Microfinance Leaders Launch Campaign for Client Protection at Clinton Global Ini...
New York, United States, September, 24 2008 -
The Center for Financial Inclusion at ACCION International today announced a Campaign for Client Protection in Microfinance—a broad-based initiative to unite microfinance providers in commitment to the campaign standards for the appropriate treatment of low-income clients.
Founding partners of the Campaign include Al Amana (Morocco), CGAP, Compartamos Banco (Mexico), Deutsche Bank, Freedom from Hunger, Grameen Foundation, Opportunity International, Pro Mujer and Women's World Banking.
Designed to maintain and extend the microfinance industry's dedication to the welfare of its clients in a period of rapid growth, the campaign will promote a Microbanker's Oath, akin to the Hippocratic Oath, articulating six core principles:
- Avoidance of reckless lending that creates over-indebtedness
- Transparent and fair pricing
- Collections practices that are not abusive or coercive
- Ethical standards for staff
- Recourse mechanisms for client problems
- Privacy of client data
At the Clinton Global Initiative (CGI), the Campaign announced a Commitment to Action to engage at least half of the world's 500 largest microfinance institutions (MFIs) reporting to the MIX Market (www.mixmarket.org) within the next three years. The MIX 500 MFIs serve an estimated 65 million borrowers among the self-employed poor worldwide, 70 percent of them women. Ultimately, the Campaign envisions that tens of thousands of people working in the microfinance industry will also personally sign the Oath via a campaign website.
Beyond adherence to common principles, the Campaign will develop implementation tools and certification standards to ensure that pro-consumer practices are implemented. The Campaign also seeks to engage microfinance investors, who have become increasingly active in monitoring the social performance of financially self-sustaining MFIs.
"The profit versus nonprofit microfinance debate that has captured so much industry energy this year is the wrong argument," said Elisabeth Rhyne, managing director of the Center for Financial Inclusion. "The real challenge is to maintain dual focus on rapidly scaling up outreach while meeting the highest standards of client service and protection. The Campaign will foster appropriate growth in microfinance by creating industry practices and standards—ensuring that the social mission remains front and center."
"Investors have a crucial role to play as microfinance providers further develop finance that works for low-income people," said Kate McKee, senior policy advisor for CGAP. "This Campaign provides a vehicle by which investors can both reward and support investment-grade MFIs that truly serve their target populations and adopt policies, practices and products that safeguard their clients' interests."
"The continued fallout from the subprime crisis is a sober reminder of the devastation caused by abusive lending practices," said Alex Counts, president of Grameen Foundation. "The Campaign is designed to ensure that microbankers never forget whom they are serving and that they continue to act in their clients’ best interests."
The CGI commitment to a multi-year Campaign for Client Protection is an outgrowth in part of the 'Pocantico Declaration,' a statement of principles and concerns issued by 25 microfinance leaders brought together by Deutsche Bank (DB) in April 2008 at the Pocantico Conference Center in Tarrytown, New York. While applauding rapid growth and innovation in the delivery of financial services to the world's poor, the Declaration calls attention to the need to ensure that microfinance grows with transparency and without putting the solvency of its clients at risk through over-indebtedness. The Campaign aims to ensure that consumer protection practices and principles become part of the DNA of the microfinance community.