This post was originally published on the Center for Financial Inclusion blog.
By Alex Counts, President and CEO of Grameen Foundation, and Co-Chair of the Microfinance CEO Working Group
The Microfinance CEO Working Group, as part of its commitment to client protection in microfinance and financial inclusion, set out in early 2014 to develop a model law that could be adapted, in whole or in part, into different national contexts. The Working Group’s partners were the global law firm DLA Piper and its “Council of Microfinance Counsels” which is composed of the in-house counsels of all Working Group members. After 15 months of effort, the first version of this law has now been completed and released. The blog below describes this tool and how it can be used.
Those who set policy for consumer protection in financial inclusion have a powerful new tool at their disposal, one that financial inclusion practitioners, legal experts, and regulators have had a hand in creating.
Over recent months, the law firm DLA Piper/New Perimeter has been working with the Microfinance CEO Working Group and a subgroup of the Council of Microfinance Counsels to prepare the Model Law and Commentary for Financial Consumer Protection. This is a framework of suggested legislation on financial consumer protection based on the Client Protection Principles as promoted by the Smart Campaign. The seven Client Protection Principles set standards that clients should expect to receive when doing business with a microfinance institution, and cover such critical areas as transparency, fair and respectful treatment, privacy, and prevention of over-indebtedness. The team that developed this studied multiple countries that had the most progressive and effective laws related to client protection in financial services, and in other areas.
The Model Law can be used in a variety of ways.
First, it offers a template for policy-makers that can help them in developing actual, enacted legislation. In its entirety, it can help regulators build a complete legal regime for client protection. But it serves equally well as a guide for those policy-makers who may only need provisions for addressing particular legal or regulatory gaps.
Second, the Model Law may be used to assess a jurisdiction’s current client protection regulations. By holding up the Model Law against a current national or regional legislation and regulation, policy-makers and commentators can easily assess how those laws and regulations compare with a model client-centric framework that is relevant around the world.
Third, it can serve as a resource for the development of codes of conduct and guidelines, either for a single financial service provider or for groups or country associations. While the document is framed as legislation, its systems and approaches offer guidance on effective ways to promote client protection through the internal operation of service providers.
Like the Client Protection Principles themselves, the Model Law reflects years of consideration and study by a broad cross-section of stakeholders from the entire spectrum of microfinance and financial inclusion. More critically, it offers real, actionable guidelines and tools for helping to ensure that client protection principles can, in fact, be embedded into the fabric of the microfinance industry. We urge you to have a look and also send us feedback so we can further improve the Model Law through revisions and publication of enhanced versions. Send feedback to ModelLaw@MicrofinanceCEOWorkingGroup.org.