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CARE's Code of Conduct in Microfinance
Microfinance developed in response to a desire to provide financial services for poor people in low-income countries. The organisations promoting microfinance believed that access to microfinance would lead to social and economic improvements in the lives of poor people and their families. In recent years, microfinance has become a commercial business as it has become apparent that providing poor people with financial services can be profitable. Larger financial intermediaries such as banks are downscaling and are now providing microfinance services while smaller financial intermediaries such as non-governmental organisations (NGOs) are upscaling and becoming for- profit entities and even banks themselves. As the microfinance industry becomes more commercial, mainstream and oriented towards profit, there is the danger that microfinance clients, who may be poor, illiterate and vulnerable, may be liable to exploitation.
CARE has been active in promoting microfinance throughout Asia, Africa, Eastern Europe and Latin America for many years. Given the scale of CARE’s microfinance activities and the potential vulnerability of the poor people we works with, CARE has designed a consumer protection code that is aligned with our basic programming principles. The code is intended to protect the rights of our clients and partners, and ensure that they are treated with dignity and respect and the same time provide them with the highest quality products and services. Any partner that receives funding or technical assistance from CARE for microfinance activities is expected to adopt and implement a code of conduct aimed at fostering transparency and protecting its customers. The basic principles of CARE’s microfinance code of conduct, shared by CARE and our partners, are as follows:
- Ensure that clients have a complete understanding about the true costs that they are paying on loans and other financial services and the return they are receiving on their savings.
- Ensure that if a loan application is denied to a client, the reason is clearly explained to him or her.
- Ensure that staff are respectful to clients, do not exploit them and do not use violent or harmful practices in loan collection.
- Ensure that clients avoid investing their loan in business ventures with no prospect for profit to ensure that clients are not deprived of their basic survival capacity as a result of repaying the loan.
- Ensure that financial services are fairly priced and that the cost of services is not exorbitant and comply with local industry standards or practices.
- Educate clients on financial management and ensure that clients and their families benefit from the services they receive and do not become over-indebted.
- Ensure that loans that fund unsustainable environmental practices are not supported.
- Ensure that clients are aware of their rights and that a formal and transparent mechanism is in place to handle complaints and disputes.
- Ensure that all clients are treated with dignity and respect.
- Ensure that sensitive information regarding clients is not disclosed to a third party without prior written agreement from the client.
- Ensure that the interest of the clients is always safeguarded and in no case encourage any business deal that undermines the client’s control over the business transaction.
- Ensure that no person is denied access to financial services based on sex, race, nationality, ethnicity, class, religion, age, physical ability, caste or beliefs as long as it is not in conflict with national procedures and regulations.
In all cases CARE will regularly work with partner microfinance institutions to ensure that the consumer protection code of conduct in microfinance is being adhered to.
