Client Protection: The State of Practice – A Look at Client Protection Practices in Pakistan’s Microfinance Industry

Improving client protection practices in Pakistan’s microfinance industry
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This note attempts to summarize the current state of client protection practices in Pakistan. It discusses results of an assessment conducted for ten microfinance providers (MFPs) in 2013 based on a methodology developed by the Smart Campaign. These ten MFPs account for approximately 70% of the market in terms of number of clients and approximately 65% in terms of gross loan portfolio. Hence, the paper suggests that the results of the study can be considered as largely representative of large to mid-sized MFPs operating in the country. Key recommendations to improve consumer protection include:

  • MFPs should take client data privacy seriously;
  • Mid-sized MFPs need to further formalize their product development mechanisms;
  • MFPs must formulate policies regarding use of data obtained from the microfinance credit bureau and determine acceptable debt thresholds for clients;
  • MFPs should move toward standardized disclosures on the annualized percentage rate interest calculation formula, and move away from flat interest rate pricing;
  • Most MFPs must formalize policies and procedures to comply with minimum standards of practice for fair and respectful treatment of clients;
  • MFPs should create avenues for clients to air their suggestions, concerns, and grievances.

About this Publication

By Khalid, Z. , Shahid, A.