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Consumer Protection and Financial Literacy: The principle of Product Development in Financial Services Sector. Presented at the 1 st International Islamic Financial Inclusion Summit Solo, July 18th, 2012 Yoko Doi , Financial Sector Specialist Financial and Private Sector Development Unit

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Presented at the 1 st International Islamic Financial Inclusion Summit Solo, July 18th, 2012

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    Consumer Protection and Financial Literacy:The principle of Product Development in Financial Services Sector

    Presented at the 1st International Islamic Financial Inclusion Summit

    Solo, July 18th, 2012

    Yoko Doi, Financial Sector Specialist

    Financial and Private Sector Development Unit

    World Bank Jakarta Office

    outline of presentation
    Outline of Presentation:

    Importance of Consumer Protection and Financial Literacy (CPFL) for Financial Inclusion

    The Principles of Product Development: Financial Inclusion & Consumer Protections: Good Practices from other countries

    World Bank’s engagements on CPFL Globally and in Indonesia

    cpfl is important for financial inclusion
    CPFL is Important for Financial Inclusion
    • Benefits of increased financial inclusion may be undermined (or lost) by weak financial consumer protection
    • Weak regulation of consumer finance leaves consumers vulnerable to abuse
        • reduced consumer trust in financial sector
        • reduced use of formal financial services
    • Weak financial literacy means that consumers cannot protect themselves
    • CPFL one of 9 principles of innovative financial inclusion
    roles of financial supervisors in cpfl programs
    Roles of Financial Supervisors in CPFL Programs
    • Issue regulations on minimum standards of financial consumer protection
      • Require clear consumer disclosure & easy access to comparable quotes, prohibit unfair/deceptive/misleading practices
    • Review consumer complaint files to identify trends of consumer abuses.
    • Encourage industry associations to develop conduct codes, standard formats on disclosure, redress mechanisms.
    • Research consumer behavior in use of financial products.
    • Monitor financial markets for new risks to consumers.
    • Promote financial education of consumers.
    The Principles of Product Development: Financial Inclusion & Consumer Protections: Good Practices from other countries
    what can go wrong
    What Can Go Wrong?

    Cross-cutting consumer protection concerns

    Product-specific concerns

    world bank s good practices for financial consumer protection support g20 high level principles
    World Bank’s Good Practices for Financial Consumer Protection support G20 High Level Principles
    consumer disclosure

    Consumer Disclosure

    • Simple
    • Easy to understand
    • Accessible
    • Comparable
    • How do you know if it is working?
    • Try consumer testing
    helping consumers shop around makes

    Helping Consumers Shop Around

    Makes a BIG Difference

    Credit Card Loans Average Interest Rates in Peru

    Source: Superintendence of Banking, Insurance and Private Pension Funds of Peru

    business practices
    Business Practices
    • Free choice of financial products
    • Prohibition of unfair, abusive, misleading practices
    • Retail sales officers trained and qualified
    consumer redress
    Consumer Redress
    • Financial ombudsman
    • Complaints department in every financial institution
    financial literacy
    Financial Literacy
    • Household Surveys of Financial Literacy & Consumer Behavior
    • Financial education targeted on:
      • Risks/rewards
      • Rights/obligations
    • Impact Measurement Studies
    world bank strategy for country cpfl programs

    World Bank Strategy for Country

    CPFL Programs


    Baseline Household Survey of Financial Literacy & Consumer Behavior

    Action Plan to Implement Recommendations

    Implementation Program

    Follow-up Household Survey

    • Diagnostic Review of Legal & Regulatory Framework

    Feedback Loop

    world bank cpfl programs

    World Bank CPFL Programs

    Implementation Programs

    Action Plans

    -In pipeline

    Household Surveys

    -In pipeline

    Diagnostic Reviews

    -In pipeline

    world bank engagement and contribution to global dialogues
    World Bank Engagement and Contribution to Global Dialogues
    • Methodology for assessing country financial consumer protection regimes: “Good Practices for Financial Consumer Protection”
    • “Consumer Protection and Financial Literacy: lesions from Nine Country Studies”
    • 18 Country Diagnostic Reviews
    • 18 Country Household Surveys
    • 3 Country Action Plans + 2 Implementation Program
    • Member of Financial Stability Board Consultative Group on Financial Consumer Protection
    • Member of OECD Task Force for High Level Principles on Financial Consumer Protection

    the range of financial inclusion engagements in indonesia
    The Range of Financial Inclusion Engagements in Indonesia
    • 2012

    NSFI development

    • Two Diagnostics Studies

    Reform on GoI funded PNPM Mandiri RLFs Scheme

    Fin Literacy ToT for GoI

    Pilot Project (Research on Fin. Literacy Assessment on MWs)

    Microinsurance Regulatory Framework

    Microinsurance Marketplace

    Review on MW Microinsurance

    Islamic Finance for MSMEs

    Assessment on KUR (GoI Credit Guarantee Program)

    Strengthening Savings & Loans Cooperatives

    Branchless Banking regulatory review

    Evaluation of TabunganKu (Basic bank account)

    pilot project on financial literacy training

    Pilot Project on Financial Literacy Training for Indonesian Overseas Migrant Workers and Their FamiliesPartners: CMEA, BNP2TKI,Disnakertrans Malang, PPTKIS

    • WB Initiatives

    Output and Outcome


    • Modules: Training Guidelines, Trainer’s Guide for Migrant Workers, Trainer’s Guide for Migrant Workers’ Family; and supporting training tools: poster, comic book, financial book, and brochure
    • Overall, 432 migrant workers and/or their families from Greater Malang area have been trained
    • Currently, the pilot is analyzing all the data collected from the monitoring stage. Report on the results are expected to be published in mid June 2012.
    • Preliminary analysis of the monitoring data shows that there is a positive correlation between financial literacy training and opening savings account.
    • This pilot is a randomized research. The main objective is to evaluate the impact of financial literacy training for migrant workers and their families and to explore the effective ways to improve their knowledge in managing their remittances
    • Development of financial literacy training modules for migrant workers and migrant workers’ families, and development of training supporting tools
    • Providing financial literacy training: trainings are conducted for migrant workers who have registered to recruitment agencies (PPTKIS) to work overseas and/or their families.
    • Phone and face to face monitoring were carried out to assess how the training affected the household’s financial behavior.
    ta to support goi s financial literacy

    TA to Support GOI’s Financial Literacy Initiatives for Indonesian Overseas Migrant Workers and their FamiliesPartners: CMEA, BNP2TKI, BP3TKI, Disnakertrans, Government-owned Banks

    • Supporting Government Initiatives



    • ToTon financial literacy for staffs of BNP2TKI, BP3TKI (regional office of BNP2TKI, in 19 provinces across Indonesia) & Govt-owned banks; 2 batches in 2011 & 1 batch in 2012
    • Mentoring and monitoring during BNP2TKI – BP3TKI financial literacy trainings to MWs and MWs families: 17 provinces in 2011 (April – November 2011) and 9 provinces in 2012 (March – July 2012)
    • ToT implementation: March 29 – April 8, 2011, 58 staffs from 19 BP3TKIs, Bank BRI, Bank BNI, Bank Mandiri, TIFA Foundation, and SahabatWanita Foundation participated in the training. March 5 – 8, 2012, 37 staffs from 19 BP3TKIs, Bank BNI and Bank Mandiri participated in the training.
    • Monitoring tools formulated: checklist, pre test/post test questionnaire, time keeping form, mentoring & monitoring form
    • Overall, 1,287 people were trained in 2011 (542 MWs, 723 MW’s families, 22 ex MWs)
    • Mailing list established (for BNP2TKI & BP3TKI staff) as a media to discuss, learn, and share experience in conducting FL training
    • FL advocacy video produced, and FL training tutorial video in production process
    • Website on MWs financial education is under construction


    • BNP2TKI staff gained competency as mentor & Master Trainer during ToT in 2012
    • Banks (BRI, BNI and Mandiri )committed to provide support to BNP2TKI by involving their trainers in the ToT
    • Bank Mandiri committed to expand FL training as part of its CSR activities