The Beyond Codes Consumer Protection Assessments – Findings from Halfway

1. The Beyond Codes Consumer Protection Assessments – Findings from Halfway Cara Forster Program Manager for the Double Bottom Line May 8, 2009

2. Beyond Codes:An action research project to operationalize the principles of consumer protection Kenya Bosnia & Herzegovina México Islas Filipinas • Includes Commercial MFIs, NGOs and Cooperatives • Countries represent four regions • Steps to Follow: • Guided Self-Assessment on that state of consumer protection within an MFI • Confidential objective report • Pilot Projects to improve operations • Monitoring and lessons learned • Document Model practices • Develop criteria for a certification process • Information dissemination

3. Consumer Protection Principles 1. Avoid Over-indebtedness 2. Transparent Pricing 3. Appropriate Collections Practices 4. Ethical Staff Behavior 5. Mechanisms for Complaints Handling and Resolution 6. Privacy of Client Data Beyond Codes Only: Fair Pricing

4. Why conduct a consumer protection assessment? Demonstrate commitment to consumer protection. Receive independent report with assessment results. Identify areas of vulnerability and practices to strengthen them. Prepare for regulatory compliance and/or certification. Gain a reputational advantage. What is involved for the MFI? Host 2 outside consultants for a week. Provide comments and feedback on the report. Select a Pilot Project to improve one or more practices. Participate in monitoring and information exchange. What is a Beyond Codes Assessment and why do one?

5. Where? Bosnian Assessments – November 2008

6. Where? Mexico Assessments – January 2009

7. How do we conduct the assessment? • People – Interviews with many HQ and some field staff. • Paper – Review of institutional and industry documents. • Process - Analysis of institutional performance on implementation of the six principles based on a series of 80 indicators.

8. Model Practice: An excellent practice that is universal and serves as example to others. Good Practices: The organization addresses the principle well both in policy and practice. Adequate Practice: Minimum/legally required standards are achieved. Vulnerable: Practices are weak or absent. Evaluation of the Indicators:

9. Good and Model Practices 1. Avoiding Over-indebtedness • A system in which management is aware of the issue, credit bureaus are consulted, incentives emphasize portfolio quality at least as much as growth, credit capacity is assessed conservatively, products are flexible and appropriate, and oversight is carried out. • Transparent Pricing • Prices, terms, fees, and conditions are fully disclosed; management creates a culture of transparency, efforts are made to ensure client understanding of product terms, marketing is not misleading, contracts include payment schedule and complaints information. 2b. Fair Pricing • The institution is financially sustainable and does not receive subsidies, prices are transparent and competitive, passes the benefits of efficient operations on to customers, mutual long-term beneficial relationship.

10. Good and Model Practices 3. Appropriate Collections Practices • Organizational Code of Ethics for staff and agents, consequences explained prior to signing, no abusive or coercive practices, clients treated with dignity even in default, restructuring is done carefully, court proceedings respected, collections practices monitored by internal audit. 4. Ethical Staff behavior • Organizational culture of ethics, employees become certified in the Code, ethics included in induction and training, staff represent the institution with pride, staff rules offer case examples, ethics included in evaluations, process for internal complaints and sanctions.

11. Good and Model Practices 5. Mechanisms for Complaints Handling and Resolution • A mechanism exists, clients are informed of their right to complain and how, trained staff receive and channel complaints, resolution is prompt, oversight by Audit and Honor Committee, information used to improve products and services. • 6.Privacy of Client Data • Privacy policy in place, consent requested in writing for use of information, staff trained on confidentiality and data security, minimal information shared with third parties, clients trained on how to safeguard their information.

12. Questions?