Principle # 5 –
Fair and respectful
treatment of clients
This presentation is made
possible by the Smart Campaign
www.smartcampaign.org
Agenda
1. Client protection principles
2. Principle #5 in practice
3. Participant feedback
4. Tools for improving practice
5. Conclusion and call to action
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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
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Agenda
1. Client protection principles
2. Principle #5 in practice
3. Participant feedback
4. Tools for improving practice
5. Conclusion and call to action
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Fair and respectful treatment of clients
The Principle in Practice:
Providers and their agents treat clients fairly and
respectfully. They do not discriminate. They will
ensure safeguards are in place to detect and correct
corruption.
Consider this:
Most abuses happen during the loan sales and debt
collection processes—these need special attention
by providers.
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The Principle in Practice
Set ethical
standards
Spell out organizational values and standards of
professional conduct for staff in a Code of
Ethics. It should be approved by the Board and
signed by staff.
Set
appropriate
debt
collection
practices
Establish the precise steps to take in case of
default including actions that should not be taken
and behavior that is prohibited. Inform clients of
their rights and the highlights of the Code.
Train staff on
ethics
Recruit and train staff in line with Code of Ethics.
Train collections staff on appropriate practices
for loan recovery.
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The Principle in Practice
Set fair
collateral
policies
Establish: 1) a policy on acceptable pledges of
collateral (don’t accept assets vital to survival)
and 2) a policy on rescheduling loans for clients
who are willing to repay.
Incentivize
appropriate
behavior
Use incentives that encourage ethical behavior
and do not put staff in a “conflict of interest” with
the clients—particularly during loan collection.
Enforce
penalties for
violations
Monitor staff compliance with ethical standards
and enforce sanctions for non-compliance. The
same rules should apply to third-party collections
agents.
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The role of management
 Creating a Code of Ethics for the institution.
 Communicating the importance of ethics to staff on a regular
basis.
 Training staff to respond to ethical dilemmas tailored for their
position.
 Empowering managers to follow up on ethical complaints.
 Establishing an Ethics Committee that rewards ethics and
sanctions violations.
Training today:
Handling
delinquent clients
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The code at the center
Management
Code of
Ethics
Human
Resources
Internal
Audit
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Examples of inappropriate practices
Offensive
language and
threats
• Credit staff uses offensive or abusive language.
• Collections agents threaten clients or harass them at
work, home, or their place of worship.
• Collections agents enter a client’s home and/or seize
Unethical
seizure of
property
Subcontracting
to unethical
businesses
Careless debt
extension
property without a judicial order.
• The institution accepts collateral that may deprive
borrowers of their basic survival capacity.
• The institution subcontracts collections to businesses
that are not subject to the same ethical standards as
the institution.
• The institution issues automatic debt extensions.
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Effects on the client and the institution
Clients
mistrust the
institution,
and tell
others.
Clients mistrust
the institution,
and tell others.
To avoid
humiliation,
clients go to
extremes to
repay their
loans.
Inappropriate
Collections
Practices
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Staff rely on
coercion for
repayment,
rather than
good portfolio
management.
What a code of ethics includes
Norms of
Conduct
Institutional
Philosophy
Ethical
Expectations
Enforcement
Methods
Mission &
Values
Norms of
Conduct
Updating the
Code
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Source: Adapted from Compartamos Banco
Conflict of
Interest
Harassment
Privileged
Information
Use of
Company
Property
Client/Staff
Relationships
Safeguarding
the Company
Reputation
Corruption
Respecting
the Work
Environment
Keeping a code “alive”
Annual Review
of Code
Ethics
workshops
Internal polices
incorporate the
Code of Ethics
New employees
must sign
Refresher
campaign each
year
Training includes
examples of real
situations
Tested on Code
after 90 days
Annual
recertification
test
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Source: Compartamos Banco
Good Practices from Around the World
One MFI includes “ethical behavior” in its
annual performance reviews in order to give
employees feedback on their behavior and
find out how successful the organization has
been in building an ethical culture.
Another MFI designed a training program on
ethical behavior that includes specific ethical
dilemmas for different job functions. The
training modules are based on experiences
that employees face at work.
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Agenda
1. Client protection principles
2. Principle #5 in practice
3. Participant feedback
4. Tools for improving practice
5. Conclusion and call to action
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Feedback from participants
Have you received training at your
institution that highlights ethical staff
behavior? Appropriate collections
practices?
Can you describe an ethical lapse or
ethical success at your institution or
elsewhere?
What kinds of collections practices
have you seen at your own (or other)
MFIs?
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Agenda
1. Client protection principles
2. Principle #5 in practice
3. Participant feedback
4. Tools for improving practice
5. Conclusion and call to action
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Tools available from the Smart Campaign
Technical
Tools
Getting Started Questionnaire: Self Assessment for
MFIs
How to Develop a Code of Ethics & Example Codes
Smart Lending
Smart Savings
Technical Guide for Investors
Samples
and Case
Studies
Client Welcome Kit
Best Practices in Collections Strategies
Code of Conduct for Collections from Swadhaar
Smart Note: Collections with Dignity at FinComun
Activities for Training Staff on Customers’ Rights
Code of Conduct E-Learning Module
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Conclusion
An institution's corporate culture should value and reward
high standards of ethical behavior and service.
What is considered appropriate/inappropriate behavior should
be specified in advance and staff should be trained regularly.
Clients must be treated with dignity at all times, and
collection efforts should never be abusive or coercive.
Good practices are available to help institutions achieve a
collections system that is both effective and ethical.
Call to Action: What next steps can your institution take to
create a corporate culture that values high ethical
standards among staff? What next steps can your
institution take to improve collections practices?
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Feedback from Participants
Endorse the Smart Campaign. Visit
www.smartcampaign.org
What’s
next?
Sign up to receive news and
information.
Download the Getting Started
Questionnaire and conduct a client
protection self-assessment.
Email us!
comments@smartcampaign.org
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