News & Highlights What’s Happening 2010 Ambassador Spotlight: Vipin Sharma, CEO, Access Development Services

Ambassador Spotlight: Vipin Sharma, CEO, Access Development Services

Why is client protection so important to our Campaign leaders? The Smart Campaign sat down with Campaign Steering Committee Member and Ambassdor Vipin Sharma, the CEO of India’s  Access Development Services, to hear his story…

The Smart Campaign: Why did Access Development Services decide to endorse the Campaign?

Vipin Sharma: Clients are at the core of the microfinance sector. Unless you respect the clients, understand their needs and treat them well, you are deviating from the spirit of the sector. In recent times, a lot of aberrations have crept into the practice of microfinance.

I learned about The Smart Campaign two years ago when I was trying to persuade Maria Otero [then CEO of ACCION International] to speak at the Microfinance India Summit that ACCESS organizes annually. I had a couple of exchanges with Robin [Ratcliffe, The Smart Campaign Director] and that’s when I heard about the client protection initiatives ACCION and CGAP were putting together. It was refreshing to know that a sector, increasingly obsessed with growth and sustainability, had started to show concerns on the issues at the client level. I invited Robin to introduce the Campaign principles at Microfinance India Summit in 2008; and since then both personally and institutionally, I have been a strong supporter of The Smart Campaign. I was invited to join the Campaign Steering Committee; and at ACCESS, we have been working with the Campaign on different initiatives ever since.


TSC: Why is protecting clients so important?

VS: Given the nature of the global poverty challenges, there is a lot of work to do. In 2006, at the Global Microcredit Summit in Halifax, as a sector we were happy that microcredit was able to cover 100 million poor over a period of ten years. But we weren’t sure how many of these clients could be brought out of poverty. For serious impact at the client level, we have to constantly raise the bar for ourselves and ask if we are truly benefiting the client. Are we able to do enough to get them out of poverty, improve the quality of their lives, and achieve double bottom line impact? Can we build both the financial capital and social capital? Protecting the clients is perhaps only the starting point.

As the sector has evolved, there is a growing tussle between soul and scale. As institutions get bigger, pursue aggressive growth and desire greater returns, many lose sight of their mission. So, while institutional bottom lines look good, there are no significant benefits at the individual client level. With increasing commercialization of the sector, client protection gains even more significance.


TSC: How do clients benefit when institutions make pro-active efforts to protect them?

VS: An applied code of conduct will ensure operational discipline within and among MFIs. The relationship and trust between the client and the institution will improve. Institutions will pay greater attention to the credit absorption capacity of clients and not overburden them with high volumes of loans. The staff of these institutions will also apply some ethics and empathy while dealing with clients – both while offering loans and recovering installments. When institutions generate greater operating efficiency, it should reflect in benefits also to the clients – maybe reduced rate of interest, a few value added services. As an industry, it is critical to recognize the nature of our business, and the role of ethics and transparency as a core operating principle.


Access Development Services

ACCESS MFI partners endorsing The Smart Campaign at a
Network Business Meeting


TSC: What client protection initiatives is Access Development Services currently working on?

VS: To support The Smart Campaign, we have a couple of mechanisms in place. The ACCESS Microfinance Alliance works with over 90 MFIs across the country. For these partners, we organize national and regional meets. Invariably, one or two sessions in these meetings are dedicated to issues on client protection, responsible finance and greater transparency. In fact, in the recent Regional Meet in Orissa in March 2010, twelve MFI partners endorsed The Smart Campaign.

In the last two Microfinance India Summits, we’ve partnered with ACCION and publicized The Smart Campaign significantly through dedicated sessions and wide publicity. ACCESS also invested in developing a short film on client protection which was screened during the Summit.

The 2009 State of the Sector Report (that ACCESS releases annually) also carried a separate chapter on the Kolar crisis, which rocked the sector. Kolar is a semi-industrial area, where many MFIs have set up shop and clients were saturated with providers. Some lenders were pushing easy loans and using bad collection practices, which led to the local community deciding not to repay their debts en masse. The situation had the potential for huge political backlash, with serious consequences for the sector. ACCESS was among the first to send a team to Kolar to assess the situation and highlight it as a part of the State of the Sector Report. ACCESS has also recently associated with MFTransparency to support pricing transparency in the country. At a personal level, I work with the Campaign as a member of the Steering Committee.


TSC: What has been the reaction from your industry colleagues when they hear about The Smart Campaign or the Client Protection Principles?

VS: I think there is increasing recognition that it is so critical to have a code of conduct for the sector, particularly focusing on better services and greater respect for the clients. The Client Protection Principles are catching up; the sector is once again realizing that it is to its detriment to ignore the client. After an earlier crisis in Krishna district in Andhra Pradesh, the sector had adopted a Code of Conduct in 2005, and once the things normalized, everyone forgot about it. And now, post the Kolar crisis and due to the growing criticism on how a few large MFIs are booking excessive profits, have poor governance, lack in transparency and their staff is heavy handed with clients, another Code of Conduct has been adopted by the larger MFIs. Talking about Client Protection Principles needs to be more than tokenism; the sector needs to realize that client protection is integral to microfinance and that something substantial needs to be done about it. A Code of Conduct is not something that you just stick on your wall; it has to be incorporated and internalized in the way you do business.


TSC: What are some other interesting client protection initiatives that are happening in the industry that you are aware of?

VS: As a fallout of the crisis, the newly set up Microfinance India Network (MFIN), largely constituting the “for profit” NBFC MFIs, has developed client protection standards within the code of conduct where clients can’t be issued more than 3 loans at a time, and the total debt burden not being higher than 50,000 rupees. As a network, it has agreed to endorse The Smart Campaign. They propose to appoint ombudsmen to ensure that the code of conduct is adhered to and to resolve complaints. I hope the intent is more serious this time, than it was in 2005.

There is a duality in the way microfinance loans are distributed in India. Loans through MFIs are often referred to as the “alternate channel.” While MFI loans bear an interest rate ranging between 24-30%; loans under the SHG bank linkage programme are at about 12%. In recent times, the regulators have been communicating their anxiety on high profit margins, poor governance and high interest rates among MFIs. To save ourselves from coming under scrutiny we have to scrutinize ourselves. In India you can quickly get on the wrong side of politics. It is becoming increasingly critical that the sector needs to regroup and look at how it adopts sector wide practices that demonstrate commitment to the mission, ethics in operation, respect for the client and greater transparency. There is a Nobel Prize awarded within the sector. We must not tarnish the reputation of the sector with a few organizations that aren’t complying with good practices.


TSC: What advice do you have for institutions in the industry that haven’t yet endorsed the Campaign?

VS: Remember and reflect on your mission. The client is at the center of it all. Endorsing the Client Protection Principles in your operations is perhaps inevitable. Adopting Client Protection Principles makes sense for you as an institution and makes sense for the client you espouse to serve. You help to build greater solidarity within the sector. Stand up for the CLIENT.




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