Responsible Finance Forum

Implementing the Client Protection Principles

Sarah Forster, Estelle Lahaye, Heather Clark, Antonique Koning and Kate McKee
01 November 2010
Source:  Consultative Group to Assist the Poor (CGAP)

As the microfinance sector has come under more intense scrutiny than ever before, responsible finance initiatives have picked up steam. Hundreds of organizations from across the industry (providers, associations, funders, etc.) have come together in the SmartCampaign,endorsing six core Client Protection Principles for microfinance and committing to implement specific improvements in products, practices, and policies. As of November 2010, more than 100 investment organizations have endorsed the Principles and are taking concrete actions to encourage providers to adopt appropriate client protection policies and practices.

In September 2009 CGAP published the first edition of this Technical Guide for investors to support the integration of the six principles into investors’ policies and processes.This second edition reflects the developments in implementation and practices over the past year.

Experience in putting client protection into practice is accelerating quickly. Many investors are now moving from endorsing the Principles to mainstreaming concrete action. This Guide provides an updated set of action steps for investors, including a new due diligence tool that provides practical guidance and tips on how to assess implementation of client protection practices by retail providers. This Guide also reflects on the main operational questions investors are facing, such as how to assess over-indebtedness and transparent and responsible pricing, and emerging responses.

We are still at the nascent stages of developing standards for client protection assessment. However, to this end we are benefiting from investors sharing knowledge and experience. We hope this Guide will facilitate continued knowledge sharing and the joint development of good practices and standards.

The target audience for this Guide is investment organizations ranging from development finance institutions to specialist microfinance funds and fund managers. However,much of the content is adaptable for use by funders more broadly, including those that provide grants.