Client focus

Elisabeth Rhyne, Center for Financial Inclusion:
"The client protection principles are really important for microfinance because they are the basis for how you treat clients, and really the client protection principles are just about applying the golden rule in finance: Treat your client the way you would like to be treated." [NpM film, 2011] 

In order for microfinance institutions (MFIs) to become financially sustainable they need to increase their business volume and service more clients. In this process of growth, it is important to stay focused on the clients and continue to work on both social and financial return. Besides well-designed products and services, which are offered in a responsible way, issues like protection against over-indebtedness received attention. It is therefore important that credit registration bureaus are present to prevent clients from having more debts than they can afford.

The Smart Campaign has initiated the Client Protection Principles (CPP). These principles set the minimum standard that clients should expect to receive when doing business with an MFI. By implementing the CPP in their operations, MFIs build strong, lasting relationships with clients and reduce financial risk. There is a consensus within the microfinance industry that providers of financial services should adhere to the following core principles: 

  1. Appropriate product design and delivery
    Providers will take adequate care to design products and delivery channels in such a way that they do not cause clients harm. Products and delivery channels will be designed with client characteristics taken into account. 
  2. Prevention of over-indebtedness
    Providers will take adequate care in all phases of their credit process to determine that clients have the capacity to repay without becoming over-indebted. In addition, providers will implement and monitor internal systems that support prevention of over-indebtedness and will foster efforts to improve market level credit risk management (such as credit information sharing). 
  3. Transparency
    Providers will communicate clear, sufficient and timely information in a manner and language clients can understand so that clients can make informed decisions. The need for transparent information on pricing, terms and conditions of products is highlighted. 
  4. Responsible pricing
    Pricing, terms and conditions will be set in a way that is affordable to clients while allowing for financial institutions to be sustainable. Providers will strive to provide positive real returns on deposits. 
  5. Fair and respectful treatment of clients
    Financial service providers and their agents will treat their clients fairly and respectfully. They will not discriminate. Providers will ensure adequate safeguards to detect and correct corruption as well as aggressive or abusive treatment by their staff and agents, particularly during the loan sales and debt collection processes. 
  6. Privacy of client data
    The privacy of individual client data will be respected in accordance with the laws and regulations of individual jurisdictions. Such data will only be used for the purposes specified at the time the information is collected or as permitted by law, unless otherwise agreed with the client. 
  7. Mechanisms for  complaint resolution
    Providers will have in place timely and responsive mechanisms for complaints and problem resolution for their clients and will use these mechanisms both to resolve individual problems and to improve their products and services.