Do Lenders Make Clear the Risks of Microfinance Loans? (Elisabeth Rhyne, Managing Director, CFI): With 700m new accounts opened between 2011 and 2014, more people than ever have a bank or mobile money account. But many of the new consumers are in poor countries, and people with low incomes are often more vulnerable to abuses when they borrow, save or send money. The Smart Campaign, a consumer movement, surveyed 4,000 microcredit borrowers in four countries. Their responses were documented in a report, It’s My Turn to Speak. The study looked at Peru and Georgia, where there is relatively good protection for consumers, and Pakistan and Benin, where protection is less robust. Some good news emerged: most people are satisfied. Borrowers rated their microlenders as good as, and sometimes better than, schools, hospitals, and governments. Grievous abuses were few – about 3 percent of those surveyed. But there were cautionary tales. Too many borrowers don’t understand what they... Read more

Towards Authentic Transparency: A Radical Rethinking of Disclosure in Financial Inclusion (Caitlin Sanford, Bankable Frontier Associates, and Alexandra Rizzi, the Smart Campaign): New Client Voices research from the Smart Campaign and Bankable Frontier Associates (BFA) finds that although microfinance providers may be complying with disclosure regulations, clients are not adequately absorbing information about their financial products. A regulatory compliance-based approach to consumer protection in which providers focus on meeting minimum disclosure requirements risks losing sight of the main objective of transparency— that clients understand what they are signing up for. With clients inadequately informed about many aspects of microfinance, even in countries with strong transparency regulations like Peru and Georgia, the Client Voices findings demand a radical rethinking of transparency. Namely, emphasis should widen from what information is provided to how much clients understand. In the Client Voices project we solicited... Read more