Client Protection Principles in Microfinance: Accion's Smart Campaign Partners With MFIN and Sa-Dhan

MUMBAI and BANGALORE, July 24, 2012 /PRNewswire/ --

'The Smart Campaign,' an initiative of the global microfinance industry housed at the Center for Financial Inclusion at Accion, is partnering with the Micro Finance Institutions Network (MFIN) and Sa-Dhan, India's two national industry associations for microfinance institutions, to ensure that the Campaign's Client Protection Principles are embedded in a standardized manner across member MFIs.

The Smart Campaign is a global coalition of microfinance institutions, networks, associations, and other professionals whose mission is to build awareness and improve implementation of the Client Protection Principles. These principles, and the campaign to implement them have been endorsed by nearly 3,000 microfinance industry institutions and leaders from over 130 countries. This collaboration with MFIN and Sa-Dhan encompasses a wide variety of institutions, ranging from small community development institutions working in remote areas to national MFIs.

In the wake of the global financial crises and instances of market overheating in microfinance, particularly in India, the microfinance community has turned its attention to the need for explicit action to protect consumers. To ensure that clients can rely on prudent and respectful treatment from their MFIs, industry leaders are working to move from broad agreement on principles to implementation of detailed standards. The Client Protection Principles are:

1. Appropriate product design and delivery

2. Prevention of over-indebtedness

3. Transparency

4. Responsible pricing

5. Fair and respectful treatment of clients

6. Privacy of client data

7. Mechanisms for complaint resolution.

In India, the Microfinance Institutions (Development and Regulation) Bill, 2012, which was introduced in the Lok Sabha in the last parliament session, demonstrates the government's renewed efforts to ensure that microfinance clients are fully protected. The bill proposes the establishment of 'District Microfinance Councils', whose role would include monitoring of client protection in their regions. The bill also contains a dedicated chapter on grievance redressal, a key client protection principle, and defines penalties for MFIs in the event of violations or unsatisfactory conduct.

Commenting on this partnership, Isabelle Barrès, Director, Smart Campaign, Center for Financial Inclusion, Accion International said, "We are very pleased to be working with such dedicated partners as Sa-Dhan and MFIN. Through our partnership, we will meet the challenge of turning principles into practice for the benefit of millions of microfinance clients."

Under the new agreement, the three partners will harmonize the Indian microfinance Code of Conduct, RBI guidelines and global microfinance standards from the Smart Campaign to create detailed client protection guidance for Indian MFIs. They will train the staff and leaders of microfinance institutions across India, carry out assessments of their on-the-ground practice, and assist organizations to upgrade practices where needed. This work is supported by a generous grant from the International Finance Corporation.

Welcoming the move, Matthew Titus, Executive Director, Sa-Dhan commented, "We are happy to collaborate with the Smart Campaign on strengthening the Code of Conduct assessment tool towards greater consistency with the global standards of client protection."

Mr. Alok Prasad, CEO, MFIN added, "Client Protection and responsible lending are the guiding principles of microfinance. Through this collaboration with the Smart Campaign, we intend to help MFIs adopt and implement proven best practices from across the world, thereby ushering in a new era of client centric microfinance."

About the Smart Campaign: 

In response to a strongly recognized need to assure safe and responsible treatment of microfinance clients, microfinance industry leaders from around the world came together in 2008 to launch a campaign to establish the Client Protection Principles and to make them part of the DNA of microfinance. To put the principles into action, the Smart Campaign was launched in October 2009. Today, it is a global effort with nearly 3,000 signatories, a wealth of tools and resources, and an ambitious action agenda. It is changing the way microfinance institutions protect their clients. For more information, visit www.smartcampaign.org

About MFIN:

MFIN is the premier industry association for 'Non Bank Finance Company - Microfinance Institutions' in India. Its membership consists of 47 leading NBFC-MFIs whose combined lending constitutes 85 percent of the Indian microfinance sector. MFIN was established with the sole purpose of promoting the key objectives of microfinance in India and of establishing guidelines for responsible lending and client protection in the microfinance industry. MFIN seeks to work closely with regulators and other key stakeholders to achieve larger financial-inclusion goals through microfinance. For more information, visit www.mfinindia.org

About Sa-Dhan:

Sa-Dhan is a national association of Community Development Finance Institutions (CDFIs) in India.  Sa-Dhan was founded in 1999 as an Association of Community Development Finance Institutions by SEWA Bank, BASIX, Dhan Foundation, FWWB, MYRADA, RGVN, SHARE and PRADAN. Sa-Dhan's mission is to build community development finance in India and help its members and associate institutions to better serve low-income households, particularly women in both rural and urban India, in their quest for establishing stable livelihoods and improving quality of life. Currently, Sa-Dhan has 242 members out of which 179 are MFIs while others are Capacity Building Organizations, Technical Service Providers, Financial Intermediaries-Financial Institutions and Formal and Informal Network/Channels for both support and capacity building. For more information, visit www.sa-dhan.net

Primary Media Contact: Madhulika Gupta, [email protected], 91-22-26059019