Given, the perception surrounding microfinance these days in India, the entire sector has been painted in the same bleak colour. The fact that microfinance organizations display significant variations should not be forgotten. We at M2i had always maintained that for micro-finance to sustain sound operational management practices, which strongly emphasize on ethical behavior and responsible lending, were necessary.

Building on our thoughts we had created a framework – Approval, Documentation, Dissemination and Observance (or the ADDO) framework for measurement of the adherence to ethical operational practices by MFIs. We developed the code of conduct assessment tool utilizing this framework, to cover the following code of conduct dimensions:

• Client origination and targeting
• Loan pricing
• Loan appraisal
• Client data security
• Staff conduct encompassing
• Communication with clients
• Loan collection and recovery process
• Relationship management and feedback mechanism

We had circulated our note on ethical microfinance practice to a group of industry experts in late 2009. Building on that we presented our concept to the group of microfinance experts in April 2010 and formally presented the tool at a microfinance lender’s forum meeting held in Mumbai in June 2010.

We have so far conducted four Code of Conduct (CoC) assessments which had been commissioned by the Small Industries Bank of India (SIDBI) in November 2010. SIDBI has made some of these reports public. They are available on SIDBI's website.(http://www.sidbi.in/Micro/codeofconduct.html). The code of conduct assessment is a pioneering initiative - a global first in the micro-finance domain. We welcome feedback on this. You can send your comments to Atul at atul@m2iconsulting.com