How Pro-active Efforts by Investors Can Reinforce
Initiatives by Retail Microfinance Providers and Related Networks and Associations
Responsible Finance Forum II
January 27, 2011
The Hague, Netherlands
Recent microfinance crises had underscored the need for appropriate products, practices and policies to protect and positively impact the end-users of microfinance. Collective action of MFIs, industry associations, national regulators, donors and investors was urgent.
The forum focused on how pro-active efforts by investors for responsible finance can motivate and reinforce initiatives by retail microfinance providers and related networks and associations. During the forum a group of 41 microfinance asset managers and institutional investors investing in microfinance signed the Principles for Investors in Inclusive Finance, a set of Principles developed by a working group of microfinance investors and Princess Máxima.
The Principles aim to raise awareness among investors and motivate them to integrate responsibility towards end-users of microfinance and other stakeholders in their decision-making and business models. They were drafted in the course of 2010 during which a broad consultation process took place. By signing the Principles, investors signal their commitment to actively support and encourage the responsible development of the microfinance sector. Irresponsible financing practices jeopardize (long-term) financial returns; this encourages both investors and MFIs to develop responsible finance practices.
The participants agreed on the following key points for follow up:
- Setting-up a steering committee responsible for implementation and operationalization of the Principles for Investors in Inclusive Finance.
- Developing a tracking and monitoring framework to check whether investors comply with the Principles.
- Investors need to keep each other and other parties involved in microfinance accountable for complying with the Principles.
- Initiatives in which different stakeholders such as governments, investors, DFIs and MFIs cooperate to improve nation-wide practices, regulation and policies promoting responsible inclusive financial sectors.
- Sharing practices and harmonizing tools.
The second Responsible Finance Forum (RFF II) was organized by the Dutch Ministry of Foreign Affairs, jointly with Her Royal Highness Princess Máxima of the Netherlands in her capacity as UNSG’s Special Advocate for Inclusive Finance for Development, BMZ, CGAP, and IFC.