Responsible Finance

Concerns about the impact of excessive interest rates, abusive lending practices, and over-indebtedness among poor borrowers has generated increased concern about responsible finance and consumer protection measures. Three main areas of responsible finance have emerged:

  • Consumer protection, regulation, and supervision to ensure that customers are treated fairly and appropriately, and that they understand the implications of their actions
  • Improved standards and codes of conduct within the industry, with an emphasis on consistency
  • Better informed consumers, so that they can become more accountable for their own financial welfare

In January 2011, more than 40 microfinance investment organizations convened to launch a responsible investment initiative called the Principles for Investors in Inclusive Finance (PIIF), under the umbrella of the United Nations Principles for Responsible Investment. PIIF commits endorsers to fund responsible retail providers and strive to create incentives for their investees to treat clients appropriately.

In addition, a multifaceted response by the microfinance community to highlight consumer protection and the social imperative behind financial inclusion and microfinance was embodied by the Smart Campaign, the Social Performance Task Force, and Truelift. Each of these addresses different but complementary aspects of consumer protection and social performance.

Rice Farmer in Bali. Photo credit: Luis Davilla, CGAP Photo Contest 2015