The Smart Campaign Adds Seventh Client Protection Principle

> Posted by Center Staff


The Smart Campaign Adds Seventh Client Protection Principle

Client Protection Principles modified to embrace wider product array and non-discrimination principle

Washington, DC, July 20, 2011 — The microfinance industry’s Client Protection Principles (CPPs) are now seven.  They have been expanded to address multiple financial products and the concept of “non-discrimination.”

Beginning in late 2010, the Smart Campaign’s “Evolution of the Principles” task force made up of representatives from financial service providers, investors and support organizations, initiated an in-depth examination of the existing CPPs to ensure they accurately reflect the mission of the Campaign and its growing endorser community.  The task force recognized that in their initial form the principles focused strongly on credit, and did not specifically address the full range of financial services. In addition, the task force felt that it was important to include the concept of “non-discrimination” in the principles, noting that MFIs should avoid discrimination in client selection and treatment e.g. on the basis of gender, ethnic origin, religion, or disability.  Specifically, Principle #2 – Transparent and Responsible Pricing – has become two principles: Transparency and Responsible Pricing and Principles #3 and 4 have been merged into one principle: Fair and respectful treatment of clients.
The Smart Campaign’s Steering Committee shared the proposed revisions with the microfinance industry for public comment in March and April 2011.  Practitioners, investors, networks, donors, supporting organizations, and consultants from around the world wrote to express their views.  The comments were thoughtful and highly supportive of the changes.  They emphasized the importance of keeping the principles aligned with the issues relevant to microfinance, particularly the prevention of over-indebtedness.  The task force consolidated the feedback and submitted an updated draft to the Steering Committee on June 23, 2011 in Den Bosch, the Netherlands.
The revised principles become official as of July 2011, when the Smart Campaign staff will begin the process of updating its website, tools, and all other listings of the principles to reflect the changes.
The revised Client Protection Principles (in their short form) are as follows:

  • Appropriate product design and delivery
    Providers will take adequate care to design products and delivery channels in such a way that they do not cause clients harm. Products and delivery channels will be designed with client characteristics taken into account.
  • Prevention of over-indebtedness
    Providers will take adequate care in all phases of their credit process to determine that clients have the capacity to repay without becoming over-indebted. In addition, providers will implement and monitor internal systems that support prevention of over-indebtedness and will foster efforts to improve market level credit risk management (such as credit information sharing).
  • Transparency
    Providers will communicate clear, sufficient and timely information in a manner and language clients can understand so that clients can make informed decisions. The need for transparent information on pricing, terms and conditions of products is highlighted.
  • Responsible pricing
    Pricing, terms and conditions will be set in a way that is affordable to clients while allowing for financial institutions to be sustainable. Providers will strive to provide positive real returns on deposits.
  • Fair and respectful treatment of clients
    Financial service providers and their agents will treat their clients fairly and respectfully. They will not discriminate. Providers will ensure adequate safeguards to detect and correct corruption as well as aggressive or abusive treatment by their staff and agents, particularly during the loan sales and debt collection processes.
  • Privacy of client data
    The privacy of individual client data will be respected in accordance with the laws and regulations of individual jurisdictions. Such data will only be used for the purposes specified at the time the information is collected or as permitted by law, unless otherwise agreed with the client.
  • Mechanisms for complaint resolution
    Providers will have in place timely and responsive mechanisms for complaints and problem resolution for their clients and will use these mechanisms both to resolve individual problems and to improve their products and services.

About the Smart Campaign

The Smart Campaign is a global campaign consisting of microfinance leaders from around the world who believe that protecting clients is not only the right thing to do but the smart thing to do. To date, over 2,000 microfinance and other financial institutions, microfinance support organizations, investors, donors, and individual industry professionals have pledged adherence to the Smart Campaign’s core Client Protection Principles. By providing microfinance institutions with the tools and resources they need to deliver transparent, respectful, and prudent financial services to all clients, the Smart Campaign is helping the industry maintain a dual focus on improving clients’ lives while attaining financial sustainability. The Campaign is headquartered at the Center for Financial Inclusion (CFI) at Accion and is governed by a Steering Committee representing a broad cross-section of the industry.
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Charlotte Connors
Manager, Operations and Communications
The Smart Campaign
Tel. +1 202-393-5113 ext 1667