Code of Ethics to be Established in Microfinance
CGAP

At the initiative of Deutsche Bank, Boulder Institute of Microfinance and CGAP, leaders of MFIs, investors, banks and development agencies gathered for the Microfinance Leaders Retreat from April 21-23, 2008 in United States to develop a common ground and set of principles that would help microfinance navigate between commercialization and its social mission. They signed the Pocantico Declaration which is hailed as the first step towards establishing a code of conduct that could distinguish microfinance from other providers of financial services who lack the social motivation that drives the microfinance industry.

The microfinance industry has seen remarkable growth in the last three decades with an array of financial service providers, investors, and other market players. The rapid growth and high profile of microfinance is now leading to accusations of aggressive collection or excessive profits and other practices that challenge principles of good practice in microfinance. "In this context, a ‘gentleman's agreement’ may not be enough," said Asad Mahmood, General Manager of Social Investment Funds at Deutsche Bank "The microfinance industry needs to recognize the potential reputational risk and act accordingly."

"Without firm commercial foundations, microfinance cannot become the profitable business that it needs to be in order to survive," said Elizabeth Littlefield, CGAP's CEO. "But without firm ethical principles and a commitment to benefit poor people's lives first and foremost, it will no longer be microfinance."

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