“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:

1. The tool identifies distinct “Service Points” (SP’s)—points of interaction between the client and the institution. For each Service Point, the tool:
2. 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:

1. Avoid Client Over-indebtedness
2. Transparent and responsible pricing
3. Appropriate collections practices
4. Ethical staff behavior
5. Mechanisms for redress of grievances
6. Privacy of client data