Responsible Finance Forum

Implementing Client Protection in Indian Microfinance

Dr. Hema Bansal, Tanwi Kumari, Aditya Mohan and Amit Gupta
01 November 2013
Source:  The Smart Campaign

Client protection has been an important issue in the global and Indian microfinance sector for several years. Between 2007 and 2010, the transformation of several big institutions from non-profit to for-profit status signalled a shift towards scale and profitability. In 2010, the Andhra Pradesh crisis brought attention to poor client treatment in an over-heating market and put client protection squarely on the sectoral map. The industry (through the work of the microfinance associations MFIN and Sa-Dhan) responded by introducing selfregulation in the form of Codes of Conducts, which were subsequently harmonized. Regulators, in parallel, introduced more specific guidelines on client protection.

Beyond these efforts, the industry needed clear standards to measure implementation of client protection. The Smart Campaign’s work provided concrete benchmark and tools to measure progress and improve practices. The Smart Campaign’s CPPs and standards are universally recognized. They set a common framework around how client protection standards are understood, applied, and practiced across the world. The Smart Campaign’s work in India aims to improve the understanding of client protection standards and raise the bar on client protection practices. Through a wide range of capacity-building activities including trainings, assessments, and upgrade projects, the Smart Campaign has supported measurable improvement of client protection practices.

This report represents an important step in understanding the state of client protection practices today in India, three years after the Andhra Pradesh crisis and two years after the Smart Campaign began its deep engagement with the sector. Results in this report are drawn from the activities conducted under the project that was implemented from June 2011 to November 2013. The report aspires to deepen the public’s understanding of how microfinance institutions can put the CPPs into practice in India and where the industry is in terms of strengths and weaknesses. Simultaneously, the report provides an overview of the level of effort made by MFIs to improve practices through participation in training and subsequent self-assessments. The report also showcases some of the extraordinary efforts and commitments made by microfinance institutions to improve their practices through upgrading projects.3 Finally, the report provides an overview of the new initiatives and Smart Campaign’s Client Protection Certification Program.

The project work streams represent the natural progression of institutional improvement from endorsement, to building understanding of client protection issues, to assessing and improving performance to externally validating performance.