Francisco de Hoyos Parra, Smart Campaign Steering Committee Member and Director of ProDesarollo, a Mexican microfinance network, believes it is the responsibility of practitioners to ensure that microfinance clients are not exploited...

Why did you join The Smart Campaign?

ProDesarollo got involved because we felt that The Smart Campaign was going in the same direction as us. We recognize that microfinance clients often have low levels of financial literacy and that it is our responsibility to ensure that they are not exploited. It is up to us to establish the ground rules because the market isn’t going to achieve that on its own.

We want our members and the authorities to become part of the international movement for consumer protection. Microfinance has become significantly more commercial in Mexico. In turn, our engagement with The Smart Campaign is our way of showing that we are committed to working with clients.

We have brought the issue of lost deposits to the attention of policy makers through an engaging advocacy video. The amount of savings may not be large, but from a social perspective, there are dire consequences for clients who lose their savings. One of the clients we interviewed was a single mother who immigrated to America in order to raise money for her family. Two years later, she had managed to save $10,000 but learned that she had entrusted her savings to an unregulated cooperative that was unable to pay her back. After sharing her testimony with the authorities, the government has decided to compensate her and the other clients affected. Our hope is that more long-term regulatory change will be achieved.

Although it is difficult for us, as a network, to directly target the clients themselves, we are currently piloting a financial education program in collaboration with some of our members that will reach at least 1,000 people. The results of the pilot will be shared with the rest of the network, which will hopefully lead to other MFIs implementing similar projects. We are also looking at a new financial education program that would specifically target women. Of course our programs are small compared to the number of MFI clients in Mexico (4 Million), but what we really aim to do is to raise awareness and get the ball rolling.

When we talk about values, everyone agrees, but when we try to find out whether procedures and policies are aligned with the client protection principles, it becomes much more difficult. MFIs often don’t realize that their incentives can encourage over-indebtedness, and it’s actually quite hard to make them understand that what they are doing contradicts what they are saying. Even if board members understand, chances are the branch managers won’t, which may be a result of the institution growing too rapidly and not properly educating their staff about their core values.

We are taking a strong stance on consumer protection issues within the network, but are being careful not to be overly demanding at this early stage. If we are too strict, members may drop out, and we would no longer be able to encourage implementation of the client protection principles.