Strengthening Consumer Protection in West African Microfinance

> Posted by Haset Solomon, Communications and Operations Associate, the Smart Campaign

La Banque Centrale des Etats de l’Afrique de l’Ouest (BCEAO), the common central bank of eight West African countries (Benin, Burkina Faso, Cote d’Ivoire, Guinea-Bissau, Mali, Niger, Senegal, and Togo) has prioritized financial inclusion in the region. A recently announced financial inclusion strategy led by BCEAO in partnership with the several national Ministries of Finance aims to include 70 percent of the adult population by the year 2020. Financial access rates range from 7 to 34 percent across the region, according to the Global Findex.

BCEAO is expanding its financial inclusion efforts, including in mobile and e-money, and financial inclusion is slowly progressing in the region, but the opportunities and challenges of the member countries vary significantly, and serious client protection issues remain, particularly among unregulated institutions and in countries with weak national supervision and enforcement. A recent IMF spotlight on Senegal calls for steps to strengthen the sector’s governance through technical assistance to improve supervisory capacities and training to improve reporting standards and practices.

Weak supervision can lead to problems like those the Smart Campaign uncovered during its Client Voice research in Benin, where illegal microfinance institutions collected and disappeared with clients’ savings.

To support a healthy consumer protection ecosystem throughout the region, both top-down supervision and bottom-up efforts are critical. As an example of the latter, the Smart Campaign often supports upgrade projects that offer tailored technical and financial support to financial institutions, and recently, with funding from MasterCard Foundation, two institutions in BCEAO member countries were awarded upgrade projects, COMUBA in Togo and Assilassimé Solidarité in Benin.

Although the Smart Campaign has developed numerous tools and resources (available on our website) for institutions to improve their client protection practices, upgrade projects tackle specific challenges as identified in collaboration with the institutions themselves.

To be eligible for an upgrade project, institutions first undergo a Smart Assessment, a comprehensive strengths and gaps analysis of the MFI’s consumer protection practices. Following the assessment, they outline the institution’s desired objectives and plan for moving forward.

La Coopérative Des Membres Unis Bethel Actions (COMUBA) is a Beninois microfinance institution formed in 2000 that almost exclusively serves women. Through the upgrade project, COMUBA adapted several Smart Campaign tools for its own use, including those on: Mechanisms from Complaints Resolution; Data Privacy; and Codes of Conduct and the Role of Microfinance Associations in Client Protection. COMUBA was seeking to address three core challenges: loan management, internal audit, and human capital concerns. The new tools include a manual on savings and lending procedures (for example, it outlines improved collateral management procedures), and a new system for client complaint resolution. With the completion of the project, COMUBA is working to integrate the tools throughout the institution.

Assilassimé Solidarité is a microfinance institution in Togo formed in 2012 that aims to reach vulnerable Togolese in the peri-urban area of Lome, particularly focusing on unbanked individuals, persons with disabilities, and single mothers. Assilassimé applied for an upgrade support to ensure and strengthen the fair and equal treatment of its clients. Accordingly, its approach included not only new policies and procedures but also staff training on those procedures capped by training for clients and assessments of client well-being. One outcome of the project was the computerization and streamlining of Assilassimé’s assessment of clients’ levels of poverty. Interviews conducted with group loan clients a few weeks after trainings indicated that they had increased knowledge of their client rights, and strengthened understanding of the institution’s client complaints system. Assilassimé continues to improve its processes and procedures to achieve international best practices, with the goal of Smart Campaign Certification in mind.

To learn more about upgrade projects, and all the ways the Smart Campaign works with institutions to improve their practices, visit the Smart Campaign website.

Image credit: World Bank

Have you read?

The Impact Investing Landscape in West Africa

What Do Clients Care About? Results from Benin

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