Microfinance Focus, November 10, 2011: The Smart Campaign’s “State of the Practice” report claims that the effort to embed client protection deeply in the microfinance industry is still young, but is thriving.

According to the report’s findings, 88 percent of the rated MFIs received overall passing marks (3.0 or higher on a 1-5 scale) with an average score of 3.8. These results also held for the two most important principles, Preventing Over-indebtedness, and Transparency.

While there was relatively little overall variation by region or institution size or type, smaller institutions underperformed the average, as did MFIs in sub-Saharan Africa.

Some organizations clearly stand out, others are working on improving their practices, and others still may have only recently discovered the Smart Campaign and the concept of client protection, the report says.

The report, commissioned by the Smart Campaign’s Steering Committee, is based on 479 third-party assessments of client protection practices at more than 300 microfinance institutions (MFIs) in five global regions.

“The fact that we now have data from almost 500 third-party, external assessments of client protection practices at MFIs shows the extent to which the microfinance industry has committed itself to accountability on this all-important front,” said Isabelle Barrès, Director of the Smart Campaign.  “Responsible finance is assured when we develop and apply tools to hold MFIs accountable for the way they interact with customers.”

In the last year, at least ten major microfinance investment funds managing over $2 billion have integrated client protection assessment into their due diligence and reporting.  National and regional microfinance associations from 30 countries have joined the Campaign in formal relationships, resulting in the training of 53 trainers and 42 assessors who have spread know-how on client protection to nearly one thousand managers and staff of MFIs.

Most importantly, raters and investors are carrying out more and more third-party assessments to examine the implementation of the CPPs. Because they are external, such assessments provide greater confidence about results than does self-reported data.

To date, the Campaign has attracted over 2,200 endorsements from over 130 countries, including over 700 MFIs (representing over 40 million clients), 130 investors and donors, 350 networks and associations, and 1,170 individuals.