Microfinance is the provision of financial services to low-income people. Over the past several decades the microfinance sector has worked to deliver financial services to economically disadvantaged populations. Initially focused on the provision of very small loans, or microcredit, the industry now delivers a range of financial products and services specifically designed to meet the unique needs of their clients.
Delivered responsibly, microfinance products are a powerful tool to fight poverty. But they can cause harm if inappropriate products are sold to vulnerable people who cannot afford them. Responsible Microfinance Institutions deliver products and services that are safe, affordable, reliable and inclusive – available to everyone, including those living in remote, marginalised communities.
Responsible microfinance ensures vulnerable clients are protected from harm by promoting transparency of information and pricing, by balancing commercial and social performance, and by designing appropriate and affordable products and services.
To protect vulnerable clients from harm, key players in the microfinance sector launched the SMART Campaign. Smart microfinance encompasses core Client Protection Principles to help microfinance institutions practice good ethics and smart business. The Client Protection Principles are the minimum standards that clients should expect to receive when doing business with a microfinance institution.
Appropriate product design and delivery
Prevention of over-indebtedness
Fair and respectful treatment of clients
Privacy of client data
Mechanisms for complaint resolution
Smart Microfinance protects clients, businesses, and the industry as a whole.