light on the issue. The study, known as Client Voice, uses an interactive voice response (IVR) approach. Three Smart Certified FSPs – AMK, Maxima and HKL – will participate, and 500 to 1,000 clients from each institution will be surveyed. Institutions that are at the stage of transforming to digital product offerings – such as AMK – are looking to adopt new and better ways to gather ongoing feedback from clients to improve their product design and delivery and are keen to test the IVR system to that effect. The study will be completed by December 2019, and the results will be published by January 2020.

Land Seizures and Reported Abuses in Cambodia: CFI Responds

The Smart Campaign

Cambodia

East Asia and Pacific

Client Treatment

Consumer Protection

Enabling Environment

Financial Inclusion Strategy

Over-indebtedness

Policy, Regulation and Government Initiatives

Smart Certification

Blog Post

<img class="aligncenter wp-image-24227" style="border: 0 solid #000000" src="https://centerforfinancialinclusionblog.files.wordpress.com/2017/10/fi-week_cropped.png" alt="" width="616" height="273" />With Financial Inclusion Week 2017 less than two weeks away, we’re excited to share a full <a href="http://financialinclusionweek.org/calendar17/">calendar of events</a> and specifically, 11 webinars or online events that you can join from wherever you are. Topics include micro pensions, IndiaStack, interactive voice response technology, and more. Don’t pass up an opportunity to hear from organizations and experts from around the world – register today!
<h4>Monday, October 30</h4>
<a href="https://attendee.gotowebinar.com/register/5232828010844793347">Digital Fireside Chat: How Are New Products and New Partnerships Unlocking Access to Insurance?</a>
Hosting Organizations: <a href="https://us.axa.com/home.html">AXA</a>, <a href="http://www.centerforfinancialinclusion.org/">Center for Financial Inclusion at Accion</a>
To kick of Financial Inclusion Week 2017, Elisabeth Rhyne, Managing Director of the Center for Financial Inclusion at Accion will join Garance Wattez-Richard, Head of AXA Emerging Customers for a digital fireside chat. During the webinar, Rhyne and Wattez-Richard will discuss how new products and partnerships are opening up new potential in the inclusive insurance space. They will take a specific look at how AXA is working to reach emerging customers.

<a href="https://www.facebook.com/Thitsaworks/">Technology-Enabled Financial Inclusion in Myanmar</a>
Hosting Organizations: <a href="https://www.thitsaworks.com/">ThitsaWorks</a>, <a href="https://www.magzter.com/MM/Information-Matrix/Myanmar-Internet-Journal/Computer-&amp;-Mobile/">Internet Journal</a>
ThitsaWorks and Internet Journal will host a Facebook Live conversation on the impact of digital services on financial inclusion in Myanmar, where mobile phone ownership has grown rapidly from 5 to 90 percent between 2011 and 2017.


<h4>Tuesday, October 31</h4>
<a href="https://attendee.gotowebinar.com/register/8455245903222706945">The Digital Landscape of Financial Inclusion: Trends, Challenges and Opportunities</a>
Hosting Organization: <a href="https://responsiblefinancialinclusion.org/">The Partnership for Responsible Financial Inclusion</a> (formerly MCWG)
The Partnership for Responsible Financial Inclusion (formerly the Microfinance CEO Working Group) and their senior staff who work in digital financial services and fintech will present on the trends, challenges, and opportunities for sector-wide collaboration in digital financial inclusion. Join the discussion and share your thoughts on the technology and innovations that are shaping the inclusive finance landscape.
<h4>Wednesday, November 1</h4>
<a href="https://mix.webex.com/mw3200/mywebex/default.do?nomenu=true&amp;siteurl=mix&amp;service=6&amp;rnd=0.9052351292117116&amp;main_url=https://mix.webex.com/ec3200/eventcenter/event/eventAction.do%3FtheAction%3Ddetail%26%26%26EMK%3D4832534b00000004931da127582115b1d0736ecfcb3b55bac591f4f402a78992b74709dd5584d48a%26siteurl%3Dmix%26confViewID%3D75612919730059323%26encryptTicket%3DSDJTSwAAAAR8kbqDsowOMB0HcHiCIxdYCb3-Oq_N6uyieiCBtymWFA2%26">Voice of the Client: Using Mobile Phones and IVR Technology to Understand Client Satisfaction in Cambodia</a>
Hosting Organization: <a href="https://www.themix.org/">MIX</a>
MIX’s webinar is focused on their <a href="http://www.themix.org/mixmarket/publications/voice-client-cambodia">Voice of the Client</a> project, a pilot developed for financial services providers (FSPs) to leverage mobile technologies as a means to analyze client satisfaction. MIX will share research findings from Cambodia and offer insight on how to best use interactive voice response (IVR) technology to gather client-level data for decision-making.

<a href="https://www.eventbrite.co.uk/e/uncdf-and-visionfund-present-whats-next-for-microfinance-in-myanmar-tickets-39003624892">UNCDF and VisionFund Present: What's Next for Microfinance in Myanmar?</a>
Hosting Organizations: <a href="http://www.uncdf.org/">UNCDF</a>, <a href="http://www.visionfund.org/">VisionFund</a>
Isolated for decades, Myanmar has only recently opened up to the global economy. This has brought a lot of discussion about the Southeast Asian country being the 'last frontier' of financial inclusion. Microfinance legislation was passed in late 2011, but what has happened since? And what does the future look like?
<h4>Thursday, November 2</h4>
<a href="https://bfaglobal.zoom.us/webinar/register/WN_pQVJ6I9gTOOpO2ylEI5gBA">A Fintech Approach to Financial Inclusion</a>
Hosting Organization: <a href="http://bfaglobal.com/">BFA</a>
BFA will host a webinar focused on the benefits and challenges of fintech approaches to financial inclusion. The webinar will highlight key findings from three of BFA’s global programs: Catalyst Fund, FIBR and OPTIX.

<a href="http://bit.ly/MIXvoc2">Voice of the Client: Using Mobile Phones and IVR Technology to Understand Client Satisfaction in Peru (Spanish)</a>
Hosting Organization: <a href="https://www.themix.org/">MIX</a>
This webinar presentation will be the same as the preceding Voice of the Client webinar, expect it will be in Spanish and it will share project research findings from Peru instead of Cambodia.

<a href="https://successfulmicropensiondesign.clickmeeting.com/financial-inclusion-week-webinar-bpps">Successful Micro Pension Design</a>
Hosting Organization: <a href="http://www.blueprintpensionservices.com/">BluePrint Pension Services</a>
BluePrint Pension Services is hosting a webinar on designing successful micro pension schemes as a solution to mitigate the risk of old age poverty for men and women working in the informal sector.

<a href="https://attendee.gotowebinar.com/register/1959278429738133251">What We Learned from Micro Pensions So Far: Case Studies from India and Ghana</a>
Hosting Organization: <a href="http://www.enviu.org/">Enviu</a>
In this one-hour interactive discussion, Ashish Aggarwal of Invest India Micro Pension Services and Samuel Waterberg of People’s Pension Trust Ghana will share their experiences and perspectives on setting up micro pension products in India and Ghana.

<a href="https://attendee.gotowebinar.com/register/4179631111385479170">IndiaStack - The Change Catalyst</a>
Hosting Organization: <a href="http://www.accion.org/">Accion</a>
Accion will be hosting a webinar to discuss the ways that IndiaStack – a combination of complimentary financial technologies – is catalyzing change in financial inclusion in India. The webinar will highlight the risks and rewards of IndiaStack and the considerations FSPs should take before integrating with this system of APIs.
<h4>Friday, November 3</h4>
<a href="https://attendee.gotowebinar.com/register/845125705152860161">How Financial Institutions and Fintechs Are Partnering for Inclusion</a>
Hosting Organizations: Center for Financial Inclusion at Accion, <a href="https://www.iif.com/">Institute of International Finance</a>
Contrary to the popular narrative, financial institutions view fintechs as partners in innovation, not threats to their core business. By offering better, less expensive, and more innovative products, financial institutions can assert their continued relevance as customer-facing institutions with help from fintech partnerships. This webinar will explore how partnerships between mainstream financial institutions (e.g., banks, insurers, and payment companies) and fintechs are addressing financial inclusion challenges and expanding access to the formal financial economy for underserved segments of the global population, particularly in emerging markets.

For more on Financial inclusion Week 2017, head to <a href="http://financialinclusionweek.org/">the Financial Inclusion Week website</a>.

Have you read?

<a href="https://cfi-blog.org/2016/11/17/financial-inclusion-week-roundup-e-magazine-keeping-clients-first-in-a-digital-world/">Financial Inclusion Week Roundup E-Magazine: Keeping Clients First in a Digital World</a>

<a href="https://cfi-blog.org/2017/04/11/save-the-date-financial-inclusion-week-2017/">Save the Date: Financial Inclusion Week 2017</a>

<a href="https://cfi-blog.org/2017/10/12/have-you-marked-your-calendars-for-financial-inclusion-week-2017/">Have You Marked Your Calendars for Financial Inclusion Week 2017?</a>

Webinars for #FinclusionWeek -- Register Today

Partnership for Responsible Financial Inclusion

Myanmar

Agent Banking

Digital Financial Services

Insurance

Insurance Companies

Pensions and Retirement Saving

&gt; Posted by Daniel Rozas, Independent Microfinance Consultant

The following post was <a href="http://www.phnompenhpost.com/analysis-and-op-ed/interest-rate-cap-will-hurt-rural-families">originally published</a> in The Phnom Penh Post.

On March 13, the National Bank of Cambodia announced a major new policy. Starting April 1, all microfinance institutions operating in Cambodia will be required to lend at interest rates no higher than 18 percent per year. This is a deeply misguided regulation that will undo over a decade’s worth of successful financial policies.

At the dawn of this century, Cambodia’s financial sector was largely nonexistent. There were no ATMs, few bank branches, and equally few customers. In rural areas, there were no banks at all, and moneylenders held a monopoly on lending.

How times have changed!

Today’s village household has far greater control over its finances and is deeply connected to Cambodia’s growing economy. A farmer can borrow from a microfinance lender to buy seeds and fertilizer and set aside savings to help pay for his kids’ school fees. He can finance a solar panel to charge the phone that lets the family stay in touch with older children in the city, who themselves can send money home to the parents cheaply and reliably. None of this even requires the three-hour trip to town – a loan officer from a microfinance institution visits the village each week, while the village shopkeeper doubles as a microfinance agent who can send and receive payments. This picture is repeated in house after house, village after village, from the outskirts of Phnom Penh to the remotest corners of Cambodia. Today, in rural areas alone, half a million clients hold savings at microfinance institutions, and over a million borrow from them.

The new regulation puts all that under threat.

Interest rate caps are a type of price control. Like all price controls, they have a predictable effect – if something can’t be sold at a profit, it won’t be sold at all. If there’s any doubt, just take a look at the empty store shelves in Venezuela, where price controls have created a major food shortage. After all, even the most socially-oriented business has to cover its costs.

The results in Cambodia won’t be empty shelves, but it will mean fewer and more costly financial services for the very people the law is intended to help – the rural poor. To understand why, consider two loans: one for $500 and one for $5,000.

To read the rest, visit <a href="http://www.phnompenhpost.com/analysis-and-op-ed/interest-rate-cap-will-hurt-rural-families">The Phnom Penh Post</a>.

Daniel Rozas is an independent microfinance consultant based in Brussels.

Have you read?

<a href="https://cfi-blog.org/2017/02/23/new-interactive-website-exploring-the-client-protection-journey-in-cambodia-and-morocco/">New Interactive Website: Exploring the Client Protection in Cambodia and Morocco</a>

<a href="https://cfi-blog.org/2015/10/20/getting-to-scale-with-housing-finance-innovation-in-cambodia/">Getting to Scale with Housing Finance Innovation in Cambodia</a>

<a href="https://cfi-blog.org/2016/03/30/interest-rate-caps-in-nigeria-may-not-be-good-for-clients/">Interest Rate Caps in Nigeria May Not Be Good for Clients</a>

Interest Rate Cap Will Hurt Rural Families

Interest Rates

&gt; Posted by Center Staff

<a href="http://bit.ly/CPPjourneyEn"><img class="aligncenter wp-image-23116" style="border:0 solid #000000" src="https://centerforfinancialinclusionblog.files.wordpress.com/2017/02/time-line.png" width="614" height="295" /></a>

What’s better than blog posts? As a blogger, I’m inclined to assert that nothing is in fact better than blog posts. Alas, with self-awareness, I think we can all agree that interactive websites are cool. And that interactive websites about client protection in microfinance are especially cool!

Created by Nathalie Assouline of Alia Développement, a new interactive website offers users a media-rich experience for learning about the development of the microfinance industries in Cambodia and Morocco, with a special focus on client protection.

Users navigate dynamic world maps and timelines, embedded with information about market size, specific market players, financial inclusion, regulation, funding, and more. The site also includes a trove of video interviews, showcasing clients and financial institution staff talking about how they see client protection.

A number of <a href="http://smartcampaign.org/certification/all-about-certification">Smart Certified</a> financial institutions are featured in videos discussing their client protection practices, including:
<ul>
 	<li>KREDIT Microfinance (Cambodia)</li>
 	<li>ATTAWFIQ Microfinance (Morocco)</li>
 	<li>Al Amana (Morocco)</li>
 	<li>Hattha Kaksekar Limited (HKL) (Cambodia)</li>
 	<li>LOLC Micro Credit Ltd. (Cambodia)</li>
 	<li>Sathapana Bank (Cambodia)</li>
 	<li>Amret Microfinance (Cambodia)</li>
</ul>
Hosted on the Smart Campaign website, the interactive microsite is provided in English and French, accessible <a href="http://bit.ly/CPPjourneyEn">here</a> and <a href="http://bit.ly/CPPjourneyFR">here</a>.

Have you read?

<a href="https://cfi-blog.org/2016/12/05/client-centricity-at-scale-the-brac-smart-certification-journey/">Client-Centricity at Scale: The BRAC Smart Certification Journey</a>

<a href="https://cfi-blog.org/2016/09/28/fintechprotects-prioritizing-responsible-agent-management-at-oxigen/">#FintechProtects: Prioritizing Responsible Agent Management at Oxigen</a>

<a href="https://cfi-blog.org/2015/03/26/smart-certification-kashf-foundation-takes-the-lead-in-pakistan/">Smart Certification: Kashf Foundation Takes the Lead in Pakistan</a>

New Interactive Website: Exploring the Client Protection Journey in Cambodia and Morocco

Morocco

The financial inclusion space is changing rapidly in Cambodia. Competition is intense, with 36 commercial banks, 11 specialized banks, 38 microfinance institutions, and over 400 NGOs currently applying for financing licenses. As this congested sector moves forward, catering to an increasingly digitally connected and aspirational market, the population is offered a sprawling range of new money management and credit options.

As consumer credit and digital financial products become more accessible in Cambodia, there is increasing risk that Cambodia’s youth (who represent newer and less experienced consumers) and the very poor (who are more vulnerable to economic shocks) can be harmed through becoming over-indebted, falling victim to scams, predatory pricing or poorly suited financial products.

For services perceived to be 'essential,' such is the case with financial services, the potential for consumer dissatisfaction is great if there is a gap between what consumers expect and what they experience or observe.

This dissatisfaction can arise when consumers feel under pressure to take a financial product that is inconvenient or doesn't adequately meet their needs or when they are required to leapfrog to the latest technology without yet building their confidence in its use. These tensions can often result in a stressful, technically difficult and frustrating experience that can escalate over the medium term to complaints or disengagement with the formal financial sector, in favor of more flexible informal products and channels.

Even if dissatisfaction is the result of unrealistic expectations on the consumer’s part – who should shoulder the failure? Is this situation the fault of the marketing, of unreasonable or unrealizable demands, or of both? Has there been a failure to deliver what was promised, or a misunderstanding of the social or financial contract between provider and consumer?

As financial markets develop and grow, key issues arise in relation to the existence of fair, open, efficient and healthy markets for consumers. With a crowded financial sector and Cambodia entering the ASEAN Economic Community in 2015, a focus on building financial consumer awareness and empowerment could not be timelier.

Consider these statistics: Cambodia’s population is estimated at nearly 16 million, 65 percent of whom are under the age of 30. Nearly half (49.2 percent) live on less than $2.50 per day; and while the number of people living in poverty halved during a period of economic growth between 2004 and 2011, these advances remain fragile. A net loss of just $0.30 in daily income would tip 3 million near-poor Cambodians back into poverty, doubling the country’s 2013 poverty rate!

Against this backdrop, Good Return and the National Bank of Cambodia (NBC) formed a partnership to design a Consumer Financial Awareness Campaign to launch early 2016. The goal of the campaign is “Activating financial behavior change through a national consumer campaign, to strengthen the economic empowerment of low income households and vulnerable consumers.”

Good Return and NBC set about creating an integrated social media campaign based on the data that <a href="http://downloads.bbc.co.uk/mediaaction/pdf/research/cambodia_media_habits_research_report.pdf">Cambodia’s youth have near universal access to a mobile phone (98 percent)</a> and that the penetration of Facebook now<a href="http://imsgroups.biz/"> equals or outperforms that of the country’s top-rated TV stations.</a> Facebook has doubled each of the past three years and there are now over 2.8 million active users. What’s more, this growth shows no signs of abating, with 100,000 new users signing up in Cambodia each month. Whilst this statistic is not lost on business, it has been largely overlooked by financial inclusion efforts, yet it offers educators and advocacy specialists the chance to reach and engage with a targeted, educated mobile audience for a fraction of the cost.

The National Consumer Financial Awareness Campaign has a dual focus on both raising Social Awareness and strengthening Consumer Empowerment. The campaign combines consequence messages with empowerment messages to motivate consumers to adopt resilient, responsible financial behaviors and build the required self-efficacy to exercise them individually, within the household and when engaged with the formal financial sector. Campaign content focuses on issues such as the benefits to consumer of engaging with the formal financial sector, effective ways to use credit to strengthen financial well-being, and shared responsibilities of consumers and financial service providers to work together for consumer satisfaction and protection of consumer rights (even the rights of the over-indebted)!

To reach the most vulnerable, rural, hard to reach, and in certain contexts still excluded Cambodian households, the Campaign will encourage inter-generational dialogue, by engaging social media connected youth as a channel for dissemination of campaign messages. Each campaign element will feature a call to action to ‘share,' ‘call,’ ‘txt,’ and ‘send’ these messages back home.

Inclusive financial sector sustainability and success can be strengthened not only through building consumer awareness through alternative social media and digital delivery channels, but also through a ‘call to action’ for young people to cascade their increasing awareness and financial capability through traditional social networks as well.

The campaign will also provide financial service providers, MFIs, and NGOs with resources geared to expanding the delivery of consistent quality consumer experiences that support the campaign’s message that the formal system can indeed provide reliable, responsive financial products reinforced by consumer protection principles.

There are still 1.2 billion reasons globally why we must work in partnership to create trusted financial ecosystems that actively alert consumers, prevent market collapses, and, as far as possible, protect consumers from debt distress.

Right now it couldn't be more important that financial service providers and consumers take a forward and hope-filled look at what ‘Business as Usual?’ could become and to view each other as collaborators rather than contenders, with a common interest to solve the financial inclusion challenges ahead.

End Note:

Facebook as the primary campaign delivery channel, offers something that no other media platform in the world has – access to billions of people’s data. A Facebook-based advertising campaign can target our audience by country, province, city, gender, age, relationship status and thousands of other factors. When you advertise on a popular medium like television, you may reach millions of people but only a certain percentage will be relevant to your product, whereas with Facebook we can automatically exclude non-relevant audiences before even launching a campaign. Even more useful is that we also have access to post-campaign data that allows us to specifically measure the results and many types of metrics to evaluate the success, or areas for improvement, of each campaign.

Have you read?

<a href="http://cfi-blog.org/2015/10/20/getting-to-scale-with-housing-finance-innovation-in-cambodia/">Getting to Scale with Housing Finance Innovation in Cambodia</a>

<a href="http://cfi-blog.org/2014/11/21/cambodian-microfinance-market-records-big-growth-but-is-it-healthy/">Cambodian Microfinance Market Records Big Growth. But Is It Healthy?</a>

<a href="http://cfi-blog.org/2014/04/16/facebook-to-provide-remittances-the-news-and-the-bigger-picture/">Facebook to Provide Remittances? The News and the Bigger Picture</a>

Can Facebook Spur a Revolution in Financial Consumer Awareness in Cambodia?

Financial Capability

&gt; Posted by Habitat for Humanity International

Microfinance in Cambodia has seen tremendous growth throughout the past two decades. The first microfinance institutions were initially established by relief organizations to provide cash transfers to poor families, to build incomes and reduce poverty. Fast forward to 2015, and the financial landscape is thriving with over 45 regulated microfinance institutions (MFIs) operating in the country. Improved financial access is contributing to 7.3 percent GDP growth and reducing poverty rates for those living under $2 per day.

Despite impressive economic growth, housing quality for many Cambodians remains below standards. A <a href="http://www.stat.go.jp/info/meetings/cambodia/pdf/c13ana09.pdf">2014 study</a> conducted by the Ministry of Planning in Cambodia revealed that nearly 27 percent of homes in rural areas still use temporary materials for walls and roughly 83 percent have temporary floors.

As migration brings more people to urban and peri-urban areas, and as a young population seeks to build new housing, there is a growing need for financial products that match the term and usage that housing requires. Recently, housing microfinance (usually characterized by larger loan amounts and longer terms than traditional microfinance) has gained traction in Cambodia as a funding source for home construction and home improvements for low income families.

In 2011 MFIs started to look seriously into housing microfinance as a separate product line – previously the common practice was for some MFIs to offer housing as part of a personal use or general purpose loan.

In 2012, the MicroBuild Fund, an investment vehicle initiated by Habitat for Humanity International with support from Omidyar Network and managed by Triple Jump, entered into Cambodia. This funding focused on MFIs with scalable housing portfolios, based on the hypothesis that to catalyze the growth of home improvement loan products, funds would be required that matched the longer loan terms paired with advisory services to build MFI capacity. MicroBuild has invested USD 39 million in 27 MFIs in 18 countries around the globe, bundled with USD 2 million worth of technical assistance. These investments have assisted partner financial institutions to maintain housing microfinance portfolios worth USD 238 million spread among 136,000 active clients.

Today MFIs offering individual home improvement loan products in Cambodia include <a href="http://www.lolc.com.kh/eng/improvement.aspx">LOLC (formerly TPC)</a>, <a href="http://www.firstfinance.biz/products-services/">First Finance</a>, <a href="http://www.hkl.com.kh/index.php?page=loan">Hattha Kaksekar Limited</a>, and <a href="http://www.amret.com.kh/amret/index.php/en/products-and-services/cp">Amret</a>, among others.

The progress of housing microfinance in Cambodia is well-aligned with global trends. A recent survey conducted by Habitat for Humanity’s Center for Innovation in Shelter and Finance (CISF) revealed that 73 percent of MFIs worldwide enter into housing microfinance to diversify their portfolios and to respond to client demand, keeping customers satisfied and loyal with appropriate products and services. In an increasingly competitive MFI sector, MFIs recognize that offering housing products with lending terms matched to use of the loan can assist with client satisfaction and loyalty, as well as reduce the risk of the loan.

MFIs seem to not be stopping there. Promising trends reveal innovations ranging from water, sanitation, solar installation, home improvement, repairs and extensions, as well as micro-mortgage products.

Additionally, innovation is being initiated in service delivery. For example, LOLC has embedded an engineer in their head office in order to initiate technical tie-ups with suppliers of solar panels, to improve the quality of improvements and service delivery. These MFIs are not just making housing loans available to clients, but doing so in a way that improves home quality in a country without a formal building code or training minimums in the construction sector.

Still there is a tremendous amount to learn and key questions to answer. First, housing microfinance provides a small sliver of the capital required to create a thriving housing finance environment. Two key questions remain. First, what other types of support to the sector are required to incentivize lenders to increase the availability of housing finance products, notably micro-mortgages? Second, in the face of increasing risks for disasters such as floods, how can investors help to ensure that disaster resilience in housing is addressed?

Ultimately, housing provides an opportunity for MFIs, housing finance companies, and commercial banks and developers alike to respond to the housing demand with new and unique product offerings including housing microfinance, relocation housing, micro-mortgages, and rental housing. Additional investors will be needed to provide capital and fuel the growth, and we hope other investors will join MicroBuild in providing capital and support in this burgeoning sector.

Habitat has supported an estimated 2 million individuals in the Asia-Pacific region, where it has been active since 1983. For more on Habitat's Center for Innovation in Shelter and Finance, <a href="http://www.habitat.org/housing-markets/shelter-finance/publications/articles">click here</a>, and on Habitat’s other work and guiding vision, <a href="http://www.habitat.org/how">click here</a>. 

Have You Read?

<a href="http://cfi-blog.org/2014/07/17/housing-finance-models-in-latin-america-and-the-caribbean/">Housing Finance Models in Latin America and the Caribbean</a>

<a href="http://cfi-blog.org/2013/09/03/microfinance-to-mitigate-substandard-housing/">Microfinance to mitigate Substandard Housing</a>

<a href="http://cfi-blog.org/2013/02/15/microfinance-for-housing-in-africas-cities/">Microfinance for Housing in Africa's Cities</a>

Getting to Scale with Housing Finance Innovation in Cambodia

Credit

Housing Finance

Microfinance Institutions

Isabelle Barrès On the Challenges of Promoting Client Protection, the Thorny Issues of Profits and Pricing, and the Smart Campaign's Next Steps

Kyrgyz Republic

Product Pricing

&gt; Posted by Center Staff

<a href="http://newsfeed.financialinclusion2020.org/"><img class="aligncenter wp-image-18949" style="border: 1px solid #000000" src="https://centerforfinancialinclusionblog.files.wordpress.com/2015/08/8-10-2015-e-zine.png" alt="" width="615" height="330" /></a>

The latest edition of the <a href="http://newsfeed.financialinclusion2020.org/">Financial Inclusion 2020 News Feed,</a> our weekly online magazine sharing the big news in banking the unbanked, is now available. Among the stories in this week’s edition are the release of a New America Foundation report on account dormancy in youth savings, Yemen exploring mobile banking to combat the hardships of war, and Cambodia launching its first agricultural insurance programs. Here are a few more details:
<ul>
 	<li>The New America report considers how to understand the challenge of youth account dormancy in large-scale account-based initiatives and policy efforts, describing the range of issues related to account engagement from the perspectives of financial institutions, policymakers, and account-holders.</li>
 	<li>Yemen, following its central bank passing regulation on e-money and mobile money in December, is looking to the development of digital finance to cover critical services during wartime, as 30 to 40 percent of bank branches are closed.</li>
 	<li>The Cambodian Center for Study and Development in Agriculture (CEDAC) has launched the country's first agricultural insurance programs, in the form of pilots for the next year and a half, protecting rice farmers against loss from drought and floods.</li>
</ul>
For more information on these and other stories, read the latest issue of the FI2020 News Feed <a href="http://newsfeed.financialinclusion2020.org/">here</a>, and make sure to subscribe to the weekly online magazine by entering your email address in the right-hand menu so you can be notified when the latest issue comes out.

Have you come across a story or initiative you think we should cover? Email your ideas to Eric Zuehlke at <a href="mailto:ezuehlke@accion.org">ezuehlke@accion.org</a>.

Youth Savings, E-Money in Yemen, Agricultural Insurance – the Latest FI2020 News Feed

Financial Inclusion 2020

Yemen, Rep.

Zambia

Index Insurance

Mobile Banking

Youth

&gt; Posted by Center Staff

<a href="http://www.thebusinessofdoinggood.co.uk/"><img class="alignright wp-image-18525" style="border: 0 solid #000000" src="https://centerforfinancialinclusionblog.files.wordpress.com/2015/06/attachment.png" alt="" width="300" height="241" /></a>

Larry Reed, director of the Microcredit Summit Campaign, recently sat down with Susy Cheston, senior advisor to FI2020, and Anton Simanowitz, co-author of the new book <a href="http://www.thebusinessofdoinggood.co.uk">The Business of Doing Good</a>, to discuss how organizations can do good work and turn a profit, particularly in the microfinance sector.

In exploring this question, Simanowitz draws on key insights from the new book, in which he and co-author Katherine Knotts studied the success of <a href="http://www.amkcambodia.com" target="_blank" rel="noopener">AMK</a>, a social enterprise which has touched the lives of millions of people living in poverty in rural Cambodia. This study revealed six powerful strategies to improve <a href="http://www.thebusinessofdoinggood.co.uk/the-six-insights.html">business to do good</a>:
<ol>
 	<li>Don’t just offer products; respond to client needs</li>
 	<li>Ask good questions and have good conversations</li>
 	<li>Do what it says on the tin</li>
 	<li>Motivate staff to do difficult work in an excellent way</li>
 	<li>Own the dirt road</li>
 	<li>Adapt to the changing landscape</li>
</ol>
Find out more about the thinking behind these insights, <a href="http://www.thebusinessofdoinggood.co.uk/the-six-insights.html">here</a>.

In the latter half of the book, the authors explore the disconnect between theory and practice and the resulting implications for client value. AMK’s success is largely attributed to its recognition of the distinction between client wants and client needs, which are rooted in the meaningful conversations the organization has with its clients. The authors observe, through their exploration of AMK, that vision is ensured only when it follows intent, instead of being constrained by conventional wisdom.

Simanowitz was here in D.C. two days ago to discuss his book with Larry Reed and Susy Cheston on-site at the Center for Financial Inclusion. He spoke about the importance of conversation in the social sector, both with customers and within the organization itself. From his exploration of AMK, Simanowitz noted that client-centricity extends far beyond identifying the needs of the clients and becomes a feedback loop built on what he called conversational interplay.

An organization that successfully addresses the reality gap between theory and practice, he argues, embraces reality. It understands that following its social vision is everyone’s responsibility and so it is fully built into the business model. Anton noted that we all have something to learn from this exploration of AMK, an organization that “has the client in their DNA” and “reinforces the truism that focus on the customer is good for business.”

Listen to the conversation now:

[soundcloud url="https://api.soundcloud.com/tracks/211947515" params="auto_play=false&amp;hide_related=false&amp;show_comments=true&amp;show_user=true&amp;show_reposts=false&amp;visual=true" width="100%" height='450' iframe="true" /]

Voice your opinion in our comments section. How can organizations best do good and do well?

Following the conversation, we asked Larry and Anton to write up a few closing thoughts.

Larry said, “What struck me from our conversation today was how much the lessons we learn from AMK apply to any social enterprise that seeks to expand the positive results achieved by its clients while also earning enough income to sustain itself and grow. Social enterprises need to align all their people and systems around their mission, and they do this with good data, engaging and open conversations, lots of iterations and improvements, incentives that reward behavior that promotes the mission, and a governance structure that reviews performance according to mission at every meeting. The result is an enterprise whose corporate culture can consistently generate creative responses to changing client needs.”

Anton said, “Countless organizations of every shape, size, and orientation -- not just in the realm of microfinance -- are in the business of doing good and working with poor and vulnerable communities around the world to deliver potentially life-changing services to address a range of pressing social needs. Some are doing excellent work, and this book examines what it is that they do that makes the difference. But at the same time, a common theme has emerged in our work over the past 20 years: we see organisations missing opportunities to do things better and organisations getting things wrong, again and again. When surveying the landscape of missed opportunities, there is temptation to become blindsided by the success stories, but we must deliver on the ethical imperative to make good on our good intentions. This book explores the inevitable shortcomings of every success story and how we can learn from those who are ‘doing good’ well.”

The authors argue that social enterprises and organizations must understand the importance of response, be it to environment, best practices, or client needs and capacities.The Business of Doing Good challenges microfinance practitioners, social entrepreneurs, philanthropists, businessmen, and students of all kinds to reevaluate their respective journeys to deliver on their good intentions throughout their work and beyond.

Anton Simanowitz (<a href="https://twitter.com/antowitz">@antowitz</a>) has worked for the past 20 years to support social enterprises to be more effective in delivering impact, and for those who support and invest in them to make better investment, capacity building and policy decisions. For support on building organizations to deliver impact, <a href="mailto:antons@pkrc.co.uk">contact him here.</a> To receive current updates about "The Business of Doing Good", follow the book on <a href="https://twitter.com/TBODGood">Twitter</a>.

Larry Reed is the director of the Microcredit Summit Campaign (<a href="https://twitter.com/MicroCredSummit" target="_blank" rel="noopener">@MicroCredSummit</a>). He has worked for more than 25 years in designing, supporting and leading activities and organizations that empower poor people to transform their lives and their communities. For most of that time Reed worked with Opportunity International, including five years as their Africa regional director and eight years as the first CEO of the Opportunity International Network.

Susy Cheston is senior advisor for the Center for Financial Inclusion (CFI) at Accion (<a href="https://twitter.com/CFI_ACCION" target="_blank" rel="noopener">@CFI_ACCION</a>) and leads the Financial Inclusion 2020 project. Cheston has a long history of work in economic development, including leading roles at World Vision and Opportunity International, as well as being active in the leadership of the Microenterprise Coalition.

Have you read?

<a href="http://cfi-blog.org/2015/03/10/responding-to-needs-and-wants-in-a-market-driven-financial-institution/">Responding to Needs and Wants in a Market-Driven Financial Institution</a>

<a href="http://cfi-blog.org/2014/11/21/cambodian-microfinance-market-records-big-growth-but-is-it-healthy/" target="_blank" rel="noopener">Cambodian Microfinance Market Records Big Growth. But Is It Healthy?</a>

<a href="http://cfi-blog.org/2015/04/20/customer-centricity-as-a-business-model-taking-the-kaleido-approach/">Customer-Centricity as a Business Model: Taking the Kaleido Approach</a>

The Business of Doing Good: A Chat with Anton Simanowitz

Customer Centricity

&gt; Posted by Center Staff

<img class="alignright size-medium wp-image-17788" src="https://centerforfinancialinclusionblog.files.wordpress.com/2015/03/cover-photo.png?w=252" alt="" width="252" height="300" />Many enterprises operating in the informal economy provide low-quality working conditions for their employees. Workers might be exposed to difficult or dangerous environments, and the formalities of labor law are missing. A new project from the International Labour Organization’s Social Finance Program and the University of Mannheim in Germany tested the hypothesis that microfinance institutions, given their unique and expansive connections to the informal economy, can successfully apply interventions aimed at improving their clients’ working conditions. The project spanned 2008 to 2012 and included collaborations with 16 microfinance institutions. The project results are shared in the recently released report, “Microfinance for Decent Work – Enhancing the Impact of Microfinance.” It suggests that microfinance institutions indeed have the potential to leverage their positioning and resources to improve their clients’ business environments.

The project was carried out in four steps. First, the participating MFIs conducted an internal diagnostic to identify the most pressing work-related challenges faced by their clients. Across the breadth of identified challenges, the issues that the MFIs chose to address were reducing child labor, promoting business formalization, enhancing business performance, and reducing vulnerability, particularly in regards to risk management and over-indebtedness. Each MFI created its own intervention with its unique institutional context in mind. These innovations included launching new financial services, introducing non-financial services, offering packages of financial and non-financial services, and restructuring institutional operations. The innovations were piloted with client impact tracked to enable before and after comparisons in control and treatment groups.

In aggregate, the pilot studies provide a compelling case for the ability of MFIs to achieve positive outcomes on clients’ business conditions. Here are a few of the impact statistics:
<ul>
	<li>Child Labor: In Pakistan, introducing an expanded microinsurance product that covered the entire family decreased child labor incidence for boys and girls by 7 percent and decreased the risk of hazardous occupations by 5 to 6 percent. The premise behind this innovation was that by enabling households to reduce health-related expenses, it would improve their capacity to manage shocks and reduce the need for households to resort to child labor to cover unforeseen expenses.</li>
</ul>
<ul>
	<li>Business Formalization: In India, interventions related to awareness of formalization increased actual formalization among clients by about 70 percent and awareness about formalization by about 93 percent.</li>
	<li>Business Performance: In India, training on productivity, occupational safety, and health led to an 11 percent decrease in work related injuries.</li>
	<li>Vulnerability: In the Philippines, interventions to boost the incidence of emergency savings resulted in the reduction of borrowing to repay another loan by 22 percent.</li>
</ul>
Along with these promising results, some of the interventions did not have as positive effects. In Nigeria, for example, a child labor awareness campaign did not change the value that parents placed on school. In Cambodia, a financial education training was associated with a 20 percent increase in likelihood to borrow from informal lenders.

For more details on the project and the results, read the <a href="http://www.ilo.org/empent/areas/social-finance/WCMS_344847/lang--en/index.htm">new report</a>, available in English, Spanish, or French.

Have you read?

<a href="http://cfi-blog.org/2014/05/12/urbanization-the-informal-economy-and-microfinance/" target="_blank">Urbanization, the Informal Economy, and Microfinance</a>

<a href="http://cfi-blog.org/2013/12/05/a-smoother-road-to-building-quality-insurance-at-scale/" target="_blank">A Smoother Road to Building Quality Insurance at Scale</a>

<a href="http://cfi-blog.org/2014/06/12/selling-sheep-on-instagram-and-sending-virtual-gifts-to-karaoke-singers-in-the-new-mobile-internet-economy/" target="_blank">Selling Sheep on Instagram and Sending Virtual Gifts to Karaoke Singers in the New Mobile Internet Economy</a>

Can Microfinance Institutions Tackle Working Conditions in the Informal Economy?

Pakistan

Philippines

Daniel Rozas

Hema Bansal

Robyn Robertson

Sonja Kelly

Bangladesh

Bolivia

Chile

Congo, Dem. Rep.

Egypt, Arab Rep.

Haiti

Kenya

Madagascar

Mongolia

Russian Federation

Sri Lanka

Appropriate Product Design and Delivery

Risk Management

Transparency

Trends

James Militzer

Brianna Nelson

&gt; Posted by the Platform for Inclusive Finance (NpM)

<img class="alignright wp-image-17776" src="https://centerforfinancialinclusionblog.files.wordpress.com/2015/03/ey.png?w=213" alt="" width="250" height="352" />How has the microfinance industry leveraged regulation and supervision to safeguard client wellbeing? In priority areas like over-indebtedness, acceptable pricing, and transparency, what progress has been made to ensure that institutions are operating responsibly? And in cases where regulatory actions have been taken, how have they been implemented? A recent research project conducted by EY and the Platform for Inclusive Finance (NpM) investigates these questions across 12 country markets and assesses the current state of client protection regulation in microfinance.

The growth of the inclusive finance sector has helped create significant opportunities for low-income people around the world. However, when not done correctly, access to financial products also has the potential to bring harm. Of the increasing importance of client protection and sound regulation, EY Senior Manager and one of the report’s authors, Justina Alders-Sheya remarked: “The sector is growing and to do so responsibly, it is necessary that supervisory authorities perform their role."

Drawing on questionnaires completed by local stakeholders, the study examined whether laws and regulations on client protection have been implemented in any way in the 12 studied countries: Azerbaijan, Bolivia, Cambodia, Ghana, India, Kenya, Peru, the Philippines, Rwanda, Russia, Tanzania, and Uganda. The study also examined the regulatory and supervisory landscape for client protection in each country. It investigated who is creating the regulations, how they’re being enforced, and the role of industry players like microfinance associations and credit bureaus.

Key players in the microfinance sector launched the <a href="http://www.smartcampaign.org/">Smart Campaign</a> to improve protection of clients throughout the industry. This international initiative for responsible microfinance has seven <a href="http://smartcampaign.org/about/smart-microfinance-and-the-client-protection-principles" target="_blank">Client Protection Principles</a>. This study focused on three of those principles: prevention of over-indebtedness, responsible pricing, and transparency.

What did the research uncover?

In large part, the legal and regulatory landscape for microfinance is still developing. Not all countries have specific law or regulations for the microfinance sector, but seven of the 12 studied countries (Bolivia, Cambodia, Ghana, India, Kenya, Russia, and Uganda) do. However, these specific measures do not necessarily include provisions on client protection, as most are focused on financial requirements for microfinance institutions.

In terms of over-indebtedness, the research shows that less than half of the studied countries have rules for adequate care during all steps in the credit process. Only five countries have specific microfinance regulation aimed at preventing over-indebtedness, despite the fact that research participants perceive over-indebtedness as a big issue across the global industry. Many MFIs are non-deposit-taking (NBFC-MFIs) and thus don’t fall within the regulatory framework for commercial banking, which may address over-indebtedness more explicitly. In Cambodia, for example, NBFC-MFIs are excluded from the obligation of monitoring total loan exposure to single beneficiaries. A bright spot in this space is Tanzania, which through the Microcredit Activities Regulations (2004), requires all institutions engaged in offering microcredit to conduct an appraisal of the character, payment history, and payment capacity of each client. Credit-reporting bureaus are still developing, making the availability of information on borrower indebtedness and repayment history, especially for smaller microfinance institutions, a concern.

On responsible pricing, seven countries do not have applicable regulations, referring instead to transparency and the sales process, with price-setting being left to the market. As for the five countries with such regulation, in Peru, Russia, and the Philippines microfinance institutions are covered by regular financial law and regulation concerning price-setting, and Cambodia and India have specific price-setting rules for the microfinance sector.

Laws and regulations on transparency in microfinance are the most well-developed of the three targeted client protection areas. Nine countries have regulations on the communication and dissemination of information between microfinance institutions and their clients. Beyond rules on clearly outlining the pricing, costs, and expenses, some countries extend their transparency regulations to other areas, like advertising, in Peru’s case.

Across the surveyed countries central banks are the most important law and regulation enforcement entities (in 11 countries). The study indicated that in countries where MFIs are under supervision, regular oversight visits to institutions occurred. Microfinance associations and special microfinance authorities also get involved in the monitoring and auditing of MFIs in some cases. In instances where there is no specific microfinance regulation, NBFC-MFIs are not always audited. Consumer protection agencies also sometimes contribute to addressing client protection in microfinance. On the whole, many different types of authorities are involved in law and regulation, with varying levels of monitoring and audit scrutiny.

Beyond these areas, Josien Sluijs, Director of  NpM points out the role of empowered clients in client protection: "In addition to regulation and enforcement, attention to financial literacy of clients is as important to develop and implement." Enhancing financial literacy among clients is a necessary step in the movement to ensure that microfinance best serves its clients.

A logical step for follow-up of the study would be to research how to improve law and regulation in a practical way and to even develop a ranking of countries so that investors have good insight on the current status on law and regulation in different countries. This knowledge might even be included in investors' due diligence. Points to consider for further research on this topic may be obtained from the report, which can be read by clicking <a href="http://www.inclusivefinanceplatform.nl/documents/ey%20microfinance%20client%20protection-%20law%20-%20regulation.pdf">here</a>. To learn more about NpM, the Platform for Inclusive Finance, click <a href="http://www.inclusivefinanceplatform.nl/home">here</a>.

Have you read?

<a href="http://cfi-blog.org/2015/03/06/regulatory-complexity-and-financial-inclusion/" target="_blank">Regulatory Complexity and Financial Inclusion</a>

<a href="http://cfi-blog.org/2014/10/20/is-regulation-enough-to-protect-u-s-servicemembers/" target="_blank">Is Regulation Enough to Protect U.S. Servicemembers?</a>

<a href="http://cfi-blog.org/2013/02/07/can-self-regulation-protect-microfinance-clients/" target="_blank">Can Self-Regulation Protect Microfinance Clients?</a>

Client Protection Law and Regulation in the Microfinance Industry

Smita Aggarwal

&gt; Posted by Anton Simanowitz and Katherine E. Knotts

<img class="alignright wp-image-17579" src="https://centerforfinancialinclusionblog.files.wordpress.com/2015/03/467304.jpg" alt="" width="230" height="349" />“Customer centricity” is the new buzz in the microfinance industry. More and more financial service providers are recognizing that their success is built on the success of their clients. Customer centricity certainly means recognizing that financial inclusion is not just about more services – it’s about better services. To achieve this, financial service providers need to grapple with the complexity of clients’ financial lives, <a href="http://www.cgap.org/publications/customer-centricity-financial-inclusion">understand what appropriate design looks like</a>, and <a href="http://www.centerforfinancialinclusion.org/fi2020/roadmap-to-inclusion/financial-capability">empower clients to use those services effectively</a>.

But is it always a “win-win”? What if clients express preferences and make choices that are not in their long-term best interests – that is, what happens when what clients need isn’t what they might want or demand? And what if responding to client needs in the most appropriate way appears to be a riskier decision from the point of view of institutional financial performance?

These tension points (and some quite radical decisions in the face of them) can be seen in the work of AMK Cambodia, highlighted in a new book <a href="http://www.thebusinessofdoinggood.co.uk/">The Business of Doing Good</a>. Witness a conversation we had with a senior manager. "We will never be a leader in client service," he proudly announced. In the competitive Cambodian market, rapid disbursement of loans that meet customer demand is an important competitive advantage. Yet AMK accepts that its own loan disbursement is slower and more time-consuming for clients, and its loan sizes are much smaller than those of its competitors. Coming from an organization that is proudly “client focused”, this statement struck an odd note.

AMK, serving more than 360,000 people, is now the largest Cambodian MFI in terms of outreach. How can an MFI that invests heavily in understanding and responding to the needs of its clients be “less customer friendly” than others? The simple answer is that a market-led solution (responding to what clients want and are prepared to pay for) might look different from responding to what clients need in order to address the underlying complexities of their lives (i.e. poverty and vulnerability).

So if fast loan disbursement (which clients might prefer, and which AMK’s competitors are prepared to provide) means compromising the rigor of the detailed loan appraisal process that ensures they are not over-indebted and increases the likelihood of the success of a client’s investment, AMK is simply not interested. AMK recognises the importance of matching loans to client capacity to repay – not just whether they have sufficient collateral to cover them if they default. Central to this appraisal process is a visit to the client’s home, which experience has shown is critical to get an accurate understanding of the client’s situation. This visit takes time, is hard work for staff, and inconveniences its clients. Other MFIs have long abandoned this step, but AMK has made this a mandatory part of their lending process, and its “zero-tolerance” policy (with disciplinary action for client officers neglecting this) is verified through its internal audit function.

To understand what clients need, what they want, and what constraints they face, AMK invests in detailed research and client feedback, rather than assuming that it knows best. In fact this research overturned many common perceptions about rural poor people – showing for example that they had mixed economic baskets (rather than being solely reliant on agricultural income). It also highlighted that they were keenly vulnerable to shocks that affected their income (such as floods or health problems). These insights lay at the foundation of AMK’s product design, and have led to some noteworthy innovations.

Take the credit line loan, for example. It matches loan disbursement and repayments to erratic cash flows, and also cuts costs for clients by allowing them to draw down the amount of credit they need (up to a maximum), when they need it, rather than paying interest on capital that is not being used. On paper, the credit line looks like a risky product. Indeed, there were nervous glances around the boardroom table about how the organization would be able to predict its own cash flow, if clients were drawing down and repaying their loans when they chose to. And in fact in hindsight – although this looked like a case of clashing institutional and client needs - AMK has found that the seasonality of credit draw-downs and repayments are largely predictable. Clients are happy with the product – and AMK’s investors are satisfied that it’s worth supporting.

The credit line illustrates the challenge of balancing client needs with institutional risk and performance. Minimizing risk, while recognizing future benefits, has been at the core of AMK’s strategy. Whilst AMK developed a sound understanding of its clients and their needs, it has always sought to find the “sweet spot” between these needs, organizational capacity, and financial performance. As such, strategic decisions have been made about which of those needs to meet at any one point in time. These decisions were driven by the evolving internal and external context (including organizational capacity, market share, regulation, competition). For example, in the past five years, AMK has evolved from largely a credit-only provider to a multi-channel, multi-service provider (including insurance, savings, and remittances). In the case of savings, its early research revealed that clients can and did save (although not in regular amounts in a secure way), and highlighted the role that savings played in helping clients to cope with the unexpected. However, it wasn’t until regulatory barriers dropped that they were able to offer these in a way that made sense both for clients and the organization – by rolling out an agent savings model that took flexible services to where they were needed most (rural areas).

The Business of Doing Good tracks the ongoing conversation around client centricity over the past 11 years within AMK. AMK’s journey is founded upon a clear understanding of its clients’ needs, and clarity about its purpose within the lives of those clients and indeed the marketplace. As such, this book is relevant to all microfinance organizations, and those that support them to be more effective.

Learn more about the book: website: <a href="http://www.thebusinessofdoinggood.co.uk">www.thebusinessofdoinggood.co.uk</a>; Twitter: <a href="https://twitter.com/TBODGood">@TBODGood</a>

Anton Simanowitz (<a href="https://twitter.com/antowitz">@antowitz</a>) has worked for the past 20 years to support social enterprises to be more effective in delivering impact, and for those who support and invest in them to make better investment, capacity building, and policy decisions.

Katherine Knotts (<a href="https://twitter.com/katherineknotts">@katherineknotts</a>) is a writer and strategic communications specialist, who works with microfinance and other social purpose organizations to help them analyse what’s working (and what’s not), distill lessons learned, and package those lessons for other practitioners through written and film media.

Have you read?

<a href="http://cfi-blog.org/2014/07/08/does-financial-inclusion-need-to-be-more-customer-centric/" target="_blank">Does Financial Inclusion Need to Be More Customer Centric?</a>

<a href="http://cfi-blog.org/2014/11/21/cambodian-microfinance-market-records-big-growth-but-is-it-healthy/" target="_blank">Cambodian Microfinance Market Records Big Growth. But Is It Healthy?</a>

<a href="http://cfi-blog.org/2014/10/31/fast-moving-consumer-goods-and-customer-needs-the-missing-link-between-shampoo-and-savings-accounts/" target="_blank">Fast-Moving Consumer Goods and Customer Needs: The Missing Link Between Shampoo and Savings Accounts</a>

Responding to Needs and Wants in a Market-Driven Financial Institution

Jeffrey Riecke

&gt; Posted by Jeffrey Riecke, Communications Associate, CFI

<a href="https://www.flickr.com/photos/26572455@N00/3029606952/"><img class="aligncenter wp-image-16685" style="margin-top:5px;margin-bottom:5px" src="https://centerforfinancialinclusionblog.files.wordpress.com/2014/11/3029606952_5ac0b68446_z.jpg" alt="" width="610" height="436" /></a>New data shows the Cambodian microfinance market disbursed <a href="http://www.cambodiadaily.com/business/mfi-sector-up-51-percent-in-9-months-72629/">$1.79 billion</a> in loans over the first three quarters of 2014, amounting to a 51 percent increase over last year’s Q1-3 figures. The data comes from the Cambodia Microfinance Association (CMA) and includes loans issued by 45 of the country’s MFIs. Last year’s total for the same period was $1.18 billion from 39 institutions. In a country where fewer than <a href="https://smtp.accion.org/owa/redir.aspx?C=LJElTQncWEOL8BGEFBDnbCEmKzY92dEIpRWrFeYBJJmWGgXb8gqSxlkJqLt5gXtWRuETatllyH8.&amp;URL=http%3a%2f%2fwww.cgap.org%2fblog%2ffinancial-inclusion-cambodia-trending-digital">20 percent</a> of the adult population has access to formal financial services, such expansion in activity might be exciting, but is it sustainable for borrowers and institutions?

Some individuals who are unfazed by the rapid growth point to the recent economic strengthening enjoyed by the country. Cambodia’s GDP increased annually on average <a href="http://www.tradingeconomics.com/cambodia/gdp-growth-annual">7.7 percent</a> between 1994 and 2013, and it’s <a href="http://country.eiu.com/cambodia">expected</a> to maintain a nearly equivalent trajectory in the years to come. On distributing this wealth, the country <a href="http://www.worldbank.org/en/country/cambodia/overview">achieved</a> its Millennium Development Goal of halving poverty in 2009. Agriculture in Cambodia is big, constituting about <a href="https://www.gfmag.com/global-data/country-data/cambodia-gdp-country-report">35 percent</a> of the country’s GDP. About 90 percent of those who are poor or who are vulnerable to slipping into poverty live in rural areas. More small and medium sized entrepreneurs making investments in farming efforts, or other income-generating activities, aligns with an expanding economy.

The worry, however, is that the microfinance lending growth isn’t so much a reflection of an uptick in borrowers or a healthy increase in borrowers’ investment sizes, but a trend fueled by growing overindebtedness. In a 2013 report by the Cambodia Institute of Development Study analyzing overindebtedness levels, <a href="http://www.cambodiadaily.com/business/mfi-sector-up-51-percent-in-9-months-72629/">51 percent</a> of respondents indicated that they have struggled to repay their loans on time. Chan Mach, CEO of the Kredit microfinance institution in Cambodia, <a href="http://www.cambodiadaily.com/business/mfi-sector-up-51-percent-in-9-months-72629/">reports </a>that about one-third of those who apply for a loan at his MFI already have two loans issued from other institutions (it’s against Kredit policy to issue a loan to someone in such a position). These individuals might be seeking a third loan so as to make payments on their two outstanding loans, perpetuating a cycle of overindebtedness.

The Cambodian Microfinance Association <a href="http://cma-network.org/drupal/MicrofinanceEnvironment">indicates</a> that the prevalence of individuals taking out loans from multiple institutions is a severe issue in the market. In some instances individuals might take out more than four or five loans, which in the likely case of inability to repay causes significant problems for all involved. The root causes of multiple lending in Cambodia, CMA shares, include under-use of credit reporting, lack of thorough credit assessments of prospective clients, and the issuance of multiple land titles by local authorities (which can then be used as collateral documents multiple times). In addition, although Cambodia is ranked 9 in the <a href="http://www.centerforfinancialinclusion.org/publications-a-resources/browse-publications/534-2013-global-microscope" target="_blank">EIU Global Microscope 2014</a> rankings, it does not score well on client protection. Thankfully, the Cambodian market should see near term progress at least on credit reporting, as there have been appreciable <a href="http://cfi-blog.org/2013/10/03/global-microscope-finds-the-world-getting-more-microfinance-friendly/">advancements</a> in the country’s credit bureaus in just the past few years, as reflected in its high rating on this indicator in the Microscope.

As Cambodia’s microfinance market continues to expand and work continues to bring in the unbanked population, it will be crucial to keep the issues of client ability to borrow and overindebtedness front and center.

Image credit: <a href="https://www.flickr.com/photos/26572455@N00/3029606952/" target="_blank">KieranBall</a>

Have you read?

<a href="http://cfi-blog.org/2010/06/23/aligning-interests-in-cambodia/" target="_blank">Aligning Interests in Cambodia</a>

<a href="http://cfi-blog.org/2014/11/10/the-global-microscope-2014-results-and-surprises/" target="_blank">The 'Global Microscope 2014': Results and Surprises</a>

<a href="http://cfi-blog.org/2014/07/14/2014-banana-skins-report-reveals-overindebtedness-as-biggest-concern-in-microfinance-industry/" target="_blank">2014 Banana Skins Report Reveals Overindebtedness as Biggest Concern in Microfinance Industry</a>

Cambodian Microfinance Market Records Big Growth. But Is It Healthy?

The majority of Kenyans have mobile money accounts; their activity demonstrates digital financial services’ potential. Accion helps Kenyan innovators harness emerging technologies to create new financial services.

<a href="http://www.centerforfinancialinclusion.org/publications-a-resources/browse-publications/534-2013-global-microscope"><img class="alignright wp-image-16543" style="border: 2px solid #000000" src="https://centerforfinancialinclusionblog.files.wordpress.com/2014/11/microscope.png" alt="" width="280" height="353" /></a>If there’s one thing we’ve learned in taking a close look at financial inclusion efforts around the world, it’s that context matters. That’s why we are excited to be part of the team releasing the <a href="http://www.centerforfinancialinclusion.org/publications-a-resources/browse-publications/534-global-microscope">Global Microscope 2014: The Enabling Environment for Financial Inclusion</a>. The Microscope is carried out by the Economist Intelligence Unit (EIU) with sponsorship and guidance from the Multilateral Investment Fund of the IDB, CAF, and Citi. The Microscope evaluates the environment for financial inclusion in 55 different countries and provides powerful signals to policymakers in each country on their progress. Which countries topped the list and which have the most room to grow?

We’ll tell you, but first, it’s important to know what the results mean. Each country inspected in the Microscope is assessed on 12 indicators that consider best practices in national regulatory environments and institutional support for providers serving clients at the base of the pyramid. Indicators range from government support for financial inclusion, to supervision of microfinance and other financial products, the status of credit reporting, regulations governing mobile banking and, last but not least, consumer protection.

This year is an important one in the publication’s eight year history because the focus shifted from microfinance to the environment for financial inclusion, a process that involved adapting the framework to account for today’s diversity of providers and products. What we were surprised by, however, was just how little a difference this made in the rankings. We charted last year’s results on the microfinance environment against this year’s results on the financial inclusion environment and we found a very high correlation between the two (see figure below). Environments that are enabling for microfinance are often environments that are enabling for financial inclusion. Six countries from last year’s top 10 were in this year’s top ten.

<a href="http://bit.ly/1s9k6T0"><img class="aligncenter wp-image-16546" src="https://centerforfinancialinclusionblog.files.wordpress.com/2014/11/microscope-figure.png" alt="" width="600" height="290" /></a>

So, who leads the pack? Here’s the list of the top 10 countries and their scores (on a scale of 0 to 100).
1) Peru -- 87
2) Colombia -- 85
3) Philippines -- 79
4) Chile -- 66
5) Mexico and India (tie) -- 61
7) Bolivia and Pakistan (tie) -- 58
9) Cambodia and Tanzania (tie) -- 56
There were three very clear champions: Peru, Colombia, and the Philippines, whose scores are well above the next-ranked country, Chile. Peru and Colombia performed strongly across the board, scoring in the top five on nearly all indicators. The Philippines’ inclusion environment ranked well in part due to its capable regulator, optimal credit regulation, and effective dispute-resolution mechanisms.

The wide range of performance is notable. Top-scoring Peru secured 87 out of a possible 100 points, while lowest-ranked Haiti only managed 16, and there are countries spread rather evenly throughout the whole scoring distribution. This reveals a very wide range of attention to and progress on financial inclusion across the world. This range is borne out by the finding that a third of countries have active national financial inclusion strategies with targets, a third have strategies that remain vague or patchy, and a third have not made any formal commitment to financial inclusion.

Regionally, both Latin America and the Caribbean and East and South Asia score well. While the Middle East and North Africa region had the lowest regional average score, low scores are present among countries in several regions: Democratic Republic of the Congo, Madagascar, Egypt, Yemen, and Haiti.

East and South Asia and Sub-Saharan Africa are the leading regions in regulation for electronic payments. Kenya and Tanzania in particular stand out for their strong regulation conducive to the growth of mobile payments, and Bangladesh, Pakistan, and Sri Lanka for their effective e-pay infrastructure.

The Microscope found that countries that had strong institutional support – credit reporting, client protection, accounting standards – often performed very well overall, and countries that had weak institutional support performed poorly. Countries at the bottom of the rankings performed especially poorly on measures of institutional support.

The Microscope report, with its country profiles, provides a rich source of information for further research. It also provides a stimulus for policymakers to focus on areas for improvement and to look to the leaders for inspiration and example.

For more detail, including country breakdowns and rankings, you can download the report <a href="http://www.centerforfinancialinclusion.org/publications-a-resources/browse-publications/534-global-microscope">here</a>.

Graphic credits: <a href="http://bit.ly/1s9k6T0">'Global Microscope 2014'</a>

Have you read?

<a href="http://cfi-blog.org/2013/12/17/defining-the-path-to-financial-inclusion-in-peru/" target="_blank" rel="noopener">Defining the Path to Financial Inclusion in Peru</a>

<a href="http://cfi-blog.org/2013/10/03/global-microscope-finds-the-world-getting-more-microfinance-friendly/" target="_blank" rel="noopener">Global Microscope Finds the World Getting More Microfinance-Friendly</a>

<a href="http://cfi-blog.org/2012/12/20/putting-a-microscope-on-client-protection-in-microfinance/" target="_blank" rel="noopener">Putting a Microscope on Client Protection in Microfinance</a>

&nbsp;

The 'Global Microscope 2014': Results and Surprises

&gt; Posted by Center Staff
<img class="alignright size-full wp-image-2763" title="5" src="https://content.centerforfinancialinclusion.org/wp-content/uploads/sites/2/2011/02/5.gif" alt="" width="100" height="100" />Andhra Pradesh's shadow is long, and particularly dark where it falls across the media. But beyond the bleaker headlines are stories of a different kind, about countries where microfinance is working.
The Center's managing director, Beth Rhyne, this week published an article on this topic in The China Daily. It may cast a new light on microfinance for the newspaper's nearly 400,000 readers, many of whom hail from Asia's business and investor community.
Here are some excerpts from "Five Countries Where Microfinance Works":
<ul>
 	<li>"Indian policymakers created a perfect storm for a microfinance shipwreck ... MFIs, locked out of the ability to provide a range of services, had no other channel for growth than unbridled credit expansion."</li>
 	<li>"Tiny Bolivia got many things right ... competition between ... strong institutions brought interest rates in Bolivia below 20 percent, among the lowest microfinance rates in the world."</li>
 	<li>"Cambodia and Mongolia followed Bolivia’s example. Acleda Bank in Cambodia and Xac Bank in Mongolia ... added savings and other services, offering a solid range of products."</li>
 	<li>"Indonesia showed what a state-owned bank can do ... Bank Rakyat Indonesia now serves tens of millions of clients, has been profitable since it began, and has never experienced a significant crisis of over-lending."</li>
 	<li>"The government’s nurturing approach led the Economist Intelligence Unit to rank the Philippines second in the world in its “Global microscope on the microfinance business environment 2010.”</li>
</ul>
To access the entire article, please click <a href="http://www.cdeclips.com/files/asiapdf/20110218/cdasiaweekly20110218p14.pdf" target="_blank" rel="noopener">here</a>.
For more information, <a href="http://bit.ly/FI2020signup">sign up for updates</a> from the Financial Inclusion 2020 campaign.

5 Countries Where Microfinance Works