Transcript Microfinance Client Protection Principles

Bringing Smart Policies to Life
The basics: Consumer protection
Last update: 2010
Consumer Protection: Definition
“Consumer protection is generally
considered to be a regulatory response to
a market failure”
• Consumer protection laws are a form of government
regulation which protects the interests of consumers
• Laws are designed to ensure fair competition and the
free flow of truthful information in the marketplace
Consumer Protection: Benefits
• Without adequate consumer protection, benefits of
financial inclusion can be lost
• Consumers make better decisions if they have the right
information and they know what to do with it
• Market discipline facilitates financial market expansion
• Consumers, non-government organizations, financial
institutions, and governments should work together to
improve financial literacy and reap the rewards
Financial service protections
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Fair market prices / “Truth in Lending”
Equitable treatment
Disclosure
Redress
Financial education
Credit Counseling
Privacy
Policy Question:
Regulation & Supervision
• Principles vs. rules based approach
• Determining supervisory capacity
• Balancing Protection vs. over-regulation
Policy Question: Role of others
• Role of Industry: standards for fair &
equitable practices, self-regulation
• Role of consumers: rights &
responsibilities, consumer advocates,
baseline information about consumers’
financial capabilities
ACCION Center for Financial Inclusion:
Microfinance Client Protection Principles
Example of ‘code of conduct’ for microfinance
industry self-regulation globally
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Avoidance of over-indebtedness
Transparent pricing
Appropriate collections practice
Ethical staff behavior
Mechanisms for redress of grievance
Privacy of client data
Example: Philippines
• 9 million overseas workers
sent $17.3 billion in
remittances (10% of GDP in
2009)
• Bangko Sentral ng Philipinas
conducts financial literacy
campaign
– via road shows in Singapore,
Hong Kong, etc to educate
workers on planning, savings,
investing
– Selected local areas
Example: Peru
• Complaints dropped 32%
since 2004 holistic system of
consumer protection
• SBS supervises policies &
procedures that FI’s
implement but does not
directly respond to
complaints
• FI’s themselves handled 99%
of 400,000 complaints in
2008
Example: Peru
• Peru’s ‘Regulation of
Transparency’ means cost
information associated with
financial services must be
published in daily news
• Interest rates dropped 15%
in first six months of this
law
Thank you!
© Alliance for Financial Inclusion 2010
[email protected]
www.afi-global.org