The Guardian Global panel shared their views on how the financial sector can better protect new consumers from exploitation. GhanaTalksBusiness is reproducing some of the views shared below:
Tanaya Kilara, financial sector specialist, CGap, Washington DC, USA, @tkilara @cgap
Reduce the risk of agent misconduct: We need to make it easier for people to set up their own mobile money accounts without assistance. Research by Microsave, Intermedia and CGap has documented the prevalence of agents charging unauthorised fees during over the counter transactions where customers hand over their money to the agent to transact on their behalf. Female customers also report reluctance to provide their phone numbers to agents for fear of harassment.
Invest in audit studies: Mystery shoppers can help regulators with a small staff probe the incentives that drive behaviour of those selling the products. In Mexico, we found that front-line staff were not offering base-of-the-pyramid clients low-cost account options because they weren’t the most profitable.
Enea Stocco, financial inclusion specialist, UNCDF, Addis Ababa, Ethiopia
Conduct risk management assessments: Financial institutions need to be constantly monitoring and assessing their financial and social performances. For example, how are microfinance institutions prepared for the potential liquidity and solvency of their clients?
Katherine Hughes, financial inclusion programmes officer, Care International UK, London, UK, @careintuk @khughes123
Work with product providers to increase transparency: We need to bring together all stakeholders to create one voice on this issue. Working together we can help to build understanding and awareness of the right products to meet particular needs.
Use new technologies to deliver information: They are key to scaling up our efforts, in terms of getting key messages about risks and money management to clients quickly and widely. They can also be used as a resource for up-to-date and reliable monitoring and evaluation direct from clients.
Manoj Yadav, junior technical expert, GIZ GmbH, New Delhi, India,@ManojK_Yadav @giz_gmbh @GIZIndia1
Offer information without bias: Client education and awareness initiatives must be product and institution neutral. They should cover the fundamentals like the demerits of over-indebtedness, risks faced by households without insurance and savings, and financing old-age expenses using pensions.
Erin Taylor, research fellow, Institute for Money, Technology and Financial Inclusion, UC Irvine, Lisbon, Portugal @erinbtaylor_
Don’t try to emulate community approaches: Grameen bank required groups of women to take out joint liability loans but it resulted in people bullying each other. The problem was that these groups were accountable to an organisation that was both external and far more powerful. We need to recognise that our institutions and the people they serve enter into particular relationships that are different from pre-existing ones, and adapt accordingly.
Promote products that offer anonymity: The greater anonymity of formal financial services can provide protection. People store money in their mobile money accounts so that they don’t get robbed. Women use accounts to hide money from their husbands and maintain control over their own savings.
Look to your customers for answers: How do they protect themselves when using informal financial services? In community-based systems, how do trust and familiarity regulate how people behave towards one another financially?
Keep clients updated of changes: Education needs to be ongoing. People starting to use products for the first time need access to good information about individual products then, but since they are always changing, information needs to be kept up to date and always easily accessible.
Erin Steinhauer, vice president, global financial inclusion, Visa Inc., San Francisco, USA, @erinsteinhauer @GlobalMatters
Adopt evidence-backed approaches: It’s not just about who should solve the problem, but what will work in different communities. Resolutions must be supported by ethnographic research that analyses people’s financial management behaviour to inform the most effective consumer protection tools.
Heather Burke, director of corporate social innovation, Peacework, San Diego, USA, @_H_M_B @Peacework_org
Use NGOs to build trust: We reach the communities the for-profit institutions have not been able to reach or have little incentive to target. NGOs can build links between different groups to get all stakeholders working together and can also highlight the areas where needs haven’t been met and where there is an opportunity for innovation.
Elisabeth Rhyne, managing director, Center for Financial Inclusion at Accion, Washington DC, USA @CFI_Accion
Revise group-lending methods: We need to avoid social shame in collections. Firstly, lenders need to take responsibility for late payments from the beginning. Secondly, groups need to be educated about what are acceptable collection practices, but also individuals need to know that a default will damage their credit history and ability to go to another lender. This will mean they will not default frivolously. And when lenders know this, they can approach clients knowing that most clients are “can’t pay” not “won’t pay” and that enables them to be more realistic and less threatening.
Make it safe to complain: Our research has found that microfinance customers’ interactions with formal institutions are generally fraught. Some clients worried that if they complain to a financial service provider, they will not be able to get services in the future. So financial institutions need to go to extra lengths to make it clear to a client that there will be no negative consequences if they complain and that their complaint will be dealt with seriously.