News & Highlights What’s Happening 2010 Ambassador Spotlight: Kate McKee, Senior Advisor, CGAP

Ambassador Spotlight: Kate McKee, Senior Advisor, CGAP

Kate McKee has been working to improve client protection in the financial sector for over two decades, starting when she helped build a bank that financed poor people in poor communities across the U.S. 24 years ago…..

KMcKee_head_shot_200The Smart Campaign: Why are you so passionate about client protection?

Kate McKee: From the days when I was helping build a bank to finance to poor people in poor communities of the US, I’ve been working to help make sure that financial services are appropriate, fair and safe. When I worked in North Carolina, we saw the harm that poorly-designed and predatory loans could wreak on families and small businesses. Equity is a central theme in CGAP’s current strategy. How can microfinance be equitable if basic principles of transparency and fairness are not widely respected? Ensuring client protection is the cornerstone of our industry’s long-term vision – that access to finance will help low-income people build better lives for themselves. So we jumped at the chance to help build a campaign that would ensure that microfinance lived up to its promise. And personally, I jumped at the chance to apply consumer protection experience from my earlier career to this work.

TSC: What is CGAP’s role in the Smart Campaign?

KM: CGAP and the Center for Financial Inclusion co-founded the Campaign, working closely together from day one on the vision and plan. As we developed the overall strategy, there were two key areas where CGAP had a clear comparative advantage – funders and policy. One theme that emerged clearly from Based on the consultative process was that there weren’t strong enough incentives for providers to adopt improved client protection practices. While providers and their associations, networks and support organizations had done a great job getting started with codes of conduct, progress in moving from codes to action was slow. That led us to think that increased attention by donors and investors to client protection would kick-start more work by providers.

The second area where CGAP leadership seemed to make sense was policy and regulation. Since the Campaign is an industry initiative focused on what the key industry players can do, you might think that policy work doesn’t really belong. But the right kind of consumer protection regulation – that defines basic rights and responsibilities of clients and providers – can actually create a more level playing field and advance the Campaign’s goals. So we’ve been working to identify practical regulatory approaches that can promote transparency and fair treatment for poor people in poor countries where regulatory capacity tends to be overstretched.

So from the Campaign’s early days, we agreed that a good division of labor was for us (CGAP) to work with donors and investors and for The Smart Campaign secretariat (the Center for Financial Inclusion) to concentrate on tools for providers, networks and support organizations. .

TSC: What should donors and investors be doing to promote consumer protection? How is CGAP helping them?

AM: The main role we see for investors is to create the right incentives for the providers. We would like to see them factor client protection performance into their decisions about which MFIs to fund – by building it into their due diligence processes — and to support and reward improvements made by their partner MFIs. An investor might still choose to partner with an institution that is not perfect, but we would expect them to do this analysis up-front to identify strengths and weaknesses and determine if management is willing to make the highest-priority improvements. Equity investors are in a particularly strong position to seek and support stronger client protection, since their financing and governance roles give them both more leverage and more responsibility to engage with management. Donors have a wide range of options to support client protection through their grant making. They can fund MFI work on client protection directly. They can also underwrite broader industry initiatives such as the Campaign, tools development, improved credit information, or client awareness and education.

Among the tools CGAP is developing for funders is the Investor Guide for Implementing the Client Protection Principles (now in its second edition), which lays out a seven step process to integrate client protection within investment procedures. We developed a companion due diligence checklist in response to investor demand, to improve consistency in how investors assess and verify specific client protection practices. Now we’re turning to work with donors on their range of options to strengthen client protection in individual MFIs and across the industry. 

TSC: What are the biggest challenges for the campaign going forward?

AM: First, we must do a better job in articulating the business case for providers and other stakeholders to implement the principles. We need credible evidence on the actual costs of improving products, practices and policies — and the benefits that accrue to those that take the lead on improved client protection. Second , we must move beyond credit to other products– what does acceptable practice look like for deposit, payment and insurance services? While these discussions are in their infancy, they are essential. The Campaign has committed to deliver on its promises to all clients, not just borrowers.

A final key challenge is establishing client protection standards, even if they vary according to the service, the country context or the type of MFI. Providers want clear standards, as do funders and networks. We have been in a discovery phase – discovering current practices of providers around the world. We are not yet at a point where we can say “this is an acceptable collections approach” or “this is transparent enough for prices.” But the Campaign’s work is starting to uncover robust standards for some principles. We need to continue our industry-wide consultations to get to this point for all principles and services. And it is not too early to start planning for third-party verification such as certification of an MFI’s compliance with the principles.


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