1. Principle #3 – Transparency This presentation is made possible by the Smart Campaign
Principle #3- Transparency
[Introductions of facilitator(s) and participants]

2. Agenda Client protection principles
The client perspective on transparency
Principle #3 in practice
Participant feedback
Tools for improving practice
Conclusion and call to action
This is the agenda for today’s discussion. We will begin by reviewing the seven principles of client protection. 2

3. Client Protection Principles
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
[Each principle is listed, along with how the Smart Campaign defines the principle].
These are the Seven Principles of Client Protection
1. Appropriate product design and delivery
Providers will take adequate care to design products and delivery channels in such a way that they do not cause clients harm. Products and delivery channels will be designed with client characteristics taken into account.
2. Prevention of over-indebtedness
Providers will take adequate care in all phases of their credit process to determine that clients have the capacity to repay without becoming over-indebted. In addition, providers will implement and monitor internal systems that support prevention of over-indebtedness and will foster efforts to improve market level credit risk management (such as credit information sharing).
3. Transparency
Providers will communicate clear, sufficient and timely information in a manner and language clients can understand so that clients can make informed decisions. The need for transparent information on pricing, terms and conditions of products is highlighted.
4. Responsible pricing
Pricing, terms and conditions will be set in a way that is affordable to clients while allowing for financial institutions to be sustainable. Providers will strive to provide positive real returns on deposits.
5. Fair and respectful treatment of clients
Financial service providers and their agents will treat their clients fairly and respectfully. They will not discriminate. Providers will ensure adequate safeguards to detect and correct corruption as well as aggressive or abusive treatment by their staff and agents, particularly during the loan sales and debt collection processes.
6. Privacy of client data
The privacy of individual client data will be respected in accordance with the laws and regulations of individual jurisdictions. Such data will only be used for the purposes specified at the time the information is collected or as permitted by law, unless otherwise agreed with the client.
7. Mechanisms for complaint resolution
Providers will have in place timely and responsive mechanisms for complaints and problem resolution for their clients and will use these mechanisms both to resolve individual problems and to improve their products and services. 3

4. Agenda Client protection principles
The client perspective on transparency
Principle #3 in practice
Participant feedback
Tools for improving practice
Conclusion and call to action
Now, let’s discuss transparency from the client’s perspective. 4

5. Lack of transparency affects the client and the MFI
Effects the…
Client…
MFI… 1
Client does not understand the maintenance fees for her savings account.
…sees that her savings have decreased and thinks the bank has robbed her.
…loses business when client tells others about her experience. 2
…is demoralized and does not trust ATM transactions.
…loses benefit of investment in new technologies.
Client is not aware that she receives only three free ATM withdrawals before incurring fees. 3
When institutions are not transparent with clients, both clients and the institution will likely suffer consequences. This chart list three common ways that an institution is not transparent with clients, followed by the possible effects on the client, and the possible effects on the MFI.
Client believes that if she does not file an insurance claim, the premium will be returned to her.
…concludes that insurance is a scam when she does not have the premium returned.
…finds that products intended to add value and attract clients actually have the opposite effect.

6. The client perspective on transparency
Can your MFI clients agree with the following?
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.
Transparent and responsible pricing requires an institution to think from the perspective of their clients. This checklist will help you think about how well your clients understand pricing.
[Ask participants: Do you think your clients would agree with all of the following statements? Read the statements.]
If there are statements here that your clients wouldn’t agree with, your institution should examine how pricing and term information is disclosed to clients.

7. Agenda Client protection principles
The client perspective on transparency
Principle #3 in practice
Participant feedback
Tools for improving practice
Conclusion and call to action
Now let’s look at what the principle of transparency looks like in practice. 7

8. The Principle in Practice:
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.
This is the Campaign’s definition of the principle “Transparency.” An institution puts the principle into practice by communicating 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 an important part of many of the other principles. Foremost, it is a pre-condition to responsible pricing. In other words, transparency is the foundation of responsible pricing.

9. The Principle in Practice
Disclose information
Train staff
Provide total cost
Disclose the prices, terms, and conditions of all products, including fees and information on the recovery process, and whether these can change over time.
Train staff to communicate effectively with clients, including clients with literacy limitations.
Follow truth-in-lending laws and required APR or EIR formulae. If no requirements, show at least the total cost the client pays.
The Smart Campaign has defined the following as indicators for how a financial service provider puts this principle into practice.

10. The Principle in Practice
Use multiple channels
Allow time for questions
Provide account information
Use multiple channels for disclosing information, such as brochures, meetings, orientation sessions, posters, etc.
Allow adequate time for clients to review information and ask questions prior to signing contracts.
Regularly provide accurate account information, such as savings account balances and receipts for all transactions.
[Continued from previous slide]. The Smart Campaign has defined the following as indicators for how a financial service provider puts this principle into practice.

11. Good Practice: Increase client understanding
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?
Transparency is more than full disclosure. It means communicating in a way that is meaningful to clients—a way they can easily understand the information. Here are some questions to consider.
Fine print is often overlooked by clients. Minimize the use of fine print.

12. 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
Another good practice is to inform the client and then confirm that they’ve understood the information. This can be accomplished using:
Call backs
Check lists for information that staff should cover with the client
Key facts or FAQ documents that the client can take home
Glossaries for key terms (especially those that many clients may not be familar with)
Analysis of common questions/complaint—these can help a provider understand the common misunderstandings that clients have

13. Agenda Client protection principles
The client perspective on transparency
Principle #3 in practice
Participant feedback
Tools for improving practice
Conclusion and call to action
Now, we want to hear from you. 13

14. Feedback from participants
Have you seen examples of lack of transparency?
What effect does the competitiveness of the local microfinance market have on transparent pricing at institutions?
[At this point in the presentation, ask participants for their feedback on the information presented so far. Use these questions (or others that have come up during the presentation) to stimulate discussion.]
Have you received training from your institution that highlights transparent pricing?

15. Agenda Client protection principles
The client perspective on transparency
Principle #3 in practice
Participant feedback
Tools for improving practice
Conclusion and call to action
Now, let’s look at some of the tools that are available from the Smart Campaign to help practitioners improve on this principle. 15

16. Tools available from the Smart Campaign
Technical Tools
Getting Started Questionnaire: Self Assessment for MFIs
Calculating Transparent Prices (MFTransparency)
Putting Transparency into Practice: Communicating About Pricing
Responsible Pricing State of Practice
Technical Guide for Investors
Samples and Case Studies
Client Welcome Kit
Loan Agreement for Small Business Clients from Crystal
Loan Contract Summary Handout from MiBanco
Transparent & Responsible Pricing at Mi-Bospo
These, and dozens more tools are available for free on the Smart Campaign website.

17. Summary [Read the summary on this slide]
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.
Clients need to have access to information that is meaningful to them.
The Smart Campaign offers tools to help providers improve their transparency.
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?
[Read the summary on this slide]
[Use the Call to Action question, and any of the questions below, to stimulate discussion among participants].
How could one or more of the “good practice” examples be implemented in your institution?
What other solutions have you seen (or would like to see)?
Have you seen a similar (or different) practice in your institution or elsewhere?
What are the costs associated with improving transparency to clients? What are the benefits—both to the client and the institution?
What is the role of financial institutions in financial literacy for clients? Have you seen good models for providing this service sustainably?

18. Thank you!
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What’s next?
Download the Getting Started Questionnaire and conduct a client protection self-assessment.
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