Smart Microfinance is being fully transparent in the pricing, terms and conditions of all financial products. Smart Microfinance is 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.
Smart Microfinance encompasses core Client Protection Principles to help microfinance institutions practice good ethics and smart business. The Client Protection Principles are the minimum standards that clients should expect to receive when doing business with a microfinance institution. These principles were distilled from the path-breaking work by providers, international networks, and national microfinance associations to develop pro-client codes of conduct and practices. There is consensus within the microfinance industry that providers of financial services should adhere to these core principles:
- 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 overindebtedness and will foster efforts to improve market level credit risk management (such as credit information sharing).
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.
Putting the Principles to Work:
Detailed Guidance on the Client Protection Principles
This draft guidance is intended to engage participants in developing a consensus on the meaning and interpretation of each of the Client Protection Principles (CPPs). It gives general guidance on how each principle should be applied. The document begins with a general discussion of each principle and then discusses product-specific applications as the principle applies to credit, savings, payment services, and insurance. The discussions by product are at a relatively early stage of development. Detail will be added in the coming months, particularly in these areas: branchless banking, payments, savings, and microinsurance.