Self -Assessment of Client Protection Practices

Contents

• About MFO Crystal• Core Values• CSR initiatives and projects• Key Social Indicators for 2017• Crystal and The Client Protection Principles• Appropriate product design and delivery• Prevention of over-indebtedness• Transparency• Responsible pricing• Fair and respectful treatment of clients• Privacy of client data• Mechanisms for complaint resolution

About MFO Crystal

CrystalisaleadingMicrofinanceOrganisationsin Georgiasupportingmicro andsmall businesssectors.

Mission of Crystal is to support micro entrepreneurs and smallholder farmers inrealizing their business potential, reaching financial stability and elevating livingstandards.

Keyhighlights for2017:

GEL227 million TotalAssets

40regionalbranches,upto 896employees

65,000borrowers; 54%rural and53%female clients

77% collateral-free loans, 64%inlocalcurrency

14% of MFImarket share;2ndlargestMFIsinGeorgia

GEL 100 millionfunding from international financial markets

“B”credit rating, ”B-” socialrating, 5-StarMFIbythe MIX

Targetgroups:micro entrepreneurs,start-upsandsmallholderfarmers

Products :Micro Loans,MoneyTransfers,CurrencyExchange,Paymentservices

2017First Fitch RatedMFO

inGeorgia

2017First MFO that Issued

unsubordinated unsecuredbondsof 10mln GEL

2017ImplementedInternational

ReportingStandard– IFRS 9

2016Implemented micro creditdistribution

channelscalled “Credit Boutiques” in ruralareas

Kutaisi

Responsible lending practices focused on avoiding over-indebtedness; overallsocial responsibility towards clients, staff, business partners, local communityand theenvironment.

Core Values

Clients can compare costs, terms and conditions of the loan and understandconsequencesof adefault. Crystal’s relationship with clients, staff, funders andawider society is basedon transparency, franknessand fairness.

A long-term and equitable relationship with key stakeholders. Thecornerstone of Crystal’s approach is care towards all partners andconsideration of theirinterests.

Our product design, lending standards, distribution channels and customer interfaces are all about access.Wearealwaysaccessibleto our clients andbusinesspartners

Innovationandconstant improvement is the way Crystal and its peoplework. We love technologyandencouragecreativity. Innovationis life!

Responsibility

Transparency

Partnership

Access

Innovation

Responsible lending practices focused on avoiding over-indebtedness; overallsocial responsibility towards clients, staff, business partners, local communityand theenvironment.

2016/17 UNWoman:action plan for the implementation ofWomen’sEmpowerment Principles

2016 UNGlobalCompactGeorgia:steeringcommitteemember

2015 CSRClubGeorgia:steeringcommitteemember

2014 Launchingthe International EducationalCampaign“Borrow Wisely”

2013 Signingthe EthicCodeof the GeorgianMicrofinanceAssociation

2012 Adopting the UniversalStandardsfor SocialPerformanceManagement

2011 Joiningthe UNGlobalCompact,adopting the 10principles

2010 Approving Environmental Policyof theCompany

2010 Launchingthe EthicCodeof theCompany

2009 Endorsing the SMARTClientProtectionPrinciples

2007 Approving the social fund for charity projects (2%of net income)

CSRinitiatives and projects

Key Social Indicators for 2017

53%

47%

# ofclientsbygender

Female

Male

29%

17%

54%

#ofclientsbylocation

Urban

Semi-Urban

Rural

90%

10%

Loan portfolio bycurrency

GEL

USD

59%

41%

# ofEmployeesbygender

Female

Male

6

Along withattractivefinancial

performance,Crystalremains

stronglycommitted to the best

internationalpracticesof

CorporateSocialResponsibility

andmakesits bestto integrate

thesestandards into thedaily

businessactivities.

Averageloan size:GEL2,540

Averageageof the client:44Y

# of Start-Up clients:111

Staff turn-over ratio:15%

Crystal and The Client Protection Principles

JSC MFO Crystal has adopted international principles that are dedicated to protection of clients. Theseprinciples are followed by more than 300 Credit Officers and take in consideration the aspects theseprinciples during their daily procedures and operation. 7 Principles that are:

●Appropriate product design and delivery

● Prevention of over-indebtedness

● Transparency

●Responsible pricing

● Fair and respectful treatment of clients

● Privacy of client data

●Mechanisms for complaint resolution

practically implemented by MFO Crystal.

► Appropriate product design and delivery

Crystal and The Client Protection Principles

JSC MFO Crystal has developed delivery channels through 40 branches and 17 boutiques in eachregion of Georgia, that’s an opportunity for our clients to get financial services near to theirhouses, that saves their budget and creates kind of comfort. Besides the Delivery channels Crystalteam has developed and significantly improved product design and digitalized them, whichcreates flexibility for our clients.

Boutiques are good example of how operatively we reach the regions and little villages, wherefinancial services are supplied though – “Akido” and tablets. “Akido” (https://akido.ge/) is anonline platform where clients are able to purchase different types of electronic products, homeappliances, furniture, Fertilizers, pesticides, seed material and etc. We create kind of comfort forour clients by reaching the villages and their houses with tablets and through “Akido” online shopwe offer fast installments that is processed by electronic agreements signed by SMS verification.

After signing the agreement, client will be able to access personal cabinet, where electronicagreement and payment schedule can be checked.

► Appropriate product design and delivery

This is how “Akido” Personal page looks like

• Client’s Profile

• Schedule

• Loan Agreement

► Prevention of over-indebtedness

Since over-indebtedness of clients is risk related and has important impact on our clientsand portfolio quality, this issue is well regulated. MFO crystal takes adequate care in allphases of their credit process to determine that clients have the capacity to repay withoutbecoming over-indebted, providing monitoring system that supports to prevent clients’ overindebtedness.

The Process starts when financial information of the client is checked by credit officer. After2 months of the loan is granted we randomly choose clients and check if they have met theloan agreement purposes, how they follow payment schedule and etc.

Before the loans are granted they are individually assigned by points from 1 to 5 (regulatedby official internal document – Regulatory rule of obligatory monitoring, article 3.2.2)through the internal system “Loan Keeper” which is opportunity to effectively monitor andbe focused on those clients that are high risky.

1 point 2 points 3 points 4 points 5 points

Low Risk Average Risk Increased Risk High Risk Fraud

► Transparency

JSC MFO Crystal provides clear, sufficient and timely information to clients in a manner thatthey understand what we offer, what are the loan agreement terms, what is fixed andeffective rate, provide detailed information about pricing and conditions that are highlightedin contract.

Loan Agreement Example

• Loan Agreement Number• Annual Fixed Rate• Annual Effective Rate• Financial Expenses• Monthly Expenses• Other agreement information

► Responsible pricing

Loan Product prices are determined by macroeconomic factors and competition on Georgianfinancial market. Since more that 70 MFOs and 16 Banks are operating in Georgia, prices,terms and conditions are highly competitive and affordable for consumers. On the otherhand regulatory – National Bank of Georgia has developed set of principles and rules thatcompanies are used to follow. For example, one of the latest regulation was about effectiverates of the loan. According it effective interest rate should be not more that 100%. Thisregulation pushed out of the market online lending companies that set over 400% of effectiverates on small loans.

MFO Crystal is annually (in month of October) actively involved in campaign “Borrow Wisely”which is dedicated to improve awareness of our clients.

MFO Crystal actively used creative videos to share interesting financial information to people.

Check Link - https://www.youtube.com/watch?v=pPG0cxewSAcOther videos can be found here: https://www.youtube.com/user/MFOCrystal/videos

► Fair and respectful treatment of clients

Our loan officers fairly and respectfully treat our clients and this is defined in internal proceduresdocument called – Problem Loans Management Procedures.

Articles from Problem Loans Management Procedures:

Article 3.9Loan collection practice – Problem loan collection practice is based on International Client Protection Principles, which defines that - Financial service providers and their agents will treat their clients fairly and respectfully. They will not discriminate. Providers will ensure adequate safeguards to detect and correct corruption as well as aggressive or abusive treatment by their staff and agents, particularly during the loan sales and debt collection processes.In case of breach of the article principles, disciplinary obligation measures shall be applied to the employee.

Article 5If loan is overdue by 15 days official sealed letter is sent to the client notifying about loan relatedimportant information. Also, if this does not take an effect, after 30 days of overdue theguarantor will receive sealed letter from Crystal notifying about breaching contract.

► Privacy of client data

Client personal information is highly respected by MFO Crystal in accordance with the laws and regulationsof individual jurisdictions. Our credit officers are aware that even if the relative asks for any personalinformation of client officer should not Provide any.

“Code of Ethics” of MFO Crystal is an internal document that regulates privacy of client data, Article 7.1;

► Mechanisms for complaint resolutionMFO Crystal has implemented responsive mechanism for complaints and problem resolution for clients,which is used both to resolve individual Problems and improve as well. This procedure is Regulated by“Code of Ethics” article 11.1 and internal document - “Customer complaints procedures”.

Client rights are also protected by National Banks of Georgia through NBG President Order №151/04; whichcontrols client right protection during providing financial services from local financial companies.

Our company takes specific actions regarding this issue:Complaints are received through the call center which process them and directs to CSR department and toHead of internal Quality Control Department. Afterwards the information is being processed and preparedto take an action and resolve it.