Does Client Protection Matter to Clients?

Why does MicroSave ask itself, and CGAP publishes the conclusion, that Client Protection Matters to Clients, i.e. Poor sofar unbanked people who are often unregistered, surviving in the informal sector, who are thus still unprotected?

Foreign donors, experts and charities claim to help the weakest in this world. And how do they do that in Microfinance?

Since the huge rise in their popularity, the world’s MF Champions talk about “Don’t Rush to Regulate” and since a few years they unequivocally promote “Mobile, Electronic Banking”. Their research (as on Branchless Banking, Agent Banking) also reveals large cases of fraud and theft, yes indeed, of money of the poor. Please also read http://www.newswise.com/articles/cell-phone-financial-identity-theft. WHAT reason for the strategic choice by these donors, researchers? Is their interest of growing their MF Business, growing their employment more important than promoting enforceable rights of the poor?

Maybe that for many Microfinance is like Corporate Social Responsibility is for many commercial companies, “for people who aren’t principled enough to behave decently!” (Peter Horvath) If not then I hope that the MF champions will start to think about the coherence and consistency between their claims and actions.

In the context of more focused attention on ‘Customer Protection’ (CP)strategies like Smart campaign , ,ombudsman , grievance redresses cell, etc.,) at policy level both at global and national level as well in MF arena, the first one which matters is recognition of ‘Client ‘ itself in Micro finance realm. To wit, ‘ who is MF client ? or who is client in micro finance ? then comes the question ‘Does client protection matter to the client ? Further, in view of innovative developments in the ‘ means of out reach’ beyond MFI to the so called ‘clients’ and diversification of products and services beyond micro credit in MF fold for them, there appears to be some ambiguity in the status of client under the brand name Micro finance which entitles them for such client protection benefits and identification of the stake holder as well for providing such CP services to them.
With this premise, a few questions matter from research perspectives on client protection.
That is to address – Does the status of following clients indicate that they are full fledged client of Microfinance and does client protection matter to them deservingly?
1. The person having a micro saving in a post office /bank ?
2. The person having micro insurance coverage from micro insurance company?
3. The person having been accommodated with micro (old age )pension/micro insurance under social welfare scheme by Government
4. Under the group financing concept (SHG/JLG/women group –Gramin type) does the group represent collectively as client or the individual members of the particular group enjoy the status of a client to the concerned principal financial provider ? Further, in the latter case, does the member become a client to the particular group where she joined or to the lending institution ( bank/MFI/Govt.) which funded to the group for relending to its members? In such case does the provision of CP matter to whom – SHG or MFI ?
5. In the case of 4, a) does mere membership in the group having only group savings and credit , entitle the person as ‘ a financially included MF client? b) In the case of drop out member or member with defunct account , does the member enjoy the client status continuously deserving CP? or does client protection matter to these clients deservingly?
6. In the case of tech based branchless ‘means’ of financial access as well agency/correspondent model with too many actors in the supply chain, who is the stake holder for CP to the ultimate clients and how accountability is fixed in the absence of direct relationship between the financing institution and the client?
7. Does client protection matter only to MFI and their micro credit borrowers only? Even in such case when micro credit is integrated with micro insurance , what about CP for these clients related to other mf services ?
8. Finally does ‘micro credit’ client alone enjoy the typical MF client status for getting CP benefits ?
Prudent research on client protection need to encompass for removing ambiguity on the status of client in MF arena. This is what matters on client for the development practitioners since diversified MF services which are essentially needed for poverty cure, are provided demanding diversified client protection services besides the one related to micro credit. .This is what really matters at this juncture in MF arena.
Thank you for sharing my views.
Dr Rengarajan

We are delighted to see this conversation around the clients’ perspective on consumer protection gaining ground, thanks to the CGAP blog. These results confirm the findings of a study undertaken in Bolivia by Microfinance Opportunities (MFO) and Freedom from Hunger three years ago (http://bit.ly/mfo-cpstudy). MFO used focus group discussions to generate the information and, as with the MicroSave study, fair treatment and respect followed by transparency of information topped the list of consumer protection principles for clients.

The uneven playing field and information asymmetries that often define the provider-client relationship need to be closely addressed in any consumer protection strategy if it is to work for the consumer. Recognition of the need to correct these imbalances led Microfinance Opportunities to develop financial education resource manual. The manual offers a client’s perspective with respect to the topic of consumer protection in terms of balancing the rights and responsibilities of providers and consumers in transacting financial services. (The manual can be viewed and downloaded for free at: http://bit.ly/mfo-cpmanual). A video on the same theme is also available.

For more information, please visit ahttp://www.microfinanceopportunities.org