
“Smart Lending: Client Protection in the Grameen-Style Group Lending Process” is a tool for MFIs that want to incorporate good client protection practices into their group lending process. The tool is applicable to Grameen-style “group of groups” credit methodology and was developed specifically for Indian MFIs.
The group lending process is segmented into five key phases: (1) Client Recruitment & Application, (2) Compulsory Group Training & Group Recognition Test, (3) Group Loan Approval, (4) Disbursement & Customer Service, and (5) Collections & Recovery.
Like other Smart Tools, this tool is structured as follows:
- The tool identifies distinct “Service Points” (SP’s)—points of interaction between the client and the institution. For each Service Point, the tool:
- demonstrates how an MFI can model good practice in client protection in:
- their policies, and
- their operations; and
- identifies which Client Protection Principles are affected; and
- the document provides recommendations for the use of client protection tools that could help MFIs improve client protection practices at each service point.
The Client Protection Principles:
- Avoid Client Over-indebtedness
- Transparent and responsible pricing
- Appropriate collections practices
- Ethical staff behavior
- Mechanisms for redress of grievances
- Privacy of client data
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