Client Protection Principles

Client Protection Principles protect Micro-Clients (Do no harm)

MBK strives to implement all of the following client protection principles:

1. Transparency

• • • Total costs of borrowing so that clients can compare between alternatives
    • Do not hide the cost of compulsory savings (no access, low interest rate)
    • Do no hide costs of high penalties and fees
    • Provide accurate and timely account balance information
    • No penalty in case of working capital repaid earlier

2. Prevent Over-indebtedness and Multiple Lending

• • • Evaluate capacity of Client business to use loan
    • Monitor borrower over-indebtedness
    • Do not provide financial incentives to Account Officers and other staff for recruitment of new clients
    • Clients can receive a maximum of two loans or working capital from formal MFIs, including government sources

3. Ethical Staff Behaviour

• • • Written code of ethics
    • Clear acceptable and non-acceptable behaviour & reprimands
    • Detection system for client mistreatment
    • Performance evaluation reviews ethical behaviour

4. Appropriate Bad Debt Collection Practices

• • • Acceptable collateral policies
    • Rescheduling policies and procedures
    • Use and training of debt collectors if used. In fact, MBK does not employ debt collectors.

5. Complaints Handling and Resolution

• • • Hotline in head office, other active handling process
    • Resolution monitoring system
    • Feedback
    • Staff training

6. Privacy of Client Data

• • • Written agreement to keep client data confidential
    • Client understanding and written consent from client required for other data use

Cooperation is Possible between MFIs

1.  Role for Industry Association:

• • • Important to enrol Bank and Non-Bank Microfinance as association members
    • Assist MFIs to implement client protection principles
    • Sign up MFIs in MIXMarket information exchange (transparency)
    • Capacity building
    • Produce, disseminate and monitor implementation of Code of Conduct (pricing, staff poaching, client poaching, collection practices, staff behaviour)

2. MFIs can assist one another in Client Protection Principles:

• • • Transparency; avoid over-indebtedness and multiple lending
    • Responsible pricing
    • Ethical staff behaviour; appropriate collection practices,
    • Complaints handling and resolution; privacy of client data

3. No Staff Poaching– Train your Own!

• • • How else can you open many branches? But if you do it, do you increase or decrease financial inclusion?
    • Are you fair to other MFIs who have trained their own staff from scratch?
    • How about 2-year interval before recruiting staff from other MFIs? Or obtain written permission first?
    • Don’t you want to Widen Financial Access?

4. Avoid Over-Indebtedness
5. Evaluate capacity of Client business to use loan
6. Monitor borrower over-indebtedness
7. Do not provide financial incentives to Account Officers and other staff for recruitment of new clients
8. Clients can receive a maximum of two loans or working capital from formal MFIs, including government sources

9. Do Not Target Same Clients – Find New Ones!

• • • Existing MFI Clients already have access to finance
    • Do not take advantage of already trained, disciplined & financially literate Clients from other MFIs
    • Do not take advantage of Clients with Credit History
    • Don’t you want to Expand Financial Access?