Governance & Methodology for the European Code of Conduct for Microcredit Provision in Europe...
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![Page 1: Governance & Methodology for the European Code of Conduct for Microcredit Provision in Europe Brussels, Belgium, 17 th December Prof. Karl Dayson, Executive.](https://reader035.fdocuments.us/reader035/viewer/2022081602/5517e26d550346c1568b4590/html5/thumbnails/1.jpg)
Governance & Methodology for the European Code of Conduct for Microcredit Provision in Europe
Brussels , Belgium, 17th December
Prof. Karl Dayson, Executive Director, Community Finance Solutions, University of Salford
![Page 2: Governance & Methodology for the European Code of Conduct for Microcredit Provision in Europe Brussels, Belgium, 17 th December Prof. Karl Dayson, Executive.](https://reader035.fdocuments.us/reader035/viewer/2022081602/5517e26d550346c1568b4590/html5/thumbnails/2.jpg)
• Gradual shift as MFIs professionalised to move away from subsidy to more sustainable approaches. The change was driven by:– Short life-span microcredit programmes– Increasing size of MFIs– Increased public scrutiny
• Today numerous guidelines, manuals & several specialised MFI rating systems
Background
![Page 3: Governance & Methodology for the European Code of Conduct for Microcredit Provision in Europe Brussels, Belgium, 17 th December Prof. Karl Dayson, Executive.](https://reader035.fdocuments.us/reader035/viewer/2022081602/5517e26d550346c1568b4590/html5/thumbnails/3.jpg)
• Questions raised about loan book of Grameen Bank – efficiency by growth strategy
• Very little discussion about subsidy (Von Pischke)
• Do they actually help the poor? (Ellerman)
• Should the focus be on savings & is there a tension between a MFI & its clients (Allen)
• Impact on client of cost of credit & collection processes (India)
• Does microfinance crowd out other anti-poverty initiatives? (Bateman)
• The role of the state in governance (regulation & interference)
MFIs: A Crisis of Governance?
![Page 4: Governance & Methodology for the European Code of Conduct for Microcredit Provision in Europe Brussels, Belgium, 17 th December Prof. Karl Dayson, Executive.](https://reader035.fdocuments.us/reader035/viewer/2022081602/5517e26d550346c1568b4590/html5/thumbnails/4.jpg)
• Diverse sector yet shouldn’t hide similarities
• Lack of common accounting measures
• National legal frameworks are very different
• No agreement on what sustainability looks like or is
• Access to capital as public money reduces
• Quality of sector is uneven
• Lack of policy clarity and what should be the relationship with the banking sector & business advice community
Problems facing MFIs in Europe
![Page 5: Governance & Methodology for the European Code of Conduct for Microcredit Provision in Europe Brussels, Belgium, 17 th December Prof. Karl Dayson, Executive.](https://reader035.fdocuments.us/reader035/viewer/2022081602/5517e26d550346c1568b4590/html5/thumbnails/5.jpg)
• Consists of 166 clauses and 20 priority clauses• Some clauses only applicable to large providers• Spread across five chapters
– Customer and Investor Relations– Governance– Risk management– Reporting standards– Management Information Systems
Content of the Code
![Page 6: Governance & Methodology for the European Code of Conduct for Microcredit Provision in Europe Brussels, Belgium, 17 th December Prof. Karl Dayson, Executive.](https://reader035.fdocuments.us/reader035/viewer/2022081602/5517e26d550346c1568b4590/html5/thumbnails/6.jpg)
• Sufficient information to customers• Customer rights • Avoiding over-indebtedness of customers• Customer care• Ethical staff & institutional behaviour• Customer data protection • Investor relations
Customer & Investor Relations
![Page 7: Governance & Methodology for the European Code of Conduct for Microcredit Provision in Europe Brussels, Belgium, 17 th December Prof. Karl Dayson, Executive.](https://reader035.fdocuments.us/reader035/viewer/2022081602/5517e26d550346c1568b4590/html5/thumbnails/7.jpg)
• Business planning• Board responsibilities & membership• Management • External audit• Risk mgmt framework• Managing credit risk• Managing fraud & security risk• Internal audit
Governance & Risk Mgmt
![Page 8: Governance & Methodology for the European Code of Conduct for Microcredit Provision in Europe Brussels, Belgium, 17 th December Prof. Karl Dayson, Executive.](https://reader035.fdocuments.us/reader035/viewer/2022081602/5517e26d550346c1568b4590/html5/thumbnails/8.jpg)
• Content primarily developed for non-bank providers• Non-bank providers sign up to signal that will adapt its practice to Code• Providers given 18 months from sign up to comply with Code• Subject to external evaluation of Code
• Must comply with 80% of weighted total of applicable clauses and all priority clauses
• Clauses weighted according to importance – medium, high & priority• Non-applicable clauses:
– Size provider– Contradiction national legal framework– Not material to provider
Signing up to Code
![Page 9: Governance & Methodology for the European Code of Conduct for Microcredit Provision in Europe Brussels, Belgium, 17 th December Prof. Karl Dayson, Executive.](https://reader035.fdocuments.us/reader035/viewer/2022081602/5517e26d550346c1568b4590/html5/thumbnails/9.jpg)
Overview of process
Request to start evaluation from provider
Initial contact and queries
Sign up to Code
Completion & submission self-assessment tool
Pre-evaluation phase
Implement Code
![Page 10: Governance & Methodology for the European Code of Conduct for Microcredit Provision in Europe Brussels, Belgium, 17 th December Prof. Karl Dayson, Executive.](https://reader035.fdocuments.us/reader035/viewer/2022081602/5517e26d550346c1568b4590/html5/thumbnails/10.jpg)
Overview of process
Review justification for non-applicable clauses
Check documentation
Review compliance with clauses
Submission of recommendation
Evaluation phase
![Page 11: Governance & Methodology for the European Code of Conduct for Microcredit Provision in Europe Brussels, Belgium, 17 th December Prof. Karl Dayson, Executive.](https://reader035.fdocuments.us/reader035/viewer/2022081602/5517e26d550346c1568b4590/html5/thumbnails/11.jpg)
Overview of process
Decision on award
Provision post-award decision support and advice
Provider addresses non-compliance with clauses
Amendments reviewed & decision on award
Post-evaluation and post-award phase
![Page 12: Governance & Methodology for the European Code of Conduct for Microcredit Provision in Europe Brussels, Belgium, 17 th December Prof. Karl Dayson, Executive.](https://reader035.fdocuments.us/reader035/viewer/2022081602/5517e26d550346c1568b4590/html5/thumbnails/12.jpg)
Thank you
Prof. Karl Dayson
Executive Director
Community Finance Solutions
T: +44 (0)161 295 2827