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> Posted by Rafe Mazer, Financial Sector Specialist, Government & Policy, CGAP
It’s a great time to be working on consumer protection. Even while risks change or expand in scope as new products evolve and access increases, it seems that there are just as many talented researchers and new approaches to making consumer protection work emerging. Some of the most important breakthroughs are coming from consumer and behavioral research. This includes insights into what sales staff really do and why (see, for example, this infographic on a recent World Bank/CGAP/CONDUSEF audit study in Mexico), how consumers make financial decisions—not always for purely economic reasons, and what the context of low resources or scarcity means for financial behavior.
The next step is to take these research insights and turn them into improved consumer protection policies in emerging markets. CGAP’s recent publication, Applying Behavioral Insights in Consumer Protection Policy, describes a range of current and potential ways we can bridge the research and policy fields. But what about providers? What can we take from the recent behavioral insights emerging for the Client Protection Principles?
> Posted by Hema Bansal, India Director, the Smart Campaign
As a child growing up in India, I was always intrigued by stories from Myanmar, but disturbed by conflicts that it had witnessed. Not knowing much about the country, as an adult I still had an innate desire to visit. On May 7th and 8th, I attended the Responsible Finance Seminar, organized by Entrepreneurs du Monde (EDM), held in Myanmar’s city of Yangon. I was completely awed by the mystical peace of the city, I was also impressed by the demonstrations of support at the seminar for instilling client protection in Myanmar’s microfinance industry. It’s a great opportunity for a young market to secure responsible practices from its outset.
Myanmar, the second-largest country in Southeast Asia, remains one of its poorest. Decades of isolation have severely affected its development. In terms of financial inclusion, a large proportion of the population in Myanmar relies on informal lenders. The formal sector only serves about 20 percent of the population, largely because of the existing financial institutions’ limited capability.
In May 2011, President Thein Sein publicly recognized microfinance as a means of development by enabling local and foreign investors to establish fully privately-owned MFIs. Since the rationalization of licensing in Myanmar, around 110 MFIs have been registered. Deposit-taking institutions have been allowed to set-up shop rather easily due to low minimum capital requirements and the absence of separate prudential regulations from non-deposit-taking institutions, such as rules pertaining to reporting standards and portfolio quality management.
> Posted by Alex Rizzi and Leah Wardle, Deputy Director and Tool Development Specialist, The Smart Campaign, CFI
The Smart Campaign will soon launch its certification program on client protection for microfinance institutions (MFIs). In this fourth post in a series, Smart Campaign members Leah Wardle and Alex Rizzi discuss how experience from the field sheds light on standards that are often overlooked by MFI managers but are a crucial part of client protection.
A Dominican loan officer once told me that if I really wanted to know what clients thought of the institution, I should ask a client who had already exited the program. These are the only people, he told me, who speak honestly about the institution’s failures.
In some ways, he was right about exit clients. They have little to lose, and can freely complain about their former lender without repercussion. But I think MFIs should also expect to hear from current clients, and to address problems before they lead to client exit. The key is to have a complaints system that is easy for clients to use (so they’ll actually complain if they need to) and to respond quickly to issues (so the concern is addressed). Increased client satisfaction is one of those fantastic “win-win” achievements, and the effective handling of client complaints is one way to get there.
At a high level, the Smart Campaign Certification standards require that an institution a) has policies and procedures that provide a straightforward way for clients to submit complaints, b) teaches clients (and staff) how to use the system. The institution should also c) have a protocol for resolving complaints in a fair and timely way, and d) should ultimately analyze trends in the complaints data to improve their operations.
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