Fifty fund managers, investment funds, development finance institutions and NGOs from four continents recently launched the Guidelines for Investing in Responsible Digital Financial Services, a set of voluntary standards supported by the G20 group of large economies. CGAP (the Consultative Group to Assist the Poor), one of the signatories, describes responsible investments as those that “enhance client protection, strengthen social performance management, and define acceptable behavior…”. The development of these guidelines comes in response to concerns associated with digital financial services, such as “the rapid growth of digital lending products, some of which carry risks of overpricing and over-lending to customers.”
The guidelines stipulate that financial technology (fintech) investors and investees shall: (1) develop and expand product offerings for underserved customers; (2) incorporate known risks when developing business models; (3) encourage the formation of regulatory and legal frameworks addressing customer and commercial interests; (4) promote the interoperability of digital financial services; (5) create standards to protect the privacy of consumer data; (6) practice transparent pricing of products and services; (7) improve disclosure to consumers regarding product terms and conditions; (8) maintain a focus on customer service; (9) actively discourage consumer over-indebtedness and promote financial literacy and; (10) utilize industry-standard metrics to mitigate risks and gauge performance.
As of June 2018, the guidelines’ co-founding signatories have invested a total of USD 1.5 billion in approximately 200 fintech companies.
By Nicholas Galimberti, Research Associate
Sources and Additional Resources
Responsible Digital Financial Service background
https://responsiblefinanceforum.org/investor-guidelines/
IT News Africa article
http://www.itnewsafrica.com/2018/06/global-fintech-investors-team-up-to-promote-responsible-digital-finance/
CGAP on responsible finance
http://www.cgap.org/topics/responsible-finance
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