The enduring global financial crisis underscores IFC’s commitment to advance responsible finance across three pillars:
Consumer Protection Regulation: Supporting industry-wide customer protection regulation around principles of transparency; responsible pricing; fair and respectful treatment of clients; privacy of client data; mechanisms for complaint resolution; and financial education and awareness programs.
Financial Institutions Self-regulation: Embedding responsible finance practices into business functions across strategy and governance, customer acquisition and relationship management, product design and delivery channels, processes and risk management, and financial education.
Financial Education: Building capacity of end clients through broad-based financial awareness, financial literacy and financial education programs at the sector level and through financial institutions.
IFC’S GLOBAL CONVENING ROLE
IFC co-founded the sector-wide Responsible Finance Forum (RFF) in 2010 with the Federal Ministry for Economic Cooperation and Development (BMZ) and Consultative Group to Assist the Poor (CGAP). IFC’s Responsible Finance Advisory plays a global convening role and coordinates participants from the financial sector, bilateral and multilateral donors and broader international community through the G20 Global Partnership for Financial Inclusion. IFC collaborates globally to implement client protection principles. Learn more: www.smartcampaign.org.
IFC continues to play a leadership role through the global Responsible Finance Forum to sharpen emerging knowledge and innovative solutions. The Forum has focused its work in 2012-2013 on a global mapping and highlighting evidence from implementation across the pillars; and RFF IV in 2013 was directed towards Insurance. Learn more: www.sptf.info
RESPONSIBLE FINANCE DIAGNOSTIC
IFC’s Responsible Finance diagnostic tool supports institutions in operationalizing responsible finance interventions within their business. The tool provides specific recommendations to design targeted A2F advisory services across core client protection principles, tailored across A2F products and adapted to the local market context.
The tool provides analysis and recommendations for institutions seeking to adopt responsible finance practices. Main areas of assessment include: (I) Market Assessment: considers the existence of regulations relevant to fulfill responsible finance practices and whether institutions can achieve their commitment and capacity to adopt responsible finance practices; (II) Institutional Assessment: covers core operational areas in financial institutions: (1) Strategy and Governance; (2) Customer Acquisition & Relationship Management; (3) Products Offered; (4) Delivery Channels; (5) Process & Risk Management; and (III) Financial Education: includes internal practices and broader external initiatives.
RESPONSIBLE FINANCE GLOBAL PORTFOLIO
IFC has supported its clients to implement responsible finance interventions to deepen outreach and expand product offerings sustainably. IFC to date has helped to incentivize over 65 institutions worldwide, to implement responsible finance solutions across microfinance, insurance, housing finance, sustainable energy finance, mobile banking, agri-finance and credit reporting. IFC embeds responsible finance principles into the core delivery of financial services, enabling financial institutions to balance profitability with inclusive finance, and contribute to creating shared value to advance sustainable growth.
Capturing Client Feedback
China Foundation for Poverty Alleviation (CFPA) Microfinance, China, one of the largest microfinance institutions in China, was first established in March 1989 as an NGO which transformed into a commercial institution, following the steady growth of the microfinance sector in China. An IFC investee and advisory client, CFPA, is today a market leader in responsible finance, with strong management and board commitment and customer focused business practices. CFPA conducts regular client satisfaction surveys to ensure client feedback is captured and reflected in product innovation and improvement of services.
Establishing Debt Counseling Center
In Bosnia, where over-indebtedness has challenged the entire microfinance industry, IFC and others established the region’s first debt counseling center. IFC is also launching the SMART certification program for responsible lending. Moreover, IFC works with a number of MFIs across the region helping them transform into deposit-taking organizations; with policymakers and industry bodies to improve the regulatory environment for microfinance, and recently with the microfinance industry to introduce responsible lending practices.
Incentivizing Staff for Portfolio Quality
Utkarsh Microfinance, India, an IFC investee and advisory client, serves some of the poorest, under-penetrated low-income states of India. Utkarsh has capped the maximum number of loan accounts that one staff member can handle, as an incentive to ensure portfolio quality. It has demonstrated that responsible finance practices are not only good for clients but are also good for business. Responsible finance practices are indeed a contributing factor to their sustainability, portfolio quality and growth while operating in some of the poorest parts of the country.