Principle 1: Prevention of over-indebtedness
Why is this important? Prevention of client’s over-indebtedness should be the main rule of the microfinance and any other business operation that deals with lending money in a competent manner. Financial institutions should make sure they do not get their client indebted more than she or he can handle it. Credit can be a problem if access to credit is seen as a right rather than as a stern business decision both for a client and for an institution.
Principle 2: Transparency of prices
Why is this important? Clear information is the essence of the consumer’s protection, especially when the level of financial literacy is low and clients may not be able to make competent decisions on advantages and risks of financial products and services.
In practice, this principle means that financial lenders are to make sure that full information is available to users, in a clear language which is not ambiguous in any way and that a client is able to understand it. The principle covers both written and oral communication that takes place before
the sale (marketing), during the sale and after the sale (during all contacts with a client)
Why is it important? Fair price, especially in non-competitive markets, protects consumer’s interest. However, there is no consensus on the definition of a fair price. For the GSA the fair price is defined as the way the institution shows its care for the wellbeing of the buyer and shows its commitment to establishing a mutually beneficial relationship with the client.
In practice, this means that financial institutions’ principle is not to charge the client for their own lack of efficiency. They favor a long-term and beneficial relationship with the client instead of a short-term maximization of profit. What the market can handle is not always what benefits the client.
Principle 3: Appropriate ways of debt-recovery
Why is this important? The debt-recovery tests the institution’s commitment to treat its clients with respect and dignity.
In practice, recovering the debt in an appropriate manner does not mean a debt write-off or flexibility in terms of timely payment. The financial institution sticks to this principle by maintaining high standards of ethical behavior even when it does not manage to get its client to fulfill her/his contractual obligations.
Principle 4: Ethical behavior of the personnel
Why is this important? Treating clients with respect and dignity is the basic principle of the consumers’ protection. The image of an institution is based on the behavior of its personnel.
In practice, a financial institution applies this principle by creating corporate culture which values the high ethical standards of behavior among its personnel and ensures the guarantees in terms of preventing, revealing and eliminating the corruption or mistreatment of clients. .
Principle 5: Mechanisms for negotiations and handling of complaints
Why is this important? The buyers should have an opportunity to communicate their problems, to complain when relationship is incorrect or unacceptable. The buyers should expect timely resolutions and attention to their problems.
In practice, a financial institution applies this principle by utilizing a mechanism for collecting complaints, timely reacting to them and resolving problems for their clients.
Principle 6: Confidentiality of the clients’ data
Why is this important? Buyers have the right to expect that their personal and financial information will not be disclosed to those who are not authorized to see them.
In practice, financial institutions apply this principle by respecting the confidentiality of their clients’ data, by ensuring the integrity and security of the users’ data. Financial institutions request clients’ permission prior to sharing their information with others.