Annex 1: Additional Criteria for Recommendations… · Web viewThe Smart Campaign and its Evolution of Standards Working Group contracted EA Consultants ... 5.6 In-house and 3rd

Evolution of Client Protection Standards The Client Protection Standards were created to operationalize where the microfinance industry sets the bar in terms of the minimum behaviors clients should expect from institutions with which they do business. Building off of the seven Client Protection Principles (CPPs), the Client Protection Standards specify what ‘doing no harm,’ must entail in practice.

The client protection standards represent the output of several years of industry collaboration and input, managed by the Smart Campaign. For the standards released in January 2013 as part of the Client Protection Certification Program, the Smart Campaign worked with a Task Force of over 30 experts representing various stakeholders to develop and vet the standards. The standards are truly a public good for and by the industry.

Standards that reflect social norms and expectations of an evolving industry must be dynamic. In order to incorporate an ever-changing sector and its diversity of products, services and related client protection risks, the Smart Campaign has begun work to evolve and improve its standards. One of the areas flagged as requiring more attention and specificity was microinsurance.

The Smart Campaign and its Evolution of Standards Working Group contracted EA Consultants to make an initial set of recommendations for improving the Client Protection Standards based on their application to risks to clients that stem from microinsurance. This initial set of recommendations is included in this document and will go through a period of open comment, beta-testing and expert review over the remainder of 2014. The recommendations are predominantly at the indicator and guidelines level but also include one recommended standard.

After this period of review the Smart Campaign will determine which of the recommendations would be appropriate to include in its standards, which are currently scheduled to be re-released in Q1 2015. After the release of the final recommendations, institutions interested in certification would not be held against these for at least six months in order to make time for adjustment and alignment. We welcome your comments and thoughts on these recommendations and thank you for your participation.

Annex 2 of this document contains the current standards and indicators as well as guidelines that specifically apply to insurance for your reference when reviewing the current recommendations.

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http://smartcampaign.org/certification/certification-standards

Smart Campaign: Suggested Improvements in Client Protection Standards for MicroinsurancePrioritization of risks to clients and suggested changes and additions to standards, indicators, and guidelinesEmily Zimmerman and Barbara Magnoni, EA Consultants, July 17, 2014

This document contains our suggested additions and modifications to the Smart Campaign’s Client Protection Standards to apply to the role financial institutions (FIs) play in delivering insurance to their clients. Section 1 outlines our approach to identifying and narrowing the suggested changes, and Section 2 offers a list of suggested changes.

1. Analytical ApproachOur suggested changes were selected with the following main considerations in mind:

• The primary risks and potential harms facing clients

• The level of control the FI has over these risks and potential harms

• The measurability of these risks and potential harms and an FI’s actions to mitigate them, including:

o Feasibility of capturing datao Extent to which metrics can be

standardized o Relative objectivity of metrics

Most critical is a consideration of risks. We identified a list of 24 risks corresponding to Smart’s Client Protection Principles. Some are more critical than others to the protection of clients and beneficiaries. Some are more frequently observed. In light of the breadth and range of these risks, as well as the issues of control and measurability, we recommend that the review of our recommendations consider a prioritization of specific risks. Annex 1 provides a summary of the additional criteria we used to identify recommendations.

The 4 main risks that we consider essential to the applicability of Smart Principles to microinsurance are listed in Table 1A. Recommendations corresponding to the four highest-priority risks are marked with an asterisk in Section 2 below.

Table 1A: Enumeration of Highest Priority Risks for Microinsurance ClientsAlready Addressed in Certification 1.0

Addressed in Recommendations

1 Products are of low value. ✔2 Clients are unaware that they are purchasing insurance or of

salient product details.✔

3 Clients feel pressured into making a purchase or are not able to consider the insurance purchase and make an informed decision.

✔ ✔

4 Legitimate claims are rejected or not made. ✔

2

Identify and prioritize risks

to clients

Consider control of FI

Consider measurability

Feasibile Standardizable Objective

Table 1B enumerates an additional 20 risks. While each of these is important to some clients under some circumstances, these risks are not prioritized on our suggestions because a) they are observed less frequently in practice, b) they generally result in less severe harm to clients, c) they tend to fall outside of the FI’s control, d) they are less readily measurable, and/or e) there is not sufficient consensus as to the practices needed to mitigate the risk.

As shown in Table 1B, the majority of these risks are addressed by the recommended changes, and several are also addressed in the current version 1.0, though these risks are in some cases less fully addressed than the four highest-priority risks listed above.

Table 1B: Enumeration of Additional Risks to Microinsurance ClientsAlready Addressed in Certification 1.0

Addressed in Recommendations

5 Products are inappropriate for the clients they are sold to. ✔6 Loans are extended to clients who may not be able to repay

them, in anticipation of a likely insurance payout.✔ ✔

7 Clients are not fully aware that they are purchasing insurance (of particular concern for compulsory products).

✔

8 Clients do not at the time of purchase know and understand salient product details.

✔

9 Clients do not retain the information they need to effectively file a claim if needed, or alternatively receive documentation or other support that enables them to do so.

See below

10 Staff do not have sufficient training or information to effectively communicate with clients about insurance products.

11 Clients are unaware of salient rights they have under contracts (such as cooling off periods) or how to exercise those rights.

✔

12 Products are automatically renewed against clients’ wishes or without their knowledge.

✔

13 Claims are denied without giving clients the notice or opportunity to correct any deficiency.

✔

14 Beneficiaries do not know when or how to make a claim if needed.

✔

15 Insurance premiums are set at a level that severely erodes the value products have to clients.

See below

16 The FI unfairly discriminates between clients in its offer of insurance or support in claims processes.

✔ ✔

17 The FI treats clients unfairly, unethically, or fraudulently in the sale of insurance or processing of claims.

✔ ✔

18 The insurer treats clients unfairly, unethically, or fraudulently in the sale of insurance or processing of claims.

✔

19 Claims are not processed in a fair and timely manner. ✔20 Clients’ data is used or shared without their informed

consent.✔

21 Clients are not aware of their rights to submit complaints or the channels they may use to do so.

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22 Staff do not know how to resolve or intermediate clients’ complaints

23 Complaints do not receive appropriate, timely responses.

24 Products and processes are not improved, where possible, to address the problems that lead to common or avoidable complaints.

✔

2. Recommendations and PrioritizationThis section presents recommendations for inclusion into certification 2.0. The recommendations are organized into sections that represent different levels of recommendations – new standards for existing principles (Table 2A), new indicators for existing standards (Table 2B) and new guidance for existing indicators (Table 2C).

New material is shaded in blue for clarity, and suggestions corresponding to the four highest-priority risks are marked with an asterisk (*).

In addition to the below, we wish to highlight two critical risks not addressed in the recommendations below for which further research could be valuable in establishing clear, meaningful benchmarks.

9. Clients do not retain the information they need to effectively file a claim if needed, or alternatively receive documentation or other support that enables them to do so. FIs may take very different approaches to mitigating this risk, and there is no agreed best practice in the sector; FIs are encouraged to base the approach they take on an understanding of their own clients and processes, and to measure its effectiveness. Additional research and publication of lessons learned in this critical area will help the sector move toward establishing best practices.

15. Insurance premiums are set at a level that severely erodes the value products have to clients. Given the wide diversity in insurance products and markets, it is not feasible to set universally applicable standards for claims ratios, commission rates, or other measures that influence value-for-money. Additional feedback from the field and reporting in these areas will help to establish meaningful benchmarks.

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Table 2A: Recommended Standards for Existing Principles

Existing Principle

Proposed Standard

Proposed Indicators Proposed Guidelines Notes & aspirational guidance for FIs

Measurement tool

Principle 1: Appropriate Product Design and Delivery

Claims are processed in a fair and timely manner.

All claims are paid to clients within 30 days of filing (or the time period required by local law.

Recognizing that prompt payments are often crucial to the value clients receive from products, FIs should target prompt payouts.

In many cases, institutions have been able to offer much faster payouts of anywhere between 24 hours and one week. Flexible documentation requirements can be a key to ensuring this process is moved more quickly and to the extent that FIs can contribute to making these requirements less onerous, it is to the advantage of their clients.

MIS

*FI tracks claims rejection ratio and reasons for rejection.

- This is to mitigate against legitimate claims being rejected. FIs can contribute to development of benchmarks through reporting / publication of these KPIs.

MIS

When a claim is denied, claimants are provided notice and a reasonable time period during which to correct any deficiency.

- - Management interview; claims protocol

FI tracks promptness of claims ratio.

- - MIS

5Proposed New Standards, Indicators, and Guidelines

Table 2B: Recommended Indicators for Existing Standards

Existing Principle

Existing Standard

Proposed Indicator Proposed Guidelines Notes & aspirational guidance for FIs

Measurement tool

Principle 1: Appropriate Product Design and Delivery Channels

1.3 The FI does not use high pressure/ aggressive sales techniques.

*The FI has obtained any license or approval required by local law to sell insurance.

May include an agent or broker license; insurance regulation sometimes creates some leniency for group policies or for microinsurance.

This licensure should be viewed by FIs as a minimum but not necessarily sufficient; FIs should not assume that the training and other prerequisites for licensure alone provide sufficient education and support to staff to sell and service insurance responsibly.

Management interview; legal documentation

Principle 2: Prevention of Overindebtedness

2.1 The FI incentivizes quality loans

Where loans are covered by insurance, they are not made in expectation of the likelihood of a claim being paid and not considering credit risk.

- - Management interview

Principle 3: Transparency

3.5 The FI provides accurate and timely account information

[Insurance] Clients are informed of salient features of insurance contracts at the time of enrollment.

This information may be provided verbally and/or in writing, and also includes information suggested in the guidelines to 3.1.1.

Clients are informed of cooling off periods, cancellation rights, and other relevant rights under policies.

Clients are told the importance of informing beneficiaries of coverage.

- Review of sales protocol and documentation; sales training materials

[Insurance] Clients are informed before any lapse, expiration, or cancellation of insurance products and given an opportunity to

- - Review of sales protocol


prevent it.

[insurance] If products are automatically renewed, clients are provided notice and (for voluntary products) an opportunity to opt out of renewal.


Principle 4: Responsible Pricing

4.3 The FI does not charge excessive fees

[Insurance] FI does not charge any up-front “entrance fee” or “initiation fee” to insurers


Principle 5: Fair and Respectful Treatment of Clients

5.6 In-house and 3rd party collections staff are expected to follow the same practices as the FI staff

The FI’s contract with its insurer provides the FI with frequent opportunities to review and cancel, taking into consideration complaints by clients and responsible pricing and service delivery.

- This mitigates against the insurer treats clients unfairly, unethically, or fraudulently in the sale of insurance or processing of claims.

Management interview; contract review


Table 2C: Recommended Guidelines to Existing Indicators

Existing Principle

Existing Standard

Existing Indicator Suggested Guideline: Notes & aspirational guidance for FIs

Measurement tool

Principle 1: Appropriate Product Design and Delivery Channels

1.1 The FI designs products that are appropriate to client needs and do no harm.

1.1.1

The FI designs products that are appropriate to client needs and do no harm. It does not offer products that produce negative value for the clients.

*[Insurance] All insurance products offered by the FI are underwritten by a licensed insurer.

An exception to the above can be made if the FI can demonstrate that a) no insurers are willing to offer appropriate products, b) its activities are not contrary to any applicable local law, and c) the associated risks are minimal and are clearly disclosed to clients.1

Smart MI publication provides guidance on appropriate product features. FIs should we should consider these features but also recognize the tradeoffs they entail (e.g., the simplest products may not be best matched to clients’ risk management needs, and minimizing exclusions often keeps price high).

Management interview

*FI can demonstrate that its choice of insurer and product offering are based on a consideration of the value and appropriateness for clients of the products and service offered (e.g., through a competitive bidding process and/or market study).

- Management interview; review of quotes received from insurers; minutes of Board/ management meetings

*FI tracks claims ratio, renewal ratio, coverage ratio (and demographics of those covered), promptness of claims ratio, and complaints ratio.

FIs are encouraged to measure the client value and appropriateness of products in other ways (e.g., through impact studies) and modify coverage accordingly.

FI should also track the characteristics (gender, age,

MIS

1 The International Association of Insurance Supervisors take the position that generally informal insurance should be avoided and “all entities that act as insurers should be subject to licensing,” though it also mentions that it may be appropriate to exclude some activities from the definition of “insurance” to facilitate access to products. It also envisions transitional periods during which informal insurance operations are gradually formalized.


Existing Principle

Existing Standard


Measurement tool

loan size, geography, branch or geographic area) of those making claims compared to overall beneficiary characteristics to ensure that certain groups are not excluded or under-claiming.

No more than 10% of clients enrolled in compulsory products report that they prefer not to be covered by the product.

- Client survey

Compulsory health coverage: products do not duplicate government healthcare or public health insurance programs already used by existing clients.

- Management interview

1.2 The FI seeks client feedback for product design and delivery

1.2.1 The FI investigates reasons for clients drop out.

[Insurance] FI investigates reasons for cancellation or non-renewal of voluntary products.

- Client surveys, exit interviews, or more informal discussions

1.3 The FI does not use aggressive sales techniques

1.3.1 The FI does not use high pressure/ aggressive sales techniques. Does not force clients to sign contracts (for credit, no forced signing of any individual borrower or group member, or any guarantor).

*[Insurance] Clients are given a policy document or certificate of coverage.

FIs should use feedback from clients and assessment of client understanding to determine the appropriate level of detail in this documentation.

Policy review

*Staff are regularly reminded of clients’ rights to refuse a voluntary insurance product

- Management interview; staff training protocols

Principle 3: Transparency

3.1 The FI fully discloses cost and non-cost

3.1.1 The FI fully discloses to the clients all prices, installments, terms and

*[Insurance] Clients are informed (verbally and/or in writing) of the events covered,

FIs should also regularly survey (or seek informal feedback from) clients to

Review of sales protocol; client surveys


Existing Principle

Existing Standard


Measurement tool

information 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.

coverage amounts, individuals covered, premium paid, and any major exclusions.

ensure that they can identify events and individuals covered by insurance and the premium paid.

3.4 The FI leaves adequate time for client review and discloses at multiple times

3.4.1 The FI communicates all information related to the product (terms, conditions, etc.) to clients before signing.

*[Insurance] For voluntary products, clients are given an opportunity to consider the purchase decision and ask questions and are reminded that purchase is voluntary.

This may not always involve providing a period of hours or days to consider the decision (which may not always be feasible); FI should use its understanding of its clients and processes to determine the best way to minimize this risk.

Review of sales protocol and documentation

Principle 5: Fair and Respectful Treatment of Clients

5.5 In selection and treatment of clients, the FI does not discriminate inappropriately against certain categories of clients

5.5.1 The FI has a non-discrimination policy.

[Insurance] Insurance is offered to all clients who might benefit from it (i.e. clients are not excluded on any basis other than applicability of the covered risk).

This mitigates against the FI unfairly discriminates between clients in its offer of insurance or support in claims processes.

We expect that other unfair, unethical, or fraudulent treatment would be captured by review of credit operations and/or the other Principles.

Management interview; policy review


Annex 1: Additional Criteria for Recommendations

ControlThe sale and use of microinsurance products involves six basic stages (outlined below). FIs play a critical role at many of these stages, but the degree of control they have varies. Market, institutional, and product characteristics all partially determine this level of control at each stage, but some notes on the general allocation of roles, as they relate to client protection issues, appear below. These control issues inform the recommendations we make for what the assessment and certification process can expect of an FI in ensuring client protection.

Stages in Microinsurance Coverage and Use (FI’s Perspective):

DesignMarketing &

education EnrollmentPayment/ servicing Claims

Complaints/ problems

Stage 1 2 3 4 5 6

FI RoleFIs can often determine the type of coverage and some product details, but often have less control over pricing, exclusions, and other details.

FIs typically deliver both marketing and education and have a great deal of control over what it looks like.

FIs are the channels through which these are carried out, but are often constrained by the requirements set by the insurer and/or by regulation.

FIs generally have some control as gatekeepers who transmit claims to insurers and payments to beneficiaries, but generally have little control over requirements to substantiate claims.

FIs are the channel through which clients complain and/or resolve problems, and can communicate and advocate on clients’ behalf; control over the insurer’s response and/or underlying problems is sometimes limited.

MeasurabilityFinally, we consider the measurability of both the risks/potential harms to clients and an FIs’ actions to mitigate those risks. Measurability is influenced by the feasibility of capturing this data: the extent to which FIs already capture these metrics or could reasonably be expected to. Our suggestions aim to keep in check the additional burden that this certification process imposes on FIs, keeping in mind that microinsurance offerings are generally only a relatively small secondary component of an FI’s business and that current data collection is generally quite limited.

Measurability is also influenced by the availability of standardizable measures by which FIs can be assessed. Particularly in a diverse, young, and rapidly changing sector such as microinsurance where different countries are at quite different stages of market development, it can be difficult or impossible to determine clear, universal standards by which practices can be judged. Moreover, one should be cautioned against setting such benchmarks prematurely. In some cases, our recommendations focus on the processes of tracking, considering, and using certain metrics (notably, Social Key Performance Indicators), with a view to informing the development of benchmarks.

Measurability is also influenced by the relative objectivity of the metrics. Some of the risks and activities outlined below can be assessed through readily quantifiable, black and white measures.

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Others can be assessed only through relatively subjective feedback from an FI’s management that can

easily fall into a grey area.

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Annex 2: Current Standards, Indicators and Product-Specific Guidance on Insurance

1 - - Client Protection Principle 1: Appropriate Product Design and Delivery Channels

Current Guidelines for Insurance

1 1 - The FI designs products that are appropriate to client needs and do no harm

1 1 1 The FI designs products that are appropriate to client needs and do no harm. It does not offer products that produce negative value for the clients.

* Insurance coverage is not excessive (i.e., "not useful for the client", especially in cases of compulsory products).

1 1 2 The FI has a policy describing acceptable pledges of collateral; Has clear guidelines for how collateral is registered and valued.

1 2 - The FI seeks client feedback for product design and delivery

1 2 1 The FI investigates reasons for clients drop out.

1 2 2 The FI uses client feedback to inform product development and improve existing products (client feedback can be informal).

1 3 - The FI does not use aggressive sales techniques

1 3 1 The FI does not use high pressure/ aggressive sales techniques. Does not force clients to sign contracts (for credit, no forced signing of any individual borrower or group member, or any guarantor).

* Staff are regularly reminded of clients' rights to refuse a loan/insurance/savings product.

13Current Standards, Indicators, and Product-Specific Guidelines on Insurance

2 - - Client Protection Principle 2: Prevention of Over-indebtedness

2 1 - The FI conducts appropriate client repayment capacity analysis before disbursing a loan

2 1 1 The FI policies support good repayment capacity analysis. The loan approval does not rely solely on guarantees (whether peer guarantees, co-signers or collateral) as a substitute for good capacity analysis. [individual lending] Repayment capacity analysis is done for every loan. [group lending] The group formation and loan approval process ensure the prudent self-selection of members, with emphasis on the concept of solidarity payment.

2 1 2 The FI's repayment capacity policy is adequately disseminated among staff, considering the staff growth and turn-over.

2 1 3 The FI's repayment capacity policy is uniformly used in the practice.

2 1 4 The FI performs a repayment capacity analysis at each loan cycle, even if simplified for secondary aspects at loan renewal.

2 1 5 For clients with informal revenues and/or non consumption loans (most cases), the repayment capacity analysis is based on a client visit (performed by the loan officer or delegated to the group/village members). The FI verifies the information consistency through cross-checks. For clients with a salary asking for a consumption loan, a client visit is not required.

2 2 - The FI incentivizes quality loans


2 2 1 Regular reports on PAR and write-offs are produced and reviewed by the FI's management.

2 2 2 Reasonable portfolio quality is maintained over time. If there is poor long term quality of loan portfolio, and linked to over-indebtedness, corrective measures have been put in place.

2 2 3 The FI's productivity targets and incentive systems value portfolio quality at least as highly as other factors, such as disbursement or client growth.

2 2 4 The FI's productivity targets and incentive schemes are reasonable as compared to the industry benchmark (parameters and proportion of fixed/variable remuneration).

2 2 5 If PAR is over 10% at the level of the MFI, bonuses are offered to loan officers able to decrease PAR below 10%.

2 3 - The FI uses credit bureau and competitor data, as feasible in local context

2 3 1 [credit bureau] The FI policies include clear consultation and sharing of client data (for all loan cycles).

2 3 2 [credit bureau] The FI systematically reviews client data from the credit bureau (for borrower current debt levels and repayment history) to assess the client repayment capacity prior to disbursement at each loan cycle. The FI also systematically reports client data to the credit bureau.

2 3 3 [credit bureau] [group lending] Groups access to up-to-date data from the credit bureau regarding borrower credit history: group members are provided with the credit bureau credit checks done on other members.


2 3 4 [no credit bureau] Policies include clear consultation and sharing of client data (for all loan cycles), with competitors, as feasible in local context.

2 3 5 [no credit bureau] The FI regularly consults with and reports client data to competitors (informal data exchanges consistent with legal limitations), as feasible in local context.

2 3 6 The FI has a supervisory system in place to ensure that the credit bureau or competitor data is effectively used to inform credit analysis and decisions.

2 4 - The FI Management and Board is aware of and concerned about the risk of over-indebtedness

2 4 1 The FI's management and Board of Directors show awareness and concern about the risk of client over-indebtedness, and monitor it.

2 4 2 In high risk markets, stronger efforts are required. Management and Board of Directors define what is high-risk. They review relevant market level information (relevant to the current or planned operational area of the financial institution).

2 5 - The FI's internal audit department monitors that policies to prevent over-indebtedness are applied

2 5 1 The FI's internal audit and/or internal controls department verifies the compliance with the policies and systems to prevent the risk of client over-indebtedness.

2 5 2 The FI's internal audit and/or other departments (except for credit and/or collections departments) visit a representative sample of clients each year.

2 5 3 The FI's MIS regularly provides information on rescheduled loans.


2 6 - The FI avoids dangerous commercial practices (i.e., avoids combining loan products to meet the same need, or restricting the loan use; sets prudent limits to allow for the renewal of a loan in case of early repayment; sets guidelines for appropriate rescheduling policies)

2 6 1 [group lending] The FI has a policy that avoids parallel loans within the MFI (i.e., combining loan products to meet the same need, or restricting the loan use).

2 6 2 [group lending] The FI has prudent limits to allow for the renewal of a loan in case of early repayment.

2 6 3 The FI has specific procedures to actively work out solutions (i.e., through workout plan) for rescheduling loans/ refinancing/ writing off on an exceptional basis for late clients who have the “willingness” to repay but not capacity to repay, prior to seizing assets.

3 - - Client Protection Principle 3: Transparency3 1 - The FI fully discloses cost and non-cost information3 1 1 The FI fully discloses to the clients 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.

[insurance] * Insurance product documentation lists eligibility criteria; cost and how premiums are collected; specific events covered by product and amount of loss covered; length and term of coverage, and premium due dates; all exclusions; any expiry conditions; waiting periods, if used; how to file a claim; contact information for making a claim; reimbursement conditions; whether and how insurance is regulated by a third party.* In the absence of regulations, the minimum is that clients are presented with the total cost of the loan in written form prior to sale.

3 1 2 The FI clearly presents to clients the total amount that the client pays for the product, regardless of local regulations (including in the absence of industry-wide requirements).


3 1 3 The FI participates in the MFTransparency project (or similar industry project, if applicable).

3 2 - The FI communicates proactively with clients in a way that clients can easily understand

3 2 1 The FI has effective communication. Staff communicates in such a manner that clients can understand the terms of the contract, their rights and obligations. Staff communicates with techniques that address literacy limitations (e.g., materials available in local languages).

3 2 2 The FI contracts contain simple language and no fine print (figuratively or literally). A clear facts summary page is given if the legally necessary contract is deemed too technical for the clients.

* Insurance products: premium amount and due dates, events covered, amount covered, term of coverage, contact information for making a claim, exclusions, expiry conditions, waiting periods.

3 2 3 The FI avoids using pricing mechanisms that create confusion on the total costs.

3 3 - The FI uses a variety of disclosure mechanisms3 3 1 The FI uses at least two different communication channels

for disclosing clear and accurate information about the product: written and verbal (to address literacy limitations).

3 3 2 The FI discloses pricing information in public domain.

3 4 - The FI leaves adequate time for client review and discloses at multiple times

3 4 1 The FI communicates all information related to the product (terms, conditions, etc.) to clients before signing.


3 4 2 The FI gives clients adequate time to review the terms and conditions of the product, ask questions and receive additional information prior to signing contracts.

3 4 3 The FI staff is available to answer questions.

3 5 - The FI provides accurate and timely account information

3 5 1 The FI gives clients a hard copy of all documents signed by clients (including, but not limited to the contract) with all terms and conditions. The FI ensures that there are no blank terms in all documents signed by clients (including, but not limited to, contracts) – they must be completely filled out.

3 5 2 [group lending] Each client receives a contract, and/or an individual pass/book or payment book with contact terms and signature (even if the contract is between the group and the financial institution).

3 5 3 The FI regularly gives clients clear and accurate information regarding their accounts (e.g., account statements, receipts, balance inquiries, proof of payment for loans).

3 5 4 The FI provides clients with updated balances on request.

4 - - Client Protection Principle 4: Responsible Pricing

4 1 - The FI offers market-based, non-discriminatory pricing

4 1 1 The FI offers market-based, non-discriminatory pricing.[insurance] The difference between premiums collected and paid to insurance company does not exceed an estimate of reasonable costs to administer the product. House insurance, if applicable, is not more expensive than that offered by the formal sector to the same client segment. The premium paid by the client should not exceed the premium paid to the insurance company by more than 50%.


4 2 - The FI’s efficiency is in line with its peers4 2 1 The FI has efficiency ratios aligned with peers.

4 3 - The FI does not charge excessive fees4 3 1 The FI's pre-payment penalties, account closure fees,

transaction fees or other penalties are not excessive.

5 - - Client Protection Principle 5: Fair and Respectful Treatment of Clients

5 1 - The FI culture raises awareness and concern about fair and responsible treatment of clients

5 1 1 The FI clearly spells out in a Code of Conduct (i.e., in Code of Conduct, Code of Ethics, Book of Staff Rules) the organizational values and standards of professional conduct that are expected of all staff.

5 1 2 The FI's Code of Conduct has been reviewed and approved by the Board.

5 1 3 The FI's staff signs a document by which they acknowledge that they will abide to the standards of professional conduct and not engage in the prohibited behaviors mentioned in the Code of Conduct.

5 2 - The FI has defined in specific detail what it considers to be appropriate debt collection practices

5 2 1 The FI clearly spells out in a Code of Conduct (i.e., in Code of Conduct, Code of Ethics, Book of Staff Rules) the specific standards of professional conduct that are expected of all staff involved in collection (including third party staff).

5 2 2 The FI does not endorse a policy of zero tolerance for PAR.


5 2 3 The FI's policy guarantees that clients receive a fair price for any confiscated assets; Has procedures to ensure that collateral seizing is respectful of clients' rights; Offers an explanation of the role of guarantors. In case collateral is kept in the financial institution premises, procedures are in place to ensure its security.

5 3 - The FI's HR policies (recruitment, training) are aligned around fair and responsible treatment of clients

5 3 1 The FI staff is recruited and trained in line with the Code of Ethics.

5 3 2 The FI staff is trained in line with the Code of Ethics: initial training includes a review of the Code of Conduct and a discussion with new staff on the situations where the compliance with the Code might be a challenge.

5 3 3 The FI's collection practices are covered during the initial training of all staff involved in collections (loan officers, collections staff, and branch managers). In particular, collections staff receives training in acceptable debt collections practices and loan recovery procedures.

5 4 - The FI implements policies to promote ethics and prevent fraud

5 4 1 The FI managers and supervisors review ethical behavior, professional conduct and the quality of interaction with customers as part of staff performance evaluations.


5 4 2 The FI's procedures describe the sanctions that will be taken in case of violation of the Code of Conduct or collections policies (harassment, discrimination, theft, corruption, kickbacks, etc.), that can result in termination of employment.

5 4 3 The FI staff is informed of penalties for non-compliance with Code of Conduct or collections policies.

5 4 4 There is sufficient monitoring of the practices (by operations department, internal audits), to provide education or sanctions as necessary.

5 4 5 The FI sanctions cases of violations of the Code of Conduct or collections policies (identified by management, internal audit or thanks to an efficient complaint mechanism) according to the set rules.

5 4 6 The loan officer base pay is at least a living wage.

5 5 - In selection and treatment of clients, the FI does not discriminate inappropriately against certain categories of clients

5 5 1 The FI has a non-discrimination policy.5 5 2 The FI's rescheduling policies are applied in a consistent

and fair way across the financial institution.5 6 - In-house and 3rd party collections staff are expected

to follow the same practices as the FI staff5 6 1 The same training is provided to third party collections

staff in case collection is subcontracted and they are held to the same standards as the FI staff.

5 7 - The FI informs clients of their rights


5 7 1 The FI informs clients of the main aspects of the Code of Conduct. Information includes clients’ right to complain and how to submit a complaint.

5 7 2 [group lending] The FI informs clients about procedures about collateral seizing.

5 7 3 The FI documents and communicates to clients loan policies and procedures for rescheduling credit.

6 - - Client Protection Principle 6: Privacy of Client Data

6 1 - The FI has a privacy policy and appropriate technology systems

6 1 1 The FI has a written privacy policy that governs the gathering, processing, use, distribution and storage of client information. The policy covers current staff and those who leave the organization and information leakage.

6 1 2 The FI's privacy clause is in plain language and not hidden in legalese or contract. The privacy clause stands out and is not in small print.

6 1 3 The FI's Staff Book of Rules and/or Code of Conduct penalize misuse or misappropriation of client data.

6 1 4 The FI has penalties for exposing or revealing client data to third parties without prior client consent.

6 1 5 The FI's has systems in place (including secure IT systems) to protect the confidentially, security, accuracy and integrity of customers’ personal and financial information.

6 1 6 The FI's IT systems in place have different password protection systems that are changed periodically with different access levels according to the position of the staff member accessing the data.


6 1 7 If files are stored in physical format, the FI stores the client files in a secure location, within the branch or headquarters that has 1) restricted access only to selected persons; 2) is kept in a facility secure from arson or theft.

6 2 - The FI informs clients about when and how their data is shared and gets their consent

6 2 1 The FI has a policy (included in the training manual) to describe how to talk to clients about this topic. Requires that the FI present clearly to clients how it will use and share their client data.

6 2 2 The FI communicates well the privacy policy to staff.

6 2 3 The FI trains its staff to protect the confidentially, security, accuracy and integrity of customers’ personal and financial information.

6 2 4 The FI informs customers how their information will be used internally and, when applicable, when it will be shared externally.

6 2 5 Prior to loan disbursement, the FI's staff reads the privacy portion of the contract to the client.

6 2 6 The FI's contracts include a data privacy clause, describing how and when data can be shared (in addition to credit bureau information).

6 2 7 The FI requires written client consent to share personal information with any external audience, including credit bureaus, insurance agents, collections companies, and others.

6 2 8 The FI requires written client consent to use of information or photos in promotions, marketing material and other public information.


6 2 9 [group lending] The FI trains group leaders to safeguard group member information, particularly saving account balances, dates of loan disbursement, and information on repayment problems.

7 - - Client Protection Principle 7: Mechanisms for Complaints Resolution

7 1 - The FI's clients are aware of how to submit complaints7 1 1 The FI informs clients about:

• their right to complain; and • how to submit a complaint to the appropriate person (or where they could find that information if they don’t know it first-hand).

7 2 - The FI's staff is trained to handle complaints7 2 1 The FI's dedicated staff induction training includes a

session on how the complaints mechanism works, the loan officer’s role in the process and how to appropriately manage complaints until they are completely resolved (how to handle complaints and refer them to the appropriate person for investigation and resolution).

7 3 - The FI's complaints resolution system is active and effective

7 3 1 The FI's policies include how to handle complaints. They include how to inform client about the complaint mechanism.

7 3 2 The FI has an effective, appropriate system in place to resolve complaints in a timely way.

7 3 3 The FI has assigned someone to handle complaints and refer them to the appropriate person for resolution, at least on a part-time basis.

7 3 4 The FI has a clear reporting system in place to ensure that complaints from branches/POS reach complaints handling staff.


7 3 5 The complaints mechanism is actively used by clients.

7 3 6 The FI's clients receive a timely response to their issues, within a month of complaint submission.

7 3 7 The FI's internal audit or other monitoring systems check that complaints are resolved satisfactorily.

7 4 - The FI uses client feedback to improve practices and products

7 4 1 The FI uses information to correct mistakes, omissions and activities that may be harmful to the client.

7 4 2 The FI uses complaints information to improve the organization's operations/products/ communications.


Documents

Annex 1: Additional Criteria for Recommendations… · Web viewThe Smart Campaign and its Evolution of Standards Working Group contracted EA Consultants ... 5.6 In-house and 3rd