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Responsible Finance through Local Leadership in Sub-Saharan Africa Image

Responsible Finance through Local Leadership in Sub-Saharan Africa

Peer Exchange in India: Lessons in Client Protection and Transparency

As part of the Responsible Finance through Local Leadership in Sub-Saharan Africa, eight leaders representing microfinance associations from Uganda, Senegal, Rwanda, Burkina Faso, Benin, and Ghana travelled to India to participate in a peer exchange with Sa-Dhan (The Association of Community Development Finance Institutions) and MFIN (Microfinance Institutions Network). During the three day exchange, participants learned about client protection and transparency through microfinance institution (MFI) codes of conduct.

Sa-Dhan and MFIN have set up a comprehensive, unified Code of Conduct (CoC) for all Indian microfinance institutions. The CoC focuses on issues such as client protection, grievance mechanisms, governance, disclosures, transparency, behavior, and client education. While the CoC was developed in 2005 after the microfinance crisis in Andhra Pradesh, it was not completely implemented until a subsequent microfinance crisis in 2010, after which MFI activities were banned in Andhra Pradesh. The implementation and adherence to the CoC was necessary in order for MFIs to build up credibility and confidence again amongst regulators, investors and potential clients.

Representatives from the African microfinance associations were able to listen and ask questions of the leaders from Indian microfinance associations in order to gain a better understanding of the core elements of the CoC . Participants visited two MFIs to learn more about the CoC implementation and monitoring process and engaged with MFI clients, field staff, and headquarter offices in order to gauge the CoC’s impact on microfinance clients, the field staff’s ability to comply with the CoC, and to understand how headquarters maintain CoC compliance. Finally, participants also met with representatives from the Reserve Bank of India to understand the role of the Central Bank in regulating MFIs. At the end of the exchange, the microfinance associations that are part of the Responsible Finance program created a tentative action plan to create or improve their own codes of conduct to increase client protection and transparency in their respective markets.

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