WSBI News & Views
Interview with Robin Ratcliffe
March 2010
Microfinance has become one of the fastest-growing sectors in the global economy in the past five years. In many countries, it has become the norm for microfinance institutions (MFIs) to achieve sustained growth rates of 25 percent or more.
This has increased competition in many regions as well as the risk that individual MFI and industry standards are not keeping up with such tremendous growth. With the global financial crisis hitting unexpectedly hard all over the world, the need has come also for the microfinance sector to re-examine its objectives and to re-confirm its original commitments to the alleviation of poverty and the empowerment of the poor.
This is the objective of ”The Smart Campaign”, a global campaign made up of microfinance leaders from around the world that want to keep clients as the driving force of the industry. WSBI is a member of the Campaign Steering Committee and News & Views had a conversation with Robin Ratcliffe, Campaign Director.
Robin, first of all : Why call it a Smart campaign ?
Well, “Smart” is a globally understood concept that implies a forward-thinking approach to business and way of life. “Smart” for the client protection campaign means helping MFIs achieve their double bottom lines : business profitability as well as doing good for others. In later years of the campaign the “Smart” concept can easily shift to a client-focused marketing effort urging microfinance clients to make smart decisions for their futures by choosing MFIs that prioritize consumer protection principles. The core message of the Smart campaign is the need for more consumer protection.
What is wrong now ?
Your members being bankers, I don’t need to tell you about the importance of trust for any financial business and thus also microfinance. We are convinced that we need to incorporate client protection in the business operations of the microfinance Financial Services News industry in a proactive way to keep the confidence of the client in their financial service providers. Indeed, perhaps even more than in other financial sectors, the client has from the beginning been at the very centre of the microfinance outreach and we want this to remain so. This can only work if any client of any MFI in the world knows that he can count on the six principles which form the backbone of the Campaign:
- Avoidance of over-indebtedness
- Transparent pricing
- Appropriate collections practices
- Ethical staff behavior
- Mechanisms for redress of grievances
- Privacy of client data
Can you elaborate a little bit more on these principles?
Microfinance in general and microcredit in particular is an extremely efficient tool to help the poor start small enterprises, pay school fees and smooth income, but credits can also become very dangerous if given to the wrong persons or in the wrong way. If microfinance leads to over indebtedness, its original objective would obviously be completely missed.
As for transparent pricing, we think that the microfinance industry needs to be fully transparent in the pricing, terms and conditions of all financial products. Smart Microfinance employs respectful collection practices and adopts high ethical standards in the treatment of our clients. Smart microfinance gives clients a way to address their complaints so they can be served more effectively.
And finally, smart microfinance ensures that client data remain private.
How will you implement these principles in daily business practice?
The Smart Campaign does not want to produce a code of good practices that gathers dust on a shelf. We want to work proactively with microfinance networks to monitor difficulties, to implement changes. One way of implementing these changes is to deliver staff training. Another idea we are exploring is a “Smart” certification that would take into account a number of financial and social ratings. And, via Campaign partner CGAP, we are working with regulators around the world, even though many financial regulators are not directly or not at all responsible for consumer protection.
How have MFIs reacted to the Smart Campaign?
As of March 2010, more than 900 microfinance institutions, networks, associations, investors, donors and individuals have endorsed the campaign. Of course,we still welcome new endorsers of this global effort to help the microfinance industry remain both socially focused and financially sound. You should note that The Smart Campaign targets microfinance institutions in the very large sense of the word: microfinance organisations, but also credit unions, cooperatives and savings banks. We encourage WSBI members to join the campaign by logging on to www.smartcampaign.org. I also would like to point out that any organisation that incorporates the Smart Client Protection Principles in its operations will notice strong, lasting relationships with clients, increased client retention and reduced financial risk.
Thank you Robin, for this information.
