THE PARIS APPEAL FOR RESPONSIBLE MICROFINANCE CAMPAIGN

1. The Paris Appeal for responsible microfinance THE PARIS APPEAL FOR RESPONSIBLE MICROFINANCE CAMPAIGN EUROPEAN MICROFINANCE WEEK 2011 NOVEMBER 3rd, 2011, LUXEMBOURG

2. The Paris Appeal for responsible microfinance Moderator: • Axel DE VILLE • Executive Director, ADA Speakers: • Jean-Luc PERRON • General Delegate, Grameen Credit Agricole Foundation • Board Member, Convergences 2015 • Michaël KNAUTE • CEO, OXUS Group & Octopus Microfinance Software • Executive Director, Convergences 2015

3. The Paris Appeal for responsible microfinance Mission drifts overview: Excessive commercialization of microfinance along with other negative trends have led to a crisis. • In some MFIs, profitability obstructs thesocial mission • MFIs’ clientele is rapidly growing, at the risk of weakening the relation of proximity and trust, and leading to over-indebtedness of the client • High expectations on MFIs’ ROI and market saturation are fuelling over-indebtedness • MFIs have increased their credit portfolio at a very fast pace, with the risk of weakening the progressive implementation of financing cycles, reimbursement discipline, and the attention paid to the nature of the activities • IPOs of large MFIs have triggered animated debates among the sector • To refinance their booming credit portfolio, some institutions have incurred excessive debts

4. The Paris Appeal for responsible microfinance As a result of those drifts and excesses, MFIs are exposed to: • Credit risk • Reputationrisk • Governancerisk • Politicalinterferencerisk * Source: Microfinance Banana Skins2011

5. The Paris Appeal for responsible microfinance • Consequences: • Microfinance reports in the media have put the stress on the crisis and raised concerns that seriously undermine both the reputation of microfinance and its very essence • The excessive commercialization of microfinance have thus led to several self-regulation initiatives

6. The Paris Appeal for responsible microfinance • Several initiatives in place: • Social Performance Task Force: • universal standards for social performance • MFTransparency:a global initiative for a fair and transparent pricing • Seal of Excellence for Poverty Outreach and Transformation in Microfinance: a label to certify MFIs using microfinance as a tool against poverty • Pocantico Declaration:the first step toward a common ground and set of principles to bring microfinance back to its social mission • CGAP Key Principles of Microfinance: keyprinciples for a sustainable microfinance • Smart Campaign:a global effort to ensure clients remain the industry’s driver • Principles for Investors in Inclusive Finance (PIIF): a framework for responsible investment in inclusive finance • AFI’sG20 Principles for Innovative Financial Inclusion:principles to promote financial inclusion • Prudential regulation guidelines • - Basel Core Principles for Effective Banking Supervision of microfinance activities • - Microfinance Regulation Bill in India

7. The Paris Appeal for responsible microfinance The Paris Appeal has been launched: • To bring microfinance back to its original mission: a social mission dedicated to the poor • To create and rally a movement involving all MF stakeholders, includingregulators, supervisors and international organizations • To renew the interest of international organizations, media and otherobservers in microfinance as a tool to fight againstpoverty and financial exclusion • It isneither a label nor a certification procedure and does not aim to certify a smallminority of highlycommittedplayers • It isneither a criticismnor a rejection of all the self-regulationpoliciesyetimplemented in the sector

8. The Paris Appeal for responsible microfinance Convergences 2015 Forum – 2011 Edition • 200 experts on microfinance, social economy and social business • A highattendance: over 3000 participants • 3 daysmixingnetworkingandthinking • 40 round tables with a focus on 3 major issues: impact, investment, efficiency • A market place and a libraryto stimulate exchanges • The launch of the Convergences 2015 Awards • 3 Great Debateswithprestigious speakers, hostedunder the patronage of Le Monde

9. The Paris Appeal for responsible microfinance The Launch of the Paris Appeal for responsiblemicrofinance Officially presented at the 4th annual Convergences 2015 Forum in May 2011, the Paris Appeal for responsible microfinance is part of a campaign of advocacy and action among all concerned actors: decision makers, microfinance professionals and people art large.

10. The Paris Appeal for responsible microfinance The signatories, 1. Consider that microfinance institutions must pursue a long-term double objective of financial viability and social impact, by offering products and services adapted to the poor, by leading a policy of moderateinterest rates, and by complying to the highest standards of information and client protection. The compliance of policies and practices must be certified by recognized social performance indicators.

11. The Paris Appeal for responsible microfinance The signatories, 2. Remind of the importance of solid governance of adapted prudential rules and efficient reporting and control systems. Such rules and practices must be given an efficient and objective supervision and notation system.

12. The Paris Appeal for responsible microfinance The signatories, 3. Call on to microfinance institutions, their national and regional associations, and regulation authorities, to systematically apply the principles and rules established by the industry to adjust and prevent the sector’s mission drifts, and to prevent and complete them with regulations adapted to the context in each country.

13. The Paris Appeal for responsible microfinance The signatories, 4. Encourage investors specialized in microfinance to subscribe to a Code of conduct serving the long term interests of the MFIs they support, allowing them to strengthen financial viability and to reach their social objectives.

14. The Paris Appeal for responsible microfinance The signatories, 5. Encourage researchers and universities to scale up cooperation with MFIs to conduct impact studies and disseminate best practices.

15. The Paris Appeal for responsible microfinance The signatories, 6. Call on to donorsand private foundations to uphold their microfinance commitments, to encourage innovation and diversification, to support and train clients and to focus programs on geographical regions, particularly Africa, sectors such as agriculture, and products and services such as micro-insurance and credit for the poorest, where the needs are manifest.

16. The Paris Appeal for responsible microfinance • To breathe life into this fundamental basis of rules and regulations, in the respect of the diversity of microfinance, the signatories are launching an appeal for the organization of a ‘General Assembly for Responsible Microfinance’ under the aegis of an Organization Committee mandated by the G-20. • A few steps towards the G-20: • July 2011, the G20 Microfinance in Paris (France) • November 2011, the European Microfinance Week in Luxembourg • November 2011, the Global Microcredit Summit in Valladolid (Spain) • November 2011, the G20 Cannes (France)

17. The Paris Appeal for responsible microfinance They have already signed the Paris Appeal… More than 400 beneficiaries, regulators, investors and operators have already responded positively and an increasing number of individuals and organizations are expressing their support, Including public figures Gérard Andreck, the Grand Duchess of Luxembourg, Anne Hidalgo, Natalie Portman, Jean-Michel Severino, Jean-Michel Servet, Chuck Waterfield… • And organizations • ACTED • All Mécénat • Crédit Coopératif • Crédit municipal de Paris • e-MFP • Entrepreneurs du Monde • ESG Microfinance • European Microfinance Platform • Grameen Credit Agricole Foundation • I&P pour le Développement • MACIF • Oikocredit • OXUS Microfinance Network • REM • SIDI

18. The Paris Appeal for responsible microfinance We would like to invite you to join us in supporting this Appeal. We believe that your signature will give a significant echo to this engagement and this initiative within the sector, towards policy makers and audiences at large: Sign the Appeal: eMFPPlaza : stand 10 Tell yourcolleagues: www.appeldeparis.org

19. The Paris Appeal for responsible microfinance Thankyou for your attention and your support !