HKL began research for our social performance management (SPM) program in 2008 with Financierings-Maatschappij voor Ontwikkelingslanden(FMO) program on social impact which are assessed on clients business and loan purpose and then began pilots with SPM partners in 2009. In the fall of 2012, HKL transitioned resources and responsibility to complete this program to Vietnam-based Planet Finance. An area of growing importance in microfinance sector, Social Performance Management (SPM) is defined as “an institutionalized process which involves setting clear social objectives (e.g. Increase in clients assets, increase in the number of clients in rural areas, maintain majorities percentage of clients are women, generate more jobs), monitoring and assessing progress towards achieving these, and using this information to improve overall institutional performance. At its main, SPM involves evaluating what actually happens to the clients of microfinance institutions (MFIs) in practical terms of quality of life and income levels. In addition to providing an avenue for qualifying impact, SPM is a tool for MFIs to evaluate and improve financial products, services, and operational procedures in order to increase client satisfaction and retention.
“HKL strongly believe Social Performance Management allows us to demonstrate the impact (of microfinance), and assess what methods and practices work, in an objective, comparable manner. HKL’s strong focus on the social aspects of microfinance and their network of socially committed MFIs makes them an important collaborator in this work.” Underneath there areinitiative implemented on Social Performance Managementwhich HKL have been done in particularly and regularly.
Women Clients: In the end of 2014, they are 70% of the HKL clients, and borrow money to develop a small activity to complete the family income. HKL strongly encourages the women clients to use its services.
Rural communities: Around 81% of the HKL clients are living in the rural areas. They normally have a farmer activity and apply for a loan to buy equipment or purchase additional groceries for storing and reselling, in order to develop their activity and make more profit for increasing their living standard.
Low income clients: Thru HKL policy, we assumed that all the borrowers with loan amount less than and equal to 1,000USD are low income family and up to now we did not have any effective definition yet about low income. By the above definition, HKL served 29% of active borrowers as low income clients who were excluded from the financial services and most of them in rural area by the end of 2014.
SME Loan: SME is also the part of our clients outreach; at least, a SME loan has employee between 3-5 people. SME loan is 0.11% which present for 113 loans in the end of 2014and we still enhance our operation activities in order to increase the number of employee for generating more jobs to people as we set in SPM plan.
This Environmental & Social process serves as a guide for credit officer to implement environment and society aspects in their daily work along with the client loan process. The below illustration will demonstrate each step briefly and how it is to integrate in the credit process.
1. Check the exclusion list:In the loan assessment process, the exclusion list is being used to define what activities or business may not be financed due to the negative impact on environment and society resulted from those activities or business and their purpose
2. Environmental and Social Process:
If any clients’ activities or their business fall into this list, the credit officer would have to reject the application. Loan purpose is rejected if clients’ purpose included in the exclusion list. In opposite, if the business or their activities doesn’t fall into the exclusion list, the credit officer may continue to check sector fact sheet of E&S. In case the activities of client exist in the list, but client shows their wiliness to decrease all risk so the credit officer should continue to consider that loan and process it as normal.
- Determine mitigation measure: Once, Environmental and Social risk level has been identified- low, medium and high-, the measure to mitigation that risk shall be notified.
- Verify risk, impact and mitigation measure: Environmental and Social Section has included into the evaluation from where the credit officer or evaluator can comment or suggest after seeing all E&S information in the application form.
- Discuss suggestion or requirements with timeframe: Environmental and Social requirement approved and to be put in the improving contract with specific timeframe. Environmental and Social suggestions approved and to be monitored with timeframe.
Credit officer can analyze risk of clients by checking Sector Fact Sheet and then they can discuss on the clients’ risk base on the real activities of clients. Credit officer will include environmental and social suggestions and E&S requirements in the contract.
At this step, credit officer should verify whether the Environment and Society mitigation measures in the contract would have been implemented or not. What action to be taken. Furthermore, credit officer is also responsible for report the improvement, constraints, possible interventions, further mitigation measures. The credit officer cannot force clients to implement the contract until the end of contract; they can only encourage them to implement it.
Since August 2013, Environmental and Social Monthly Report can be generated and this report was concerned about Impact Assessment on Health and Safety, Environment and Resource, and Labour evaluate. This report can measure the environment and society impact through their activities or business and HKL we make a plan for reducing the high risk level of environmental and society whenever we found.
Since the mid of 2010, credit officers, head of credit unit, sub-branch manager and branch manager have been training on Environmental and Social Manual and procedure as well as refreshment.
Client Protection Principles is a standard assessment tool which most micro finance institutions (MFIs) used to protect their clients. The goals are to be fully transparent practice good ethics, develop smart business and ensure the protection of the clients. Following the Smart Campaign guideline-which has developed a client protection assessment tool to help HKL has included in its policy the following principles such as:
1. Appropriate product design and delivery issues by product:HKL has always developed products thinking, we don’t have to harm the clients. Products are developed for characteristics of the clients, and thanks to satisfaction surveys which lead the processes to the creation of the products. Market research tries to imagine product which are flexible, appropriate with the need of the clients, affordable, and which can be totally understood by the clients especially regarding the formation of prices. HKL informs clients about their right to use the appropriate products that they really need.
2. Prevention of over-indebtedness: HKL ensures carefully that clients have demonstrated a strong ability to repay (collateral analysis, guarantee, credit history, willingness to repay…). A loan will not be provided if client has a risk of over-indebtedness. And the clients are not encouraged to buy a product they don’t need. HKL alsotakes adequate cares through providing Financial Literacy Program extended to clients are appropriate to their requirements. Internal tools were developed to prevent the over-indebtedness. As required of the law, all loan applicants are checked with the Credit Bureau of Cambodia (CBC) and for clients that have more than 2 other outstanding loan, approval from headquarter is required. Credit officers are trained to adapt products to the clients’ needs such as the repayment schedule that can be flexible base on the income of clients. HKL is good monitoring of portfolio quality, and strong internal control to make sure that staff compliance policy and procedure of credit.
3. Transparency: All the information on prices, terms and conditions of financial products, repayment are disclosed to the clients. The explanation are clear and given in a way the client can understand everything. HKL provides all the related information of the products, enabling clients to make the decision in the right way. Clients receive the contract which is read aloud to them or read by themselves before signing. Contracts indicate the loan term, amount, declining monthly interest rate and proportional annual rate, and other relevant information. All documents are in Khmer and a lot of information is displayed in branches several communication channels.
4. Responsible pricing: The prices have been set up to be affordable for the clients-even the most vulnerable agents, but also to make HKL capable to be sustainable in the long term. HKL has also built its own formal pricing procedure to respect the principle of transparency. Staffs are trained to inform more detail on prices to clients. The prices disclosed through multi-medias. HKL offers its services upon the efficient operations at the fair market price.
5. Fair and respectful treatment of clients: HKL ensures a respectful treatment to the clients, complying with high ethical standards. Standards in the place serve to prevent, detect and correct corruption, discrimination or customer mistreatment. It includes a non-discrimination policy. HKL guarantees all clients are respected by feedbacks of clients and promotes code of business conduct at management level. A code of conduct is in place and signed by all staff since the recruitment and training process. HKL ensures sufficient treatment by staffs without aggressive or abusive behavior; especially while loan or debt collection process.
6. Mechanisms for complaint resolution: HKL has developed mechanisms to respond timely and adequately to complaints and grievances of the clients. HKL tries to solve all the problems quickly, to avoid a waste of time to its clients. All of the complaints information is used to improve the product, service, and customer service of HKL. For HKL, mechanisms and written policies for complaint resolution are in place such as hotline numbers and suggestion boxes etc. Complaints are monitored as a part of call center report.
7. Privacy of client data: The privacy of the data of clients is respected, which means that the data will not be used without the consent of the clients. Staff will ask for permission from the clients before using their information. Privacy of client data is mentioned in the code of business conduct, highlighting that client data must not be disclosed without their prior written consent unless this is required by the AML regulation or there are suspicions of frauds that need to be reported to the police. HKL’s IT and Administrative systems ensure all information, clients’ information, are secure and accurate.
Client Protection Principle training: Since the mid of 2010, credit officers, head of credit unit, sub-branch manager and branch manager have been training on Client Protection Principles as well refreshment.
At Hattha Kaksekar Limited, we live off our financial knowledge. Our success depends on how well we can apply our professional knowledge for our customers and society. For that reason we are placing knowledge at the core of our Corporate Responsibility work through the Financial Literacy Program.
In particular, HKL wish to provide financial concept and also our knowledge, skills and attitudes required to adopt good money-management practices for earning, spending, savings, borrowing and investing, and it is about understanding money and finances and being able to confidently apply that knowledge to make effective financial decisions through their understanding of finances.
In 2013, HKL was experiences in providing Financial Literacy Program through one branch in Kampong Cham province along with 7 modules with 30 topics. The modules cover several topics which discussing on household finance and how well finances are managed. The flipchart is a tool for the credit officers to conduct training shortly at field level. The modules include:
Through Financial Literacy Program have done,HKL has conducted in Prey Chhor branch through 2 credit officers. We have been providing training session about above modules with over 300 clients included community people and currently our operation staff have processed their activities on this program.
In 2015, we will continue to roll out the financial literacy initiatives in other 3 branches, in Kampong Cham provinces and share financial knowledge in all our operation staff through a short presentation and they will hand out this skill to clients and community people while loan processing (promotion, home visit, loan assessment…).
|Number of Office||157|
|Total Number of Staff||2,580|
|Loan Outstanding||473 M USD|
|Number of Active Borrower||116,716|
|Deposit||371 M USD|