Friday, July 27, 2012

Kiva Scholar: The Smart Campaign and putting client protection first

As the launch of our Social Performance initiative demonstrates, Kiva strives to partner with organizations that are not only "doing good" but also "doing no harm." To that end, all Kiva Field Partners must agree to the Smart Campaign's Client Protection Principles (CPP) as a precondition to partnership.

The CPP are the result of an industry-wide effort to define the minimum ethical standards upon which microfinance institutions (MFIs) should base their client service. The seven principles are: (Explanations of each can be found here.) 

Appropriate product design and delivery
Prevention of over-indebtedness
Responsible pricing
Fair and respectful treatment of clients
Privacy of client data
Mechanisms for complaint resolution 

Currently, the CPP is merely a pledge to practice responsible microfinance -- but one that most institutions take very seriously. The exciting news is that by the end of 2013, the Smart Campaign will have gone one step further by rolling out a standardized third-party verification process. 

An official Client Protection Certification will demonstrate that an MFI is, in fact, meeting adequate standards of client care. The existence of a publicly available certification of this kind will strengthen information measurement and thereby enable investors, regulators and clients to create positive incentives for MFIs.

It's no small feat to earn a Client Protection Certification. It requires significant commitment and attention to governance, policies, procedures, staff training, measurement of results, and of course client satisfaction to meet even the minimum standards. The Smart Campaign will license expert certifiers, who will conduct an on-site assessment of all of these operational areas and conduct interviews with clients. They will then inform the MFIs of areas that need attention in a detailed report.

If this assessment does not result in a certification, an MFI will have six to 12 months to put the necessary corrective measures in place. If the certification is ultimately earned, it will last two years, after which point an updated assessment will need to take place. The assessment can be conducted in conjunction with financial audits, social audits and/or social ratings to which an MFI has already committed, or it can be done on a standalone basis. 

The Client Protection Certification is widely seen as a positive development for the field. Says Anne Hastings, CEO of the Haitian MFI Fonkoze and a member of the Smart Campaign steering committee, "After gaining broad-based industry buy-in, the Smart Campaign is moving quickly to deepen implementation. Certification will add rigor and impetus. As programs such as Fair Trade have demonstrated, third-party verification can generate strong market incentives in favor of socially beneficial practices."

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For more information on the CPP and ethics in microfinance, check out:

Center for Financial Inclusion Blog