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Guest Post: Campaign for Client Protection in Microfinance Announced at the Clinton Global Initiativ

SCL 2Guest blogger Sofia Leon is currently the Senior Program Coordinator at the Center for Financial Inclusion at ACCION International. Her passion is sustainable social enterprise, specifically seeking to scale BOP energy delivery without subsidies.

By Sofia LeonFollowing an all-star Opening Plenary, I walked upstairs at the 2008 Clinton Global Initiative to see Chris Crane of Opportunity International, Elizabeth Littlefield of CGAP, and Maria Otero of ACCION International. I work in microfinance and was clearly excited to hear this panel, but I walked into a packed room whose attention was set on the microfinance discussion at hand.

Track director Jane Wales introduced the panel, and after individual project updates from each of the three panelists, Jane asked Maria Otero to announce a new CGI Commitment spreading across the microfinance industry: The Campaign for Client Protection in Microfinance.

Maria Otero set the stage, describing how the growing interest from commercial lenders in serving the markets at the BoP make it essential for MFIs, MFI networks, and in general, institutions serving low income markets to proactively embrace client protection rather than having it forced upon them by governments, donors, or as a compliance matter by investors.

She also underscored how crucial it is to move beyond a simple affirmation of high-level principles into the “nitty gritty” of practice. The lack of such industry behaviors can lead to undesirable outcomes, as we are now witnessing. (I don’t have to remind you that the sub-prime lending crisis in the United States provides an example of an industry collapse due to risky behavior lacking proper mitigation or regulation.)

The relevance and the focus on the collaborative nature of the Campaign is what makes me passionate Maria’s announcement at this CGI Poverty Alleviation track session. The Campaign for Client Protection in Microfinance is a Commitment made by the recently launched Center for Financial Inclusion at ACCION International in partnership with ACCION International, Opportunity International, Pro Mujer, Women’s World Banking, Freedom From Hunger, Compartamos Banco, Al Amana, Women’s World Banking Colombia, CIDR/PAMIGA, BANEX, Deutsche Bank, and CGAP.

The Campaign is just beginning, but looks to involve the largest 500 MFIs reporting to the Mix Market on initiatives that aim to tackle over-indebtedness, transparent and fair pricing, ethical collections practices, ethical standards for staff, client recourse, and privacy of client data.

There isn’t a quick fix here, but these committed players recognize the need to start now along with the need to work together. (Even the New York Times came out with an article recognizing this effort, articulating the relevance this Campaign has for the industry.) Stay tuned for more to come as the coalition builds. A healthy microfinance industry affects all of us working on engaging the world’s four billion low-income consumers.

As a disclaimer, I do work for the Center for Financial Inclusion though I was volunteering at the Clinton Global Initiative. We welcome your insights and comments on how to build a stronger campaign so?I encourage you?to comment this post or contact me at