MICROCAPITAL BRIEF: India’s Sa-Dhan, Microfinance Institutions Network (MFIN) Revise Code of Conduct

Sa-Dhan, an India-based association of 214 microlenders and other financial institutions, and the Microfinance Institutions Network (MFIN), a trade association of 48 Indian microfinance lenders, recently launched a revised code of conduct. All 264 participating organizations have agreed to abide by the code. While it was originally implemented in 2011, by Sa-Dhan and MFIN, the revised code, has been drafted by those two organizations in association with the Small Industries Development Bank of India (SIDBI), the World Bank Group’s International Finance Corporation (IFC) and India-based Micro-Credit Ratings International Limited (M-CRIL), in an effort “to provide a wider canvas for governance”, said Ratna Viswanathan, the CEO of MFIN.

The original code of conduct consisted of eight elements: (1) “Integrity and Ethical Behavior”; (2) Transparency; (3) Client Protection”; (iv) “Privacy of Client Information”; (4) Governance; (5) “Recruitment”; (6) “Client Education”; (7) “Data Sharing”; and (8) “Feedback/Grievance Redressal Mechanism”. The client protection element is divided in the following sub-topics: (i) “Fair Practices”, (ii) “Avoiding Over-indebtedness”, (iii) “Appropriate Interaction and Collection Practices” and (iv) “Privacy of client information”.

The revised code includes three new elements: (1) The “Client Protection Guidelines for Microfinance Institutions”, which includes a range of client protection provisions that all participating MFIs should follow; (2) The “Institutional Conduct Guidelines for Microfinance Institutions”, indicating how MFIs should monitor that they are compliant with the code; (3) A supplement called “MFIs’ Commitment to Customers”, which lays out what a customer can and cannot expect from the lender.

By Kevin van den Brink, Research Associate

About Sa-Dhan

Founded in 1999, Sa-Dhan is an Indian association of community development finance institutions. As of 2014, the organization reports 240 members. Sa-Dhan has been recognized by the Reserve Bank of India (RBI) as a self-regulatory organization, which gives Sa-Dhan the power to monitor microfinance organizations (MFIs) and ensure responsible lending and client protection.

About Microfinance Institutions Network (MFIN)

The Microfinance Institutions Network (MFIN) is a trade association of 47 Indian microlenders that operate as non-banking finance companies. MFIN has received support from the Omidyar Network, a US-based philanthropic investment firm, and the International Finance Corporation (IFC), the private investment arm of the US-based World Bank Group. MFIN has been recognized by the Reserve Bank of India (RBI) as a self-regulatory organization, which gives MFIN the power to monitor microfinance organizations (MFIs) and ensure responsible lending and client protection.

[1] Code of Conduct for The Microfinance Industry, http://mfinindia.org/wp-content/uploads/2015/12/2nd-Edition-of-the-MFIN-CoC.pdf

MicroCapital Universe Profile: Sa-Dhan

MicroCapital Universe Profile: Microfinance Institutions Network (MFIN)

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