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Center for Financial Inclusion Publication No. 22 Study of Client WƌŽƚĞĐƟŽŶ WƌĂĐƟĐĞƐ ŝŶ >ĂƟŶ ŵĞƌŝĐĂ ĂŶĚ ƚŚĞ ĂƌŝďďĞĂŶ Multilateral Investment Fund Member of the IDB Group

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Page 1: W } }vW ]v> vu ] v Z ] v › 2013 › 1… · W } }vW ]v> vu ] v Z ] v THE SMAR T CAM PA IG N is a global e!ort to unite micro"nance leaders around a common goal: to keep clients

Center for Financial Inclusion Publication No. 22

Study of Client WƌŽƚĞĐƟŽŶ�WƌĂĐƟĐĞƐ�ŝŶ�>ĂƟŶ��ŵĞƌŝĐĂ�ĂŶĚ�ƚŚĞ��ĂƌŝďďĞĂŶ

THE SMART CAMPAIGN is a global e!ort to unite micro"nance leaders around a common goal: to keep clients as the driving force of the industry.The Smart Campaign consists of micro"nance leaders from around the world who believe that protecting clients is not only the right thing to do but the smart thing to do. By providing micro"nance institutions with the tools and resources they need to deliver transparent, respectful, and prudent "nancial services to all clients, the Smart Campaign is helping the industry maintain a dual focus on improving clients’ lives while attaining "nancial sustainability. The Campaign is headquartered at the Center for Financial Inclusioon at Accion.

www.smartcampaign.org

Financial Inclusion 2020 auspiciado por:

Multilateral Investment FundMember of the IDB Group

Founding Partner

Page 2: W } }vW ]v> vu ] v Z ] v › 2013 › 1… · W } }vW ]v> vu ] v Z ] v THE SMAR T CAM PA IG N is a global e!ort to unite micro"nance leaders around a common goal: to keep clients

Study of Client Protection Practices in Latin America and the Caribbean

Sergio Guzmán

September 2013

The opinions expressed in this publication are those of the author and do not necessarily re!ect the views of Accion, the Multilateral Investment Fund, a member of the IDB Group, the Inter-American Development Bank, its Board of Directors,

or the countries they represent.

Copyright 2013 © Inter-American Development Bank as administrator of the Multilateral Investment Fund. First Edition. Used by permission.

Contact: [email protected]

Multilateral Investment FundMember of the IDB Group

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1

Executive Summary

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Figure 1. Average Assessment Scores in LAC by Client Protection Principle

3.3

2.8

3.3

2.43.0

2.7

2.9

0.00.51.01.52.02.53.03.54.04.55.0

Prevention of Over-Indebtedness

Transparency

Responsible Pricing

Appropriate CollectionsPractices

Ethical Sta! Behavior

Mechanisms forComplaint Resolution

Privacy of Client Data

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2

Prologue

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3

Acknowledgements

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4

Contents

Executive Summary 1

Prologue 2

Acknowledgements 3

Part I. Introduction 5 The Smart Campaign 5

Part II. Arriving at a Study of Practices 7 Assessing client protection performance 7 Improving client protection performance 9 Recognizing client protection performance 9 How this Report is organized 9

Part III. The Client Protection Principles 10 Prevention of Over-indebtedness 10 Transparent Pricing 12 Responsible Pricing 15 Appropriate Collections Practices 17 Ethical Sta" Behavior 20 Mechanisms for Complaints Resolution 24 Privacy of Client Data 27

Conclusions 30

Annex 1 – Micro!nance Institutions who participated in Assessments 31

Annex 2 – Partner Micro!nance Associations 33

Annex 3 – Licensed Certi!ers 34

Annex 4 – List of Tools Translated into Spanish and Portuguese 35

Annex 5 – Client Protection Principles Changes 37

Annex 6 – Smart Assessment Methodology 38

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5

Part I. Introduction

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Table 1. Campaign’s Global Reach and Regional Representation

Africa East Asia – the Paci!c

Eastern Europe –

Central Asia

Latin America – the

Caribbean

Middle East - North Africa South Asia U.S. and

Canada Total

MFIs 452 102 147 371 49 209 37 1367

Networks 56 187 34 42 4 22 19 364

Supporting Organizations 67 13 48 42 7 48 56 281

Investors 12 4 86 10 2 13 41 168

Clients Reached ~4,969,221 ~3,708,476 ~1,380,354 ~32,963,575 ~1,745,216 ~20,337,139 - ~65,103,981

The Smart Campaign

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Part II. Arriving at a Study of Practices

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Table 2. Scoring Methodology

Weak Practice -

1

Less than Adequate -

2

Adequate - 3

More than Adequate -

4

Good Practice -

5

Practices are absent

or very weak

Does not fully meet

all parts of the

indicator

Meets all parts of the

indicator

Exceeds the

Indicator

An example

for others to follow

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Recognizing Client Protection Performance

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How This Report Is Organized

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Part III. The Client Protection Principles

Prevention of Over-Indebtedness

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Figure 3. Preventing Over-Indebtness: Asessment Scores

1

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2

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0 1 2 3 4 5 6 7 8 9 10 11 12

Financial Institutions Assessed

Mean = 3.33

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Figure 4. Regulatory Di"erences in Over-Indebtedness

1.0 2.0 3.0 4.0 5.0

Regulated

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Figure 5. Regional Di"erences in Over-Indebtedness

1.0 2.0 3.0 4.0 5.0

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Central America

South America

Prevention of Overindebtedness

HighLow

Strong Practices

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Areas for Improvement

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The Main Idea: Financial institutions that want to align their e"orts on the prevention of over-indebtedness with the Smart Campaign should keep the following in mind:

Conduct appropriate client repayment capacity before disbursement.Incentivize quality loans.Use credit bureaus and/or competitor data as feasible in the local context.Raise awareness of the risks of over-indebtedness at the management levelEnsure internal audit departments monitor policy compliance.Avoids dangerous commercial practices such as restricting loan use, not having prudent limits on loan renewal and have guidelines for rescheduling.

Transparent Pricing

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Figure 6. Transparent Pricing: Asessment Scores

1

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2

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3

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4

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0 1 2 3 4 5 6 7 8 9 10 11 12

Transparent Pricing: Assessment Scores

Financial Institutions Assessed

Mean = 2.78

High

Low

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Figure 7. Regulatory Di"erences in Transparency

1.0 2.0 3.0 4.0 5.0

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Non-Regulated

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Figure 8. Regional Di"erences in Transparency

1.0 2.0 3.0 4.0 5.0

Caribbean

Central America

South America

HighLow

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14

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Strengths

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Areas for Improvement

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The Main Idea: Financial institutions that want to become fully transparent in their pricing to their customers should:

Disclose cost and non-cost information in its entirety.Communicates proactively with clients in a way that clients can easily understand. Use a variety of disclosure mechanisms. Leave adequate time for client review and discloses at multiple times.Provide accurate and timely account information.

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Box 1 - Fostering Transparency at Banco Delta

Banco Delta, a leading institution in Panama, used an active complaint resolution mechanism to improve its transparency practices, an area of improvement identi#ed during a Smart Assessment conducted in October 2012.

After the assessment, Banco Delta conducted an analysis of incoming clients complaints received during a six-month period. The results show that clients were confused about key loan related details that were already included in their contracts. “In Panama, clients do not bother to read a document if it exceeds two pages,” reports Yarisbeth López, a promotion and sales o$cer at Banco Delta´s headquarters.

Banco Delta leveraged its complaints data to develop an easy-to-understand “rights and responsibilities” brochure (see below), which contains the 11 most pertinent facts related to loans. The #rst batch of 1,000 brochures was rolled out during May 2013 and distributed to the Bank´s eight branches across Panama. Today, these brochures are given to every client at the point of sale. Yarisbeth explained, “The brochure grabs the client´s attention; not only because it is handed out on top of the pile of documents but also because the format and length di"ers greatly from the rest of the documents. It might be the only document clients actually read.”

Providing a written document that summarizes key information in a clear and su$cient way has bene#ted both clients and sta". Understanding key information empowers client and equips them to take responsibility for their own #nancial decision-making. Yarisbeth a$rms that “the brochure has been a way to foster an atmosphere of open and transparent communication, clients now ask more questions, and this interaction strengthens the relationship between the bank and clients, they realize that we are there to help them.”

Responsible Pricing

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Figure 10. Regulatory Di"erences in Responsible Pricing

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Responsible Pricing: Assessment Scores

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Figure 11. Regional Di"erences in Responsible Pricing

1.0 2.0 3.0 4.0 5.0

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Central America

South America

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Strengths

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The Main Idea: Financial institutions who want to ensure their products follow responsible pricing guidelines should:

O"er market-based, non-discriminatory pricing.Have e$ciency ratios aligned with peers.Not charge excessive fees or penalties.

Appropriate Collections Practices

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Box 2 – MFIs Should List Explicitly Prohibited Behaviors

FIs should explicitly prohibit the following behaviors: use of abusive language; use of physical force; limiting physical freedom of clients; shouting at the client; entering the client’s home uninvited; publicly humiliating the client; violating the client’s right to privacy; discriminating based on ethnicity, gender, sexual orientation, religious belief, political opinions, or disability; participation in corruption, kickbacks, or theft; and participation in sexual or moral harassment.

An example available to other FIs on how policies and practices can change to re!ect these norms can be found available online here.

Figure 12. Appropriate Collections Practices: Assessment Scores

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Figure 14. Regional Di"erences in Appropriate Collections Practices

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Box 3 – Good Regulatory Practices from FranceAs observed in the report, many countries do not have mandates on what are the collateral items that should in no event be subject to collection. An example from a country that has very clear guidelines on this subject is France.

Article 39 of Decree No. 92-755 of 31 July 1992 establishing what are the items that cannot be con#scated when retaining a client’s assets as a form of payment to a past due obligation: Clothing; Bedding; Linen; Objects and products necessary for personal care and housekeeping; Foodstu"s; The household objects necessary for the conservation, preparation and consumption of food; Necessary appliances for heating; The table and chairs to have meals in common; A cabinet to house the linen and clothes and furniture for storing household goods; A washing machine; Books and other necessary for the pursuit of studies or vocational training objects; Objects of children; Memories to personal or family; Household pets or guard; Animals for subsistence of the debtor, as well as food for their livestock; The instruments of work needed for the personal exercise of professional activity. A telephone set for access to the #xed telephone service.

The Main Idea: Financial institutions should implement the following measures in order to make sure their collection practices are fair and consistent:

Foster a culture that raises awareness and concern about fair and responsible treatment of clients.De#nitions in speci#c detail what it considers to be appropriate debt collection practices.Ensure in-house and third-party collections sta" follow the same practices as the FI sta".

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Box 4 - De!ning and Monitoring Collection Practices at FODEMI

FODEMI, a micro#nance institution (MFI) based in the North Andean region of Ecuador, believed that enhanced collaboration amongst collections sta" would improve the likelihood that clients were being treated with dignity and respect during collections. FODEMI’s management had become aware of institutional gaps through a Smart Assessment conducted in February 2013. The resultant e"ort to bridge the gaps involved collaboration across departments including Human Resources, Social Performance, Internal Audit, Operations, and the Credit Department.

The team agreed that improving performance should include the creation of speci#c and standardized guidelines for sta" (and third-party agencies) on collections and monitoring of behavior. Speci#cally, FODEMI did the following:

1. Improve Institutional Policy. In order to lay out a foundation for appropriate behavior, FODEMI edited their Code of Conduct. The Code now speci#es that delinquent clients should “receive a respectful treatment and high quality services to recover the loan but also to solidify their loyalty.” The edited Code also lists speci#c guidelines for treating clients with dignity during the loan collection process. It identi#es unacceptable collection practices such as times of the day where client contact is inappropriate (e.g. late at night), and forbids against abusive or o"ensive language, physical harassment, and humiliation. Additionally, it mandates that assets that deprive borrowers of their basic survival capacity cannot be seized. The Code also speci#es that sta" cannot enter the client´s house without previous permission and rea$rms a commitment to non-discrimination on the basis of race, ethnicity, gender, political a$liation, disability, or religious orientation.

2. Monitor Behavior. In order to bring their new code of conduct policy o" the page, FODEMI is creating a monitoring system for loan o$cers. Before conducting sample #eld visits, auditors must now check for complaints associated with the loan o$cer whose clients they are going to visit regarding abusive collection practices. New Internal Audit standards monitor the appropriateness of collection practices to verify compliance of sta" with the Code of Conduct. Auditors are also responsible for assessing client satisfaction and whether loan o$cers have been respectful to clients, particularly during collections.

3. Align Third Party and Institutional Standards. Third-party collections agencies contracted by FODEMI must now abide by the same institutional practices expected of FODEMI sta". Speci#cally, collection agencies must commit to treating the clients with dignity. In signing the document, third party sta" pledge to follow FODEMI’s practices on “Fair and Respectful Treatment of Clients” as well as FODEMI´s mission, vision, and values

Improving collections practices is not simple. It requires an e"ort to articulate written procedures that specify inappropriate collections behaviors in a sta" handbook. While outsourcing collections is not necessarily a bad practice, FIs should make sure that third-party agents are held accountable to the behavioral standards expected from internal sta". And, to ensure internal sta" compliance, internal audit should play a key role to ensure practices throughout the organization are consistently veri#ed with clients themselves.

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The Main Idea: Ethical sta" behavior not only depends on hiring the right sta", but also making sure the #nancial institution has:

A culture that raises awareness and concern about fair and responsible treatment of clients.Human Resources policies that are aligned around fair and responsible treatment of clients that promote ethics and prevent fraud.Non-discrimination policies to prevent inappropriate bias against certain categories of clients.Consistent information to clients about their rights.Ensures that readjustments in this principle reverberate and contribute to a course redirection if necessary.

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Box 5 -Writing a Code of Ethics and Social Corporate Responsibility at ASDIRSmart Assessments measure adherence to the Client Protection Principles through examining practices by talking to sta" and triangulating that evidence with an institution’s policies. ASDIR, a Guatemalan NGO, learned from its Smart Assessment that while sta" practices adhered to the standards, they needed to document those practices for more uniformity and risk mitigation, namely through a Code of Ethics and Social Corporate Responsibility. The management believed that the code is a way to formalize processes at the institution as a legacy for the organization to solidify the organizational mission not only looking at present practice but also the institution’s future. The CEO and the Board of Directors empowered ASDIR’s Human Resources manager and the Social Corporate Responsibility Manager to work together and come up with a text acceptable to the organization and its sta".

The Managers jointly researched code of ethics from other micro#nance organizations and networks using the resources made available by the Smart Campaign (click here for access to more than 30 di"erent codes from organizations around the world). It took them approximately one month to come up with a joint draft that focused on a number of important client protection issues including:

Guidelines for managers and the board of directors.Articles on the institution responsibility to competitors, the community, and clients.Professional conduct guidelines. Practical aspects on institutional values.Non-discrimination. Con#dentiality of client data.

The draft code was presented to ASDIR’s branch managers in order to get feedback and buy-in to the new policies that put on paper much of what the institution already practiced. When interviewed, branch managers in Pologua and Totonicapán (provinces of western Guatemala) believed that the code gave more clarity in areas, such as acceptable and unacceptable sta" conduct that were previously unclear. These branch managers believed the code would help them “orient clients to their true north” and “become more e"ective managers to their sta".” ASDIR has begun to publish key aspects of the code inside its branches to raise client awareness about their rights. Additionally the posters also provide information to clients about their right to lodge a complaint or suggestion.

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Mechanisms for Complaints Resolution

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Figure 18. Mechanisms for Complaints Resolution: Assessment Scores

Mechanisms for Complaints Resolution: Assessment Scores

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Figure 19. Regulatory Di"erences in Mechanisms for Complaint Resolution

Mechanisms for Complaints Resolution

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Box 6 – Example Policies from PeruFONDESURCO’s manual carefully describes the complaints process and who is responsible for each piece. Additionally it contains two !ow charts detailing the process for complaints and suggestions, copies of forms provided to clients, and sta" directed at lodging complaints and their respective follow-up, as well as copies of brochures given to clients at o$ces to inform them about the complaints process. The manual can be found online here.

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Figure 20. Regional Di"erences in Mechanisms for Complaint Resolution

Mechanisms for Complaints Resolution

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The Main Idea: When designing mechanisms for complaint resolution a Financial Institution should ensure that:

Clients are aware of how to submit complaints.Sta" is trained to handle complaints.Complaints resolution system is active and e"ective.They use client feedback to improve practices and products.

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Box 7 - The Full Feedback Cycle at Contactar, Colombia

After experiencing a period of rapid growth, Contactar realized it needed to be more aware of the needs and concerns of its ever-expanding client base. In January 2013, Contactar decided to upgrade its overall strategy to listen to client complaints and concerns after realizing that their suggestion box – the only client-accessible complaints channel that was being used – was clearly not enough. Clients were not using it regularly, and it was often even mistaken for a trash bin! Contactar tasked Customer Service Specialist Fernando Viteri and Marketing Coordinator Eliana Belalcazar with transforming the organization’s Complaints Handling Mechanism and developing an action plan to answer Questions, Complaints, Grievances, and Suggestions (PQRS is the Spanish acronym) which included the following three key steps:

1. Design and Implementation of a Smile-o-Meter. Contactar’s cashiers provided a sample of 30 percent of the clients with new loans a feedback form containing happy, indi"erent, and sad faces. Customers were asked to describe the way they felt about how they were treated by sta". It also provides a space in case they would like to include additional comments. After implementing this mechanism, written feedback from clients has not only increased, the overall content of the feedback is also much richer than the few received previously using their already established channel. As a result, the institution decided to phase out its suggestion box entirely. Cost: One week sta" time to develop new form, approximately 1,000 smile-o-meter forms (three forms per page) to 32 o#ces.

2. Establish a Toll-Free Number. One of the recommendations of the Smart Campaign assessment was the need to install a toll-free number as an additional channel to its complaints system. Setting up the number was easy and the institution sta"ed and managed a direct line. The person sta$ng the line is blind and has successfully memorized the institution’s sales pitch and is inquisitive of client’s reasons for calling. The person writes down reports and submits it to Loan o$cers and management for follow-up. Through this channel, the institution has generated 193 loan applications, 51 of which have been accepted generating more than $40,000 in new loans. Cost: ¢25 per minute per call to the toll free number (around $1,000/month) and the salary of entry-level person sta#ng the line.

3. Advance Client Focus Groups. Contactar also implemented focus groups to better address their clients’ needs with internal resources. Understanding that the results would not be wholly representative of their client-base, they decided to hold meetings at each of their 23 o$ces with six or eight clients. These meetings have shed light on the fact that clients were unaware of the existence of home improvement, educational, consumption, or environmental loans. The institution since has developed a product marketing spreadsheet to assist its loan o$cers in their sales pitch to clients about services available. Cost: One day per focus group from Marketing Manager, one month e"ort by Marketing Manager to develop focus group methodology. Transportation, client gifts, and refreshments approximately $15,000.

Total Cost: Approximately $16,850. Total Sta" Time: Approximately 160 Sta" days. Total Business generated: $40,000 in new loans.

Privacy of Client Data

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Figure 21. Privacy of Client Data: Assessment Scores

Privacy of Client Data: Assessment Scores

Financial Institutions Assessed

1

1.5

2

2.5

3

3.5

4

4.5

5

0 1 2 3 4 5 6 7 8 9 10 11 12

Mean = 2.73

High

Low

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Figure 22. Regulatory Di"erences in Privacy of Client Data

Privacy of Client Data

Regulated

Non-Regulated

1.0 2.0 3.0 4.0 5.0

HighLow

Strengths

),V�SHUIRUPHG�ZHOO�LQ�H[SODLQLQJ�WR�FXVWRPHUV�KRZ�WKHLU� GDWD� ZRXOG� EH� XVHG�� SDUWLFXODUO\� LQ� FRXQWULHV�ZLWK� FUHGLW� EXUHDXV�� ,QVWLWXWLRQV� LQ� WKHVH� FRXQWULHV�WROG� FOLHQWV� WKHLU� GDWD� ZRXOG� EH� UHSRUWHG� DQG�FRQVXOWHG�ZLWK�D�FUHGLW�EXUHDX�EHIRUH�ORDQ�DSSURYDO�

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Figure 23. Regional Di"erences in Privacy of Client Data

Privacy of Client Data

1.0 2.0 3.0 4.0 5.0

Caribbean

Central America

South America

HighLow

Areas for Improvement

0DQ\�RI� WKH�ZHDNQHVVHV� LQ� WKLV�SULQFLSOH�ZHUH�GXH�WR�D�ODFN�RI�ZULWWHQ�SROLFLHV��7KH�FUHDWLRQ�RI�ZULWWHQ�SROLFLHV� LV� QRW� RYHUO\� RQHURXV� IRU� LQVWLWXWLRQV� DQG�PXVW�EH�FRPSOHPHQWHG�E\�VROLG�LPSOHPHQWDWLRQ��,W�LV�FUXFLDO�IRU�),V�WR�KDYH�D�ZULWWHQ�DQG�ERDUG�DSSURYHG�SULYDF\�SROLF\�WKDW�JRYHUQV�WKH�JDWKHULQJ��SURFHVVLQJ��XVH�� DQG� GLVWULEXWLRQ� RI� FOLHQW� LQIRUPDWLRQ�� 7KH�FRQWUDFWV� DQG� GRFXPHQWV� WKDW� FOLHQWV� VLJQ� PXVW�FRQWDLQ� D� SODLQ�ODQJXDJH� SULYDF\� FODXVH� WR� EH� UHDG�DORXG�WR�FOLHQWV�EHIRUH�WKH\�HQWHU�LQWR�FRPPLWPHQWV��

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7KH�H[LVWLQJ�SROLFLHV�DW�),V�LQ�WKLV�SURMHFW� WHQGHG�WR�EH�YHU\�VSHFL¿F� IRU�GLJLWDO�DFFHVV� WR�FRPSXWHUV�DQG�FRUH�EDQNLQJ�V\VWHPV�EXW�UHODWLYHO\�VFDUFH�IRU�SDSHU�GRFXPHQWV�DQG�FOLHQW�¿OHV��$FFRUGLQJ�WR�WKH�VWDQGDUGV��DQ�LGHDO�SROLF\�ZRXOG�FRPELQH�ERWK�HOHPHQWV�DQG�EH�FRPPXQLFDWHG�WR�VWDII��),V�RIWHQ�KDYH�YDJXH�VWDWHPHQWV�LQ�WKHLU�VWDII�ERRN�RI�UXOHV�UHIHUULQJ�WR�³EDQN�VHFUHF\´�DQG� FRQ¿GHQWLDOLW\� ZLWKRXW� DQ\� VSHFL¿F� RU� GHWDLOHG�GHVFULSWLRQ�RI�ZKDW�WKRVH�VWDWHPHQWV�PHDQ�LQ�SUDFWLFH��

The implementation of this principle becomes more RI� D� FKDOOHQJH� LI� 0),V� SHUFHLYH� WKLV� LVVXH� LV� QRW�LPSRUWDQW� WR� WKHLU� FXVWRPHUV�� ,QWHUHVWLQJO\�� FOLHQWV�LQWHUYLHZHG� DV� SDUW� RI� WKLV� SURMHFW� GLG� QRW� SODFH�JUHDW� LPSRUWDQFH�RQ�KRZ� WKH� LQVWLWXWLRQ�ZRXOG�XVH�WKHLU�LQIRUPDWLRQ��&OLHQWV�ZHUH�RIWHQ�ZLOOLQJ�WR�VLJQ�RQ� WKH� GRWWHG� OLQH� ZLWKRXW� UHDGLQJ� RU� FRQVHQWLQJ�WR� WKH� SULYDF\� FODXVHV�� )XUWKHU�� FOLHQWV� LQWHUYLHZHG�GHPRQVWUDWHG�OLWWOH�LQWHUHVW�RQ�KRZ�WKHLU�GDWD�ZRXOG�EH�XVHG�DQG�KDQGOHG��'UDZLQJ�IURP�WKHVH�REVHUYDWLRQV��),V�VKRXOG�H[SODLQ�WR�FOLHQWV�ZK\�LW�LV�LPSRUWDQW�WR�PDLQWDLQ�GDWD� FRQ¿GHQWLDOLW\� DQG�PLWLJDWH� WKH�YHU\�UHDO�ULVNV�RI�LGHQWLW\�WKHIW�RU�WDNLQJ�D�ORDQ�RQ�EHKDOI�RI�VRPHRQH�HOVH�ZLWK�EDG�FUHGLW�

The Main Idea: Privacy of client data incorporates two important components FIs should ensure:

Having a privacy policy and appropriate technology systems to safeguard client data.Informing clients about when and how their data is shared and gets their consent.

Box 8 - Ensuring the Security of Client Information at FUBODE

Many low-income households in Bolivia, including micro#nance clients, live in homes at times located on lots with precarious legal status and in vulnerable areas to natural disasters. According to a case study developed by FUBODE, over 60 percent of low-income dwellings lack property titles, 57 percent do not meet basic living conditions, and 75 percent are in need of extensions or renovations. FUBODE, a Cochabamba-based MFI is well aware of these trends and how they can a"ect clients. More than 50 percent of FUBODE´s clients decide to voluntarily turn in original sale and purchase agreements as part of their loan guarantee but also because they trust the organization will

keep the documents safe. “Our clients, particularly the ones in rural areas see the institution as the best place to store hard-to-replace documents,” says Alex Huarachi, FUBODE´s operations manager.

While FUBODE already had basic security measures in some of its branches at the time the Smart Assessment was conducted, the results revealed the need to implement these in all of its agencies. As of today, all 18 branches – seven of which are located in urban areas and 11 in rural zones – have a speci#c room assigned within each branch to store clients’ physical documents. Currently, every archive room in the 18 o$ces has placed smoke detectors, professional cameras, motion sensors, and #re resistant lateral cabinets to store clients’ physical documents. The room restricts access to only one sta" member per branch. Additionally, a robust security system was installed in all branches to secure client´s digital information by adding surveillance cameras and a panic button for each cashier as well as an alarm system monitored by a third party central-o$ce. FUBODE has invested an average of USD $3,500 per branch to implement this comprehensive system.

FUBODE´s changes complement the archive policy which establishes the basic principle that client data should be kept secure. The policy currently speci#es the levels of access to IT systems, storage procedures, archiving details and overall security measures that each sta" member should follow. However, the institution is well aware that implementing the security system in branches is only the #rst step. FUBODE´s objective is to update its policy and educate the rest of their sta" about the new system which should be in line with the national regulatory requirements. Rosa Cárdenas, FUBODE´s Social Performance o$cer recalls, “We see this as an ongoing and time-consuming process but investing in a high-quality security system is worth it. It is an additional customer service pillar because it allows the institution to ensure the integrity of our client´s documents.”

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Conclusions

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Annex 1 – Micro!nance Institutions That Participated in Assessments

FONDESURCO

Estamos Contigo

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SOBRE FONDO AZUL

SOBRE FONDO BLANCO

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Annex 2 – Partner Micro!nance Associations

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Annex 3 – Licensed Certi!ers

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Annex 4 – List of Tools Translated into Spanish and Portuguese

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Tools Translated into Portuguese

1 Complaints-Analysis Spreadsheet (Fundacion Delamujer)

2 Banco Solidario: Loan O$cer Training Manual

3 Certi#cation Standards Translation Page (English, French, Spanish)

4 Code of Conduct for Collections and Collections Practices for Group Loans at Swadhaar FinServe Pvt. Ltd.

5 Fonkoze: Guide for Credit Agents — Evaluating Clients for Fonkoze’s Post-Disaster Recovery Program

6 Loan Contract Summary Handout (Mibanco)

7 Microfund for Women: Client Business Evaluation Toolkit

8 Over-indebtedness of Microborrowers in Ghana

9 Putting Transparency into Practice: Communicating About Pricing

10 Smart Lending: Client Protection in the Individual Loan Process

11 Smart Microinsurance: An Overview for Micro#nance Institutions on Incorporating Client Protection Practices into Microinsurance

12 Smart Note: Collections with Dignity at FinComún

13 Smart Note: Customized IT at Caja Morelia Safeguards Client Data

14 Smart Note: Ethical Sta" Behavior at Alalay Sa Kaunlaran, Inc. (ASKI)

15 Smart Note: Facing Over-indebtedness at Partner Microcredit Foundation

16 Smart Note: Hiring Sta" with Disabilities at AccessBank, Azerbaijan

17 Smart Note: Responding to a Crisis at FUNDESER

18 Smart Note: Supporting Members to Adopt Client Protection at Azerbaijan Micro#nance Association (AMFA)

19 Smart Note: Treating Clients with Respect at Fundación Mundo Mujer Popayán

20 Smart Savings: Client Protection in the Savings Process

21 Transparency in Promotions and Sales: A Checklist for Financial Service Providers;

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Tools translated into Spanish

1 Avoidance of Over-indebtedness: Guidelines for Financial and Non-#nancial Evaluation

2 Code of Conduct for Collections and Collections Practices for Group Loans at Swadhaar FinServe Pvt. Ltd.

3 Fonkoze: Guide for Credit Agents — Evaluating Clients for Fonkoze’s Post-Disaster Recovery Program

4 Implementing the Client Protection Principles: A Technical Guide for Investors, 2nd Edition

5 Loan Agreement for Small Business Clients (JSC MFO Crystal)

6 Microfund for Women: Client Business Evaluation Toolkit

7 Over-indebtedness of Microborrowers in Ghana

8 Putting Transparency into Practice: Communicating About Pricing

9 Responsible Treatment of Clients: Practicing Non-discrimination

10 Smart Lending: Client Protection in the Individual Loan Process

11 Smart Microinsurance: An Overview for Micro#nance Institutions on Incorporating Client Protection Practices into Microinsurance

12 Smart Note: Ethical Sta" Behavior at Alalay Sa Kaunlaran, Inc. (ASKI)

13 Smart Note: Hiring Sta" with Disabilities at AccessBank, Azerbaijan

14 Smart Note: Implementing an Industry Code of Conduct at PMN

15 Transparency in Promotions and Sales: A Checklist for Financial Service Providers

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Annex 5 – Client Protection Principles Changes

Revised CPPs Original CPPs

1. Appropriate Product Design and Delivery

2. Prevention of Over-indebtedness 1. Avoidance of Over-indebtedness

combined. They are now separated to ensure independent focus on both over-indebtedness and product design.

3. Transparency 2. Transparent and Responsible Pricing

communications as a broad principle while retaining the focus on responsible pricing.

4. Responsible Pricing

5. Fair and Respectful Treatment of Clients

here

3. Appropriate Collections Practices

more inclusive item.

4. Ethical Sta" Behavior

6. Privacy of Client Data

complaints is a more suitable way to end the listing.

5. Mechanisms for Complaint Resolution

7. Mechanisms for Complaint Resolution 6. Privacy of Client Data

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Annex 6 – Smart Assessment Methodology

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Step 1:1 week after assessment

Step 2:2-3 weeks after

assessment

Step 3:4 weeks after assessment

Step 4:5-6 weeks after

assessment

notes from the field work and interviews and share with other assessors

should be specified in advance of the assessment. It may be a trainee assessor or a accredited assessor.

report among assessors for revision and comments. If other assessors have comments to add, do so in track changes.

revisions and ensure that the report format is correct.

know when to expect the final draft of the report.

an accredited lead assessor, this step may not be necessary.

scores and graphs.

Campaign for revision.

Campaign’s revisions, send the draft to the financial institution and allow 1-2 weeks for comments.

sends any revisions, analyze and incorporate any relevant revisions and submit the final version of the report to the financial institution and to the Smart Campaign.

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39

About the Multilateral Investment Fund

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About the Smart Campaign

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About the Center for Financial Inclusion

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Page 42: W } }vW ]v> vu ] v Z ] v › 2013 › 1… · W } }vW ]v> vu ] v Z ] v THE SMAR T CAM PA IG N is a global e!ort to unite micro"nance leaders around a common goal: to keep clients

Center for Financial Inclusion Publication No. 22

Study of Client WƌŽƚĞĐƟŽŶ�WƌĂĐƟĐĞƐ�ŝŶ�>ĂƟŶ��ŵĞƌŝĐĂ�ĂŶĚ�ƚŚĞ��ĂƌŝďďĞĂŶ

THE SMART CAMPAIGN is a global e!ort to unite micro"nance leaders around a common goal: to keep clients as the driving force of the industry.The Smart Campaign consists of micro"nance leaders from around the world who believe that protecting clients is not only the right thing to do but the smart thing to do. By providing micro"nance institutions with the tools and resources they need to deliver transparent, respectful, and prudent "nancial services to all clients, the Smart Campaign is helping the industry maintain a dual focus on improving clients’ lives while attaining "nancial sustainability. The Campaign is headquartered at the Center for Financial Inclusion at Accion.

www.smartcampaign.org

Multilateral Investment FundMember of the IDB GroupFounding Partner