The Smart Campaign is a global effort to unite microfinance leaders around a common goal: to keep clients as the driving force of the industry. To help the microfinance industry achieve this goal and its double bottom line objective, The Smart Campaign is working with microfinance leaders from around the world to provide microfinance institutions with the tools and resources they need to deliver transparent, respectful, and prudent financial services to all clients.
The Smart Campaign is a global effort, guided by the experience and expertise of microfinance leaders from around the world who are committed to strengthening their businesses and supporting their clients. Microfinance institutions, networks, associations, investors, donors, and individuals have endorsed the Campaign.
The Campaign Steering Committee is comprised of respected leaders in the microfinance industry from a diversity of regions and institutions including the Consultative Group to Assist the Poor (CGAP) at The World Bank, Deutsche Bank Social Investment Group, the World Savings Bank Institute, WWB Colombia, KfW (Germany), Ujjivan (India), CARD Bank (Philippines), the Microfinance Centre (Eastern Europe & Former Soviet Union), and Fonkoze (Haiti).
The Smart Campaign is housed at Accion’s Center for Financial Inclusion.
The issue of client protection in microfinance is not a new one. A number of practitioners have developed codes of client protection over the past five years. However, until now there has not been an industry‐wide client protection initiative or as great of a need for one.
The subprime meltdown in the United States that led to the global financial crisis underscores the importance of accountability, security and transparency in financial services. At the same time, the microfinance industry has evolved from its earliest roots as a social movement to a multi‐faceted financial services industry for the poor. The microfinance industry has experienced explosive growth with 1.5 billion potential customers to serve and existing microfinance institutions growing their portfolios at annual rates of 30% per year (source: Ian Callaghan, “Let Me In,” Forbes, December 20, 2007). As a result, many within the industry have seen an overemphasis on the supply side, which can have the effect of microfinance institutions not adequately knowing their clients’ repayment capacities.
The Smart Campaign was formed to bring people together across microfinance to implement a common code of conduct that governs how clients should be treated and to help implement client protection safeguards within the industry’s operations. The Campaign is supporting the development of the tools and resources necessary to make Smart Microfinance, which embodies the core Client Protection Principles, the standard for all providers and other microfinance institutions.
By incorporating client protection into all aspects of business operations, microfinance institutions can proactively and collectively strengthen microfinance and position the industry as a leader in responsible financial services.
Smart Microfinance is a term that embodies the core principles for the treatment of microfinance clients. The Client Protection Principles are the minimum standards that clients should expect to receive when doing business with a microfinance institution, and include:
- Appropriate product design and delivery
- Prevention of over-indebtedness
- Responsible pricing
- Fair and respectful treatment of clients
- Privacy of client data
- Mechanisms for complaint resolution
Smart Microfinance is being fully transparent in the pricing, terms and conditions of all financial products. Smart Microfinance means working with clients so they do not borrow more money than they can repay or use products that they do not need. Smart Microfinance employs respectful collection practices and adopts high ethical standards in the treatment of clients. Smart Microfinance gives clients a way to address their complaints so they can be served more effectively. Smart Microfinance ensures client data remains private. Smart Microfinance protects clients, businesses and the industry as a whole.
The Smart Campaign is asking microfinance institutions worldwide as well as the networks and associations that represent them to endorse the Campaign and participate in a self‐assessment based on the core Client Protection Principles. The Campaign provides microfinance institutions with the tools and resources they need to incorporate Client Protection Principles into all aspects of their operations and deliver transparent, respectful, and prudent financial services to their clients. Additionally, the Campaign serves as the hub for the compilation and development of tools and resources to better help microfinance institutions review and upgrade their operations to assure transparency and fair treatment of clients. This is an industry‐wide effort, and The Smart Campaign is the mechanism for collaboration.
Anyone interested in microfinance is invited to join the Campaign and endorse the core Client Protection Principles. However, the focus is on providers of financial services to poor and low‐income clients as well as networks, associations, investors, and individuals working in microfinance.
Smart Microfinance isn’t just the right thing to do; it’s the smart thing to do. The Smart Campaign aims to empower microfinance providers with the tools and resources they need to build sound lending practices that protect their clients and help their institutions flourish. There is a strong business case for both microfinance institutions and investors to incorporate client protection into their operations. For institutions, it helps them build stronger, long‐lasting relationships with clients, increases client retention and reduces financial risk, all of which helps microfinance institutions differentiate themselves in the market. For microfinance investors, it helps them confidently put their money towards a stronger, smarter and safer industry.
Learn more about your role in The Smart Campaign by learning more about how you can take action. We also encourage you to serve as a Campaign advocate by sending your microfinance colleagues the link to The Smart Campaign website, encouraging them to also sign on and endorse the Campaign.
Endorsers are committed to the Smart Campaign and implementation of the core Client Protection Principles in the operations and daily practices of all financial institutions serving the poor. *Update* With the launch of the Client Protection Certification Program, endorsement also means support for the certification standards as the minimum standards of practice clients should expect from a financial institution. Specifically:
For microfinance institutions: Endorsement begins with 1) a self assessment of each Institution’s own policies and practices to identify areas for improvement and 2) active promotion of Smart Microfinance and the core Client Protection Principles and certification standards among staff. Where possible, institutions work towards becoming 'Client Protection Certified.'
For networks and associations: Endorsement is a commitment to engage with affiliated organizations to endorse, promote and support The Smart Campaign and the implementation of the seven core principles of client protection.
For investors and donors: Endorsement is a commitment to support providers of financial services that adequately protect their clients by incorporating Smart Microfinance into their screening, due diligence, audits, funding agreements, monitoring, reporting, and governance roles.
For supporting organizations and individuals: Endorsement is a commitment to personally practice Smart Microfinance and to work within their own organizations to implement the core Client Protection Principles throughout their operations when applicable.
The Smart Campaign welcomes endorsements from all organizations that support our global initiative to promote client protection and raise industry standards of best practice, but cannot vouch for the level of commitment or practices of endorsing organizations.
In April 2008, Deutsche Bank brought together several dozen microfinance leaders in Pocantico, New York, to discuss the future of microfinance and examine potential risks to its ongoing growth and success. Their findings, the Pocantico Declaration (PDF), laid out their agreement on the need for an industry‐wide code of conduct and a proactive assertion of microfinance as a double bottom line industry.
Over the two months following the Pocantico meeting, CGAP synthesized the existing codes from a number of microfinance networks and associations, distilling the main points into the Client Protection Principles (listed above). CGAP began reaching out to microfinance investors, urging them to join together to integrate the six principles into their investment processes. A parallel process with donor organizations is also underway.
Recognizing the work with microfinance institutions already initiated by the Center for Financial Inclusion under its “Beyond Codes” action research project, the Center was charged with forming a global and diverse coalition of microfinance institutions, networks, associations, and other professionals working within the microfinance industry. This coalition is now known as The Smart Campaign, and it is serving as an umbrella for all industry‐wide efforts on client protection.