European Microfinance Week 2021

PRESENTATIONS

Anne-Laure BEHAGHEL opened the session by explaining the context in which Cerise and SPTF developed a new joint initiative: the Client Protection (CP) Pathway. Until 2020, the Smart Campaign initiative worked to create an environment in which financial services are delivered safely and responsibly to low-income clients. After this initiative closed, social investors and FSPs expressed a strong demand for CERISE and SPTF to fill this gap, as client protection had always been an integral part of CERISE’s SPI4 evaluation tool.

Feedback was collected from raters, investors and FSPs, based on which STPF and CERISE have redesigned the client protection journey. Although client protection standards are a part of the Universal Standards, they should remain a stand-alone product along with their evaluation. Investors need an easy way to identify committed providers, while FSPs want to demonstrate progress and not only the ultimate achievement of certification. These changes have been integrated in the CP Pathway. The Pathway describes the steps an FSP can take to improve its client protection practices and communicate this progress to investors.

Firstly, FSPs are invited to sign up to the Pathway and declare their commitment to implement client protection. Behaghel explained that FSPs are requested to submit proof of a self-assessment, external assessment, rating, or certification on client protection within six months of joining the Pathway. These documents are not shared publicly, but interested stakeholders can reach out to the listed FSP contact if they want to request the assessment. The FSPs profile is listed on the SPTF website, along with the names of their CP evaluation and contact information. Behaghel added that this approach aims to make it easier for FSPs that are not familiar with CP to join as well.

Secondly, FSPs create an action plan based on their assessment towards the standards and essential practices and gaps identified in this assessment. Behaghel explained that FSPs need to continuously improve their practices as well. CERISE and SPTF support the implementation of this action plan by updating the SPI and CP assessment tool, supporting their use and providing trainings and webinars on indicators that are needed to pass certification. Behaghel presented the SPM Pro Network that FSPs and investors can link to. This is a network of available SPM professionals trained by CERISE and SPTF to provide support to FSPs.

The third and final step offers FSPs an opportunity to show their level of achievement with certification. Behaghel explained how the methodology for certification has been updated since the Smart Campaign initiative. Instead of a single pass/fail certification approach, the CP Pathway has three levels of achievement, emphasising improvement and recognising achievement in stages. Together with certification bodies and experts, CERISE and SPTF identified non-negotiable minimum requirements. Depending on the level of compliance with entry-level, progress-level, and advanced-level indicators, FSPs can attain a bronze, silver, or gold level. For a gold level, FSPs need to comply with 95% of total indicators, which caters for regional specificities or business models that do not allow an FSP to comply with 100% of indicators. Certificates are valid for three years.

Three certification bodies have been approved to date by CERISE and SPTF to issue client protection certifications. Behaghel explained that approval is awarded to certification bodies that use SPTFs common evaluation criteria from the Universal Standards for Social Performance Management. Certification bodies must also have robust systems to ensure impartiality, balanced decision-making, and capacity to perform client protection certifications.

Behaghel introduced several benefits of the CP Pathway for FSPs as well as for investors and funders. FSPs can use the Pathway to obtain public recognition of their commitment and progress, they receive a clear roadmap for next actions and can connect to a global community of like-minded organisations through the website and resources from SPTF and CERISE. The assessment tools offered by CERISE and SPTF are useful for investors and funders to better target technical assistance needs, they can also use the steps from the CP Pathway in funding agreements to ensure commitment.

DISCUSSIONS

Behaghel opened the floor for questions. She was asked to elaborate on the costs involved in the CP Pathway. Behaghel explained that participation in the CP Pathway is free for FSPs. The main costs involved would be for third parties to conduct an assessment, provide Technical Assistance, and costs of implementing the action plan developed.

Yves Komaclo from Oikocredit asked Behaghel’s advice to investors on defining social covenants or requirements related to FSP certification. Behaghel suggested to use the steps of the Pathway and emphasised its flexibility to investors. The Pathway allows an investor to measure the status of an FSP while it can be adapted to the context of an FSP. She stressed the importance of encouraging constant improvement from FSPs but warned against demanding a high level of certification that may not be achievable. The Pathway has opened certification to those FSPs that were unable to achieve certification under the Smart Campaign initiative.

Hans Ramm from the SDC wondered how FSPs can combine an external SPI audit with CP certification. Behaghel stressed that CP certification can only be done by certification bodies, while SPI audits are conducted by consultants, or internally by the FSP. Therefore, certification would always need to be done as a separate step. However, an FSP could conduct a self-assessment against SPI indicators, as these include CP indicators as well. Another option would be to conduct the SPI audit with a focus on CP to help prepare for certification. By combining the scope, the FSP can reduce costs.

Hema Bansal questioned how to certify a hybrid model, with partially digitised processes or with digital products like remittances. Behaghel admitted that the current framework does not account for these products. However, digital credit guidelines exist to inform certification. She added that the concepts of client protection apply to any kind of financial product and FSP. The key is to ensure no harm is done to clients in any of the FSPs operations or interactions with their clients.

Joris Crisà from the e-MFP Savings Action Group added in the chat that the first months of the new CP certification methodology have shown positive signs of alignment with the market reality, based on MFR observation. FSPs who were previously certified under the Smart Campaign initiative continue to be committed and support the new methodology. Thanks to the tiered approach, certification is accessible for a broader spectrum of FSPs which has led to new players showing interest for the first time. In closing of the session, Behaghel asked all participants to spread the word and strive for an industry-wide use of the CP Pathway.