ABSTRACT
The link between client protection and stability is particularly evident in the microfinance industry where financing and regulatory simplifications heavily depend on microfinance institutions (MFIs) social performance: erroneous or hurried client evaluations and inadequate collection practices or internal monitoring systems can cause clients' defaults, contagion effect, political reaction and social revolts as well as liquidity problems. Over-indebtedness is a common problem in industrialized countries and specifically in Europe, therefore listed as one of the main problems to address in the European Union (EU) post-crisis action-plan. Consumer protection used to be traditionally seen as a secondary objective in the banking field, with depositor protection instrumental to financial stability and consumer protection to competition. Micro-entrepreneurs can hardly be considered consumers since the definition of 'consumer' under EU law generally refers to a natural person, who is acting outside of the scope of an economic activity. Interest rate levels are a very sensitive issue in microfinance.
