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Presented at European Microfinance Week Luxembourg, December 1 st 2010

Financial Education and Client Protection from Policies to Practice. Presented at European Microfinance Week Luxembourg, December 1 st 2010. By David T. Baguma EXECUTIVE DIRECTOR AMFIU. Outline. Baseline study, pilot phase (2004) Phase one (2005/2006) Phase two (2007/2009)

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Presented at European Microfinance Week Luxembourg, December 1 st 2010

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  1. Financial Education and Client Protection from Policies to Practice Presented at European Microfinance Week Luxembourg, December 1st 2010 By David T. Baguma EXECUTIVE DIRECTOR AMFIU

  2. Outline Baseline study, pilot phase (2004) Phase one (2005/2006) Phase two (2007/2009) Programme components Delivery channels Role of stakeholders Conclusions

  3. Baseline Study & Pilot Phase • …Baseline survey showed: • Low knowledge about financial services • Negative attitude towards financial institutions • Some customers better off saving than taking loans • …Programme was to address: • Rights and responsibilities of consumer • Financial services available (informed choice)

  4. Baseline Study & Pilot Phase • ...Programme goal: • Provide consumers with the necessary knowledge about their rights, obligations and choices, so they can negotiate with financial institutions for appropriate products in an atmosphere of trust • …Programme was designed as: • Multi-channel, public campaign (Radio, Flip Charts, posters/fliers, newspaper) • Did not consider institutional channels

  5. Phase One • Funded and guided by DFID/FSDU • Communication strategy development • Development of materials for communication (posters, fliers, flip-charts, newspaper supplements) • Public multimedia campaign (radio programmes, MOP FEWs) • Emphasis: teaching choices, trusting systems, trusting others and confidence building • Evaluation

  6. Phase Two • Funded and guided by EU/ACP and DFID/FSDU • Built on successes and lessons learnt of 1st phase • Wider approach: Transparency promotion • Consumer financial education/Literacy • Consumer protection • Consumer advocacy • New channels and messages nationwide • Objectives: • Informed choices • Knowledge sharing • Rights and responsibilities • Institutionalizing of market drive

  7. The “House” of TRANSPARENCY Key issues to be addressed: Informed Choices Knowledge Sharing Rights and Responsibilities Institutionalizing of MFIs’ Market Drive Display of fees and interest rates / total cost Marketing of Performance Monitoring Tool (PMT) for MFIs Handbook on consumer education Lobby and advocacy MFIs compliant to Consumer Code of Practice (CCP) CEP- launch and dissemination in 35 districts Training manuals and ToT for MFIs to conduct client training Foundation: 1st phase of CEP (2004-2006)

  8. Implementation & Channels • Training of trainers (TOT) • Music, dance and drama • Radio-Programs and spots • Posters • Consumer Code of Practice (CCP) • Complaint handling system • Display of interest rates and fees

  9. a) Training of Trainers • The ToT channel recognizes that consumer financial education is a win-win investment for both providers and consumers. • Targeting MFIs • AMFIU and Global Financial Education Programme have implemented curriculums of financial education on the following modules: • Budgeting (Use money wisely) • Savings (You can do it) • Debt management (Handle with care) • Bank services (Know your options) • Financial Negotiation (Communicate with confidence) • SACCO manual: members, management, board • Risk management and insurance (Protect your family’s future)

  10. Training of Trainers ToT Manuals and guides 6 training modules with detailed trainer’s guide and training manual AMFIU has trained 189 trainers End users: more than 20,000 trained MFIs / SACCOs Straight Talk, UCA, CEEWA, MSC, UGAPRIVI, PSDCs, Consultants, etc. Existing, potential and former clients

  11. b) Music, dance and drama

  12. c. Radio

  13. Targeting both MFIs and consumers and covering: Savings Debt management Budgeting Financial services Financial negotiation d) Posters

  14. e) Consumer Code of Practice • AMFIU spearheaded the development of an industry-wide Consumer Code of Practice (CCP) for MFIs. • Developed in a very consultative way involving all relevant stakeholders • Signed by 42 MFIs in May 2006. • Currently, every AMFIU member is expected to adhere to it. The CCP… • sets out key commitments and principles governing MFIs’ relating with customers. • reassures consumers of doing business with reputable organization. • stipulates implementation measures e. g. suggestion box, training of staff, display of information in premises, etc.

  15. e) Consumer Code of Practice CCP provisions (under review in 2010) • Lending • Information and conditions • Data protection and confidentiality • Complaints handling • Operation of clients accounts • Suppliers of other goods and services

  16. e) Consumer Code of Practice Dissemination channels: • Radio programmes and spots on the CCP • Sensitization workshops • Road map development- Assist MFIs to improve operations so as to adhere to the CCP • Awards to the most consumer friendly MFI • Sanctions for those that do not adhere

  17. f) Complaints Handling • Encourage MFIs to develop capacity to handle complaints and set up complaints procedures at MFI level. • Handling of complaints at AMFIU level. With support from SEEP, AMFIU has set up a toll-free line and a ticketing system and is operational • Support to clients • Systematic record of first-hand demand-side issues • Resolution mechanisms

  18. g) Display of interest rates and fees • Convince MFIs to see relevance • Provided display boards • Use of local language • Ensure prominent display, also in banking halls

  19. Role of Stakeholders Stakeholders include Government, Development Partners, Networks / Associations (UGAPRIVI), Financial Institutions, NGOs, Education Institutions, UCPA, GLFEP-Microfinance Opportunities, Universities. Cooperation can embrace: • Regulation • Redress • Funding • Content provision • Implementation • Quality assurance

  20. Outsourcing vs. Insourcing • Cost sharing by AMFIU members. • Some institutions have very low capacity though they have the good will. • Emphasis on adaptation to local situations and affordable channels. • Some look at it as a product that gives them a competitive edge. • Incorporation in curriculum e.g. Universities

  21. Challenges • Sustainability of the programme • Dependence on donor funding • Policy change by government • Lack of effective redress mechanisms • Adaptation to different situations (mobilisation, languages, religion, etc.)

  22. Conclusions (1) • Educated consumer make informed decisions • Use of multiple channels is effective. • Understanding and awareness influences Market forces • Need for supportive laws in consumer protection • Win-Win situation • Implement the SMART Campaign on consumer protection

  23. Conclusion [cont’d] Implement the Smart Campaign Principles: • Avoidance of over-indebtedness • Transparent and responsible pricing • Appropriate collection practices • Ethical staff behavior • Mechanism for redress of grievances • Privacy of client data

  24. Thank you very much for your attention.

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