2 1.Client protection principles 2.The client perspective on transparency 3.Principle #3 in practice 4.Participant feedback 5.Tools for improving practice 6.Conclusion and call to action Agenda

3 1. Appropriate product design and delivery 2. Prevention of over-indebtedness 3. Transparency 4. Responsible pricing 5. Fair and respectful treatment of clients 6. Privacy of client data 7. Mechanisms for complaint resolution Client Protection Principles

4 1.Client protection principles 2.The client perspective on transparency 3.Principle #3 in practice 4.Participant feedback 5.Tools for improving practice 6.Conclusion and call to action Agenda

5 Lack of transparency affects the client and the MFI Lack of transparencyAffects the… Client… MFI… Client does not understand the maintenance fees for her savings account. Client is not aware that she receives only three free ATM withdrawals before incurring fees. Client believes that if she does not file an insurance claim, the premium will be returned to her …sees that her savings have decreased and thinks the bank has robbed her. …is demoralized and does not trust ATM transactions. …concludes that insurance is a scam when she does not have the premium returned. …loses business when client tells others about her experience. …loses benefit of investment in new technologies. …finds that products intended to add value and attract clients actually have the opposite effect.

6 I can easily understand the interest rate and compare it to other institutions. I know my installment amounts and when payments are due. I’ve never had unexpected: late fees, early payment fees, or account activity fees, changes to my interest rate or loan terms. The institution has explained my responsibilities for delinquent group members. I can easily find out the amount of my outstanding debt and the balance in my savings account. I am always given the opportunity to ask questions during my interactions with the institution. Can your MFI clients agree with the following? The client perspective on transparency

7 1.Client protection principles 2.The client perspective on transparency 3.Principle #3 in practice 4.Participant feedback 5.Tools for improving practice 6.Conclusion and call to action Agenda

8 Transparency The Principle in Practice: Providers will communicate clear, sufficient, and timely information in a manner and language that client can understand, so that clients can make informed decisions. Consider this: Transparency is a pre-condition to many of the other principles—foremost, responsible pricing.

9 Full Pricing Disclosure Total Price of Products Participates in MFT Disclose to all prices, installments, terms and conditions of all financial products, including all charges and fees, associated prices, penalties, linked products, 3rd party fees, and whether those can change over time. Present the total amount that the client pays for the product, regardless of local regulations (including in the absence of industry-wide requirements). Participate in the MFTransparency project (or similar industry project, if applicable). The Principle in Practice

10 Communicate with Clients Simple Language Contracts Avoid Confusion Communicate in a way that clients can understand the terms of the contract, their rights and obligations. Use techniques that address literacy limitations. Use contracts that contain simple language and no fine print. Give a clear facts summary page if the legally necessary contract is deemed too technical for the clients. Do not use pricing mechanisms that create confusion on the total costs. The Principle in Practice

11 Variety of Disclosure Mechanisms Public Pricing Information Prior to Signature Use at least two different communication channels for disclosing clear and accurate information about the product: written and verbal (to address literacy limitations). Disclose pricing information in public domain. Communicate all information related to the product (terms, conditions, etc.) to clients before signing. The Principle in Practice

12 Adequate Time for Client Review Responsive Staff Provide Account Info Provide Balances Give clients adequate time to review the terms and conditions of the product, ask questions and receive additional information prior to signing contracts. Ensure staff is available to answer questions. Regularly give clients clear and accurate information regarding their accounts. Give clients updated balances on request. The Principle in Practice

13 Provide Hard Copies Provide Contract/Pass book Give clients a hard copy of all documents signed by clients with all terms and conditions. Ensure there are no blank terms in all documents signed by clients. Give each group loan a contract, and/or an individual pass/book or payment book with contact terms and signature (even if the contract is with the group). The Principle in Practice

14 Good Practice: Increase client understanding Good practice: Make communication meaningful to the client. Good practice: Make communication meaningful to the client. Don’t use fine print. Can you read the bottom of this slide? Use plain language. Which statement is more meaningful? A. Non-repayment will result in action on the part of the institution at the immediate outset of the delinquency. B. The institution will begin the loan collection procedures on the first day the client is late. Fit the communication method to the client. Are your documents written in the local language? How would a blind person access your important contractual information? Don’t use fine print. Can you read the bottom of this slide? Use plain language. Which statement is more meaningful? A. Non-repayment will result in action on the part of the institution at the immediate outset of the delinquency. B. The institution will begin the loan collection procedures on the first day the client is late. Fit the communication method to the client. Are your documents written in the local language? How would a blind person access your important contractual information? Fine print is often overlooked by clients. Minimize the use of fine print.

15 Good Practice: Confirm client understanding Good practice: Confirm client understanding. Use: Call backs Check lists “Key facts” or FAQ document Glossaries for key terms Analysis of common complaints/questions to improve communication Use: Call backs Check lists “Key facts” or FAQ document Glossaries for key terms Analysis of common complaints/questions to improve communication

16 1.Client protection principles 2.The client perspective on transparency 3.Principle #3 in practice 4.Participant feedback 5.Tools for improving practice 6.Conclusion and call to action Agenda

17 Feedback from participants What effect does the competitiveness of the local microfinance market have on transparent pricing at institutions? Have you seen examples of lack of transparency?

18 1.Client protection principles 2.The client perspective on transparency 3.Principle #3 in practice 4.Participant feedback 5.Tools for improving practice 6.Conclusion and call to action Agenda

19 Technical Tools Getting Started Questionnaire: Self Assessment for MFIsGetting Started Questionnaire: Self Assessment for MFIs and Guide on Smart Assessments Guide on Smart Assessments Smart Operations Smart Lending- Individual and GroupIndividual Group Smart SavingsSmart Savings and Smart MicroinsuranceSmart Microinsurance Calculating Transparent Prices (MFTransparency) Putting Transparency into Practice: Communicating About Pricing Transparency in Promotions and Sales: A Checklist for Financial Service Providers Samples and Case Studies Essential Documents for New ClientsEssential Documents for New Clients see Loan Contract Guidelines, Sample Loan Summary, and Repayment Schedule Loan Agreement for Small Business Clients from Crystal Loan Contract Summary Handout from MiBanco Transparent & Responsible Pricing at Mi-Bospo Tools available from the Smart Campaign

20 1.Client protection principles 2.Irresponsible pricing 3.Principle #4 in practice 4.Participant feedback 5.Tools for improving practice 6.Conclusion and call to action Agenda

21 Pricing, terms, and conditions must be transparent (fully and clearly disclosed). Transparency allows clients to use products effectively and to make their own informed decisions. Transparency is a pre-condition to the other client protection principles- i.e. they all rely on transparency. The Smart Campaign offers tools to help providers improve their transparency. Summary Call to Action: What next steps can your institution take to ensure that clients understand your products, as well as their own rights and responsibilities?

22 Thank you! Endorse the Smart Campaign. Visit Sign up to receive news and information. Download the Getting Started Questionnaire and conduct a client protection self-assessment.Getting Started Questionnaire What’s next? us!