MICROCAPITAL STORY: Code of Ethics Proposed for Microfinance

At the Microfinance Leaders Retreat, a meeting to discuss the future development of microfinance, leaders of microfinance institutions, investment organizations and development agencies agreed that a code of ethics aimed at guiding lending practices of microfinance institutions should be established.

Emerging from the New York meeting was The Pocantico Declaration, a document which details a set of concerns over lending practices of microfinance institutions, and which expresses “the need for a code of conduct which should govern how providers treat their clients, and that microfinance providers should be accountable for operating according to this code.” (p.2) The declaration also provides a rationale for a code of ethics, which includes “low standards of transparency in the sector” (p.1), and “the growing tendency of governments not to respect the principles of microfinance, and in particular to become directly involved in the retail provision of credit.” (p.2)

While the Pocantico Declaration emphasizes the need to develop a code of ethics for microfinance, it does not provide specifics on ethical principles that a code should embody, and does not offer a plan for how a code could be promoted to microfinance institutions.

The Pocantico Declaration derives its name from The Pocantico Conference Center of New York, the venue which hosted the Microfinance Leaders Retreat. Signatories include representatives from The Grameen Foundation, Deutsche Bank, The Inter-American Development Bank and CGAP (Consultative Group to Assist the Poor).

The Microfinance Leaders Retreat was organized by Boulder Institute of Microfinance, CGAP and Deutsche Bank. The Boulder Institute, founded in 1995, is a nonprofit organization that provides research on microfinance. The institute held USD 123,548 in total assets at the end of FY 2006. CGAP, established in 1995, is a consortium of public and private agencies that focus on expanding delivery of microfinance services to new markets. Deutsche Bank is a global financial services company and the parent of Deutsche Bank Microcredit Development Fund, which has invested USD 2.83 million of debt-capital in 28 microfinance institutions at the end of FY 2005.

By Ryan Benson, Research Assistant

Additional Resources:

CGAP: Code of Ethics to be Established in Microfinance

Microfinance Gateway: The Pocantico Declaration

The Grameen Foundation: Home

Inter-American Development Bank: Home

Boulder Institute of Microfinance: Home

CGAP: Home

Deutsche Bank: Home

Deutsche Bank Microcredit Development Fund: Home

Mix Market: Deutsche Bank Microcredit Development Fund

GuideStar.org: Boulder Institute of Microfinance – 2006 Form 990