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Client Voices: Rwandans Speak on Digital Financial Services

June 2019

Based on a survey of over 1,200 people in three districts in Rwanda, this Smart Campaign report delves into the experiences of individuals who use digital financial services, the main client protection issues they are concerned about, and the impact and prevalence of negative experiences.

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CFI Fellows Program: Responsible Digital Credit

May 2018

What does responsible digital credit look like?

All over the world, small loans to invididuals and very small business are increasingly made using digital channels, whether online, via a mobile devide or through an agent. However, trust, confidence and responsible lending practices need to be in place to ensure this industry is successful and its customers are protected and empowered. In Responsible Digital Credit, CFI Fellow John Owens outlines the digital credit landscape and the risks customers face, and examines the best practices, standards and initiatives that exist or should be implemented to improve consumer protection in digital lending. Ultimately, John argues, it will take a village to ensure that digital credit clients are protected—including govenrments, regulators, industry players, advocates and consumers themsleves. He sees three key activities: 1) industry self-regulation, 2) certification of digital credit providers, and 3) directly empowering consumers, as key to the future of what responsible digital credit looks like.

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Smart Brief: Tiny Loans Big Questions

September 2017

Tiny Loans Big Questions CoverNano-loans have generated both significant scale and a certain amount of controversy. These very small, instant consumer loans have ballooned from 11 deployments in 2011, to 52 in 2016, with a particular concentration in East Africa. In just a few years, through models such as M-Shwari, M-Pawa, Tala and Airtel Money, tens of millions of people have borrowed tiny amounts over their phones.

Nano-loans represent an enormous increase in formal financial inclusion. They address a fundamental consumer need previously unavailable to lower income people from the formal financial system: the need for very short-term money management tools to cope with income and expense volatility. While they are in many ways a boon, they also contain, and in some cases heighten risks, for consumers.

This Brief enumerates and discusses emerging consumer risks posed by nano-loans, using the Client Protection Principles as an organizing framework. We hope this lens will assist the mobile financial sector to articulate and build a consensus about responsible practices in mobile finance.

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Protecting Clients & Building Trust: Exploring responsible agent management in India

Protecting Clients  Building Trust CoverAgent networks play a critical role in increasing financial access by helping financial service providers broaden their reach without building more branches.  However, in order for an agent network to successfully extend access to financial services, the client must be able to trust the agent and perform transactions with confidence.  Early research by the Helix Institute and others has shown that strong customer service and client protection practices are linked to profitability for both agents and agent network managers.

A wide variety of entities recruit and manage agents: MNOs, service providers, aggregators, banks, microfinance institutions, etc. However, despite the variance in organizational design and services offered, there are common questions and issues with which all agent managers must grapple. Many of these issues have client protection implications. But what does responsible agent management look like in practice? To begin to answer this question, the Smart Campaign, in collaboration with Accion, carried out research in India to map its Client Protection Principles and standards against various agent models to develop a deeper understanding of the client protection risks and effective mitigating steps for agent managers. The resultant paper, Protecting Clients & Building Trust: Exploring responsible agent management in India , presents some of the early findings and the results of a Mumbai workshop where the paper was discussed and recommendations prioritized. The Campaign hopes that this note will generate debate, feedback and guidance for further research and engagement.

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The Client Voice Project

The financial well-being of clients is the foundation of the Smart Campaign and its seven Client Protection Principles. Since 2009 has certified overty forty institutions and worked with leaders across the financial inclusion industry to amplify the importance placed on ‘doing no harm’

As an industry facing campaign, Smart Campaign has engaged extensively with microfinance institutions, networks, investors, regulators and, rating agencies, but has had minimal input directly from clients themselves. To rectify this and augment clients’ the literal voice of clients in the campaign, and by extension the industry, the Client Voices project was born. The research aims to understand and shine the light on the experiences, concerns and worries of individuals who use microfinance services.

Given the global importance of client protection, geographic diversity was key and four markets were selected: Benin, Georgia, Pakistan, and Peru. Since March 2014, the Smart Campaign and its research partner Bankable Frontier Associates (BFA) have conducted desk research and field work in all four markets.  

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What Happens to Microfinance Clients Who Default

WHTCWD CoverWhat Happens to Microfinance Clients Who Default examines how default unfolds and affects microfinance clients in Peru, India, and Uganda – three very different countries that represent the global diversity of microfinance. Since default is a particularly important issue for client protection, the study was launched to explore how microfinance institutions (MFIs) treat clients who are unable to repay their loans. It was motivated by a lack of information on the client-facing actions MFIs take when a borrower moves into default. 

The study confirms that the quality of treatment clients receive during collections depends importantly on good practices within individual financial institutions, but it also found that treatment depends even more on the local environment. Humane collections can happen when a country has good regulators, a credit bureau that works well, and a culture that upholds fulfillment of debt obligations. When these features are weak missing, lenders are pushed by the demands of the market into harsh practices.

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Client Protection Principles: Model Law and Commentary for Financial Consumer Protection

ML Cover FinalThe Microfinance CEO Working Group is pleased to present Client Protection Principles: Model Law and Commentary for Financial Consumer Protection. This Model Law and Commentary (collectively, the “Model Law”) creates a legal framework for financial consumer protection based on the Smart Campaign’s Client Protection Principles. The Smart Campaign is a global effort guided by the experience and expertise of microfinance leaders from around the world who are committed to following positive client protection practices. The Client Protection Principles represent a global consensus across the sector regarding the standards of conduct and treatment clients should receive from financial service providers.

The Model Law draws upon a broad survey of experts, relevant scholarship, and existing laws and regulations from countries across the globe, and is intended for three main uses:

  • For policymakers to use as a tool in developing actual, enacted legislation
  • To assess a given jurisdiction’s client protection regulatory regime
  • To serve as a resource for the development of codes of conduct and guidelines, either for a single financial service provider or for any group or industry association

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