In the 12-plus years CFI has worked on consumer protection, we’ve seen again and again the importance of sound regulation and market conduct. While it’s not the only tool in the consumer protection playbook, sound regulation is necessary because even when providers are well-intentioned, it’s extremely difficult for “responsible” players to take action in an unfavorable environment.

As readers of this blog know, working with regulators can be time and labor intensive, but when successful, the impact can be immense. This post focuses on <a href="https://centerforfinancialinclusion.org/the-smart-campaign-and-the-mastercard-foundation-team-up-to-tackle-the-next-wave-of-consumer-protection-challenges-in-financial-services/" target="_blank" rel="noopener noreferrer">CFI’s multi-year initiative</a> in several countries in the West Africa Economic and Monetary Union (WAEMU) – Benin, Burkina Faso, Côte d'Ivoire, Guinea-Bissau, Mali, Niger, Senegal, and Togo – and draws lessons from our work in Benin, in particular, where CFI’s engagement was multi-faceted. In particular, we focus on the support provided to the national supervisory body of Benin, the <a href="https://www.anssfd.org/" target="_blank" rel="noopener noreferrer">Agence Nationale de Surveillance des Systèmes Financiers Décentralisés</a> (ANSSFD).
<h2>The Need to Strengthen Market Conduct Supervision: The Case of West Africa</h2>
WAEMU countries experience a relatively complex supervisory environment, with multiple entities sharing supervisory responsibilities. The microfinance sector is supervised by the Central Bank of the West African States (BCEAO), the Banking Commission of WAEMU (a specialized regional entity overseeing banking sector) at the regional level, and a specialized supervisory body under the ministry of finance in each WAEMU member country. The Banking Commission of WAEMU only oversees part of the microfinance sector (institutions whose total loans/deposits exceeds 2 billion CFA francs [about $3.3 million] for two consecutive years). Unlike the Banking Commission, specialized national supervisory bodies have the responsibility to supervise the whole microfinance sector in each country.

Supervision in the WAEMU region focuses on prudential regulation, ensuring the soundness and stability of the financial system. However, <a href="https://en.wikipedia.org/wiki/Prudential_regulation" target="_blank" rel="noopener noreferrer">prudential supervision</a> in itself is insufficient for detecting and addressing improper conduct of financial service providers vis-à-vis their clients. As such, market conduct supervision is an important complement to prudential regulation. Even globally, the interest for and proven practices around market conduct regulation and supervision are fairly recent, with the 2008 global financial crisis being a notable trigger. While there have been some recent efforts to incorporate aspects of market conduct supervision in the region – including the creation of local public ombudsman offices (the OQSF) in Senegal and Côte d’Ivoire and the verifications related to <a href="https://microdata.worldbank.org/index.php/catalog/2946/related-materials" target="_blank" rel="noopener noreferrer">disclosure practices and compliance with interest caps</a> – this type of supervision is relatively new to the WAEMU region.
<blockquote>Market conduct supervision is an important complement to prudential regulation.</blockquote>
Benin is no exception. The focus on prudential regulation opens the door for poor consumer protection practices and a weak culture of self-regulation among financial institutions, as evidenced by low levels of consumer protection diagnostics and implementation of codes of conduct. The context in Benin is further complicated by a high prevalence of non-regulated financial service providers (FSPs). A 2015 unpublished survey by the ANSSFD indicated that about two-thirds of microfinance institutions operating in Benin were not regulated and operating without a license. The situation is also exacerbated by <a href="https://data.worldbank.org/indicator/SE.ADT.LITR.ZS?locations=BJ" target="_blank" rel="noopener noreferrer">low literacy levels</a> in the country, putting microfinance customers at heightened risk for fraud and unfair practices by financial institutions.
<h2>CFI’s Approach Builds on Client Voices Research</h2>
CFI’s <a href="https://www.centerforfinancialinclusion.org/client-voices-benin-country-report" target="_blank" rel="noopener noreferrer">client voices research</a> in Benin indicated that about 17 percent of former microfinance clients surveyed were unable to withdraw part or all their savings. It also highlighted that late payers experienced a number of serious harms, such as shaming, confiscation of goods, requests for bribes, and involvement of police in debt collection as intimidation tactics. About one-third of respondents ignored how much they will pay in total for their loans and only 12 percent knew the interest rate. In addition, a vast majority of clients (86 percent) were not informed about where to complain.

Responding to these realities, the Smart Campaign, a consumer protection initiative housed at CFI, began a targeted approach in 2016 to build a more effective client protection ecosystem in five African markets. CFI engaged with ANSSFD, the supervisory body with the broadest mandate and most in need of resources. The two-year initiative in Benin was targeted at identifying and addressing gaps in market conduct supervision and mainstreaming market conduct supervision into Benin’s supervision system. The new interventions aimed at, among other things, supporting financial regulators to strengthen their frameworks and increase their capacity to conduct sound supervision.
<blockquote>The initiative in Benin was targeted at identifying and addressing gaps in market conduct supervision and mainstreaming it.</blockquote>
The campaign also engaged with regulators in Nigeria, Ghana, Uganda, Benin and Rwanda. Each of these countries presented unique contexts with different consumer protection priorities, leading to bespoke interventions, including mystery shopping in Nigeria, digitization of complaint handling systems in Ghana and Uganda, and support for developing consumer protection regulations for tier IV institutions in Uganda.
<h2>Ingredients for a Successful Intervention: Lessons Learned</h2>
Though it’s too early to see the full benefits of this support, we learned several lessons from the implementation process in Benin. Overall, the success of such support depends largely on the capacity to change the behavior of supervisors and increase their ownership of the tools and approaches developed during the course of the program. Below we outline several factors that can help positively influence the behavior change and ownership necessary for success.
<h3>Learning by Doing</h3>
CFI’s approach involved trainings and post-training technical assistance on market conduct supervision. It was designed such that inspectors led the development of tools that they could integrate into their existing work. With some support from CFI, the inspectors developed a series of inspection sheets addressing each of the <a href="https://centerforfinancialinclusion.org/about/what-we-do/consumer-protection/" target="_blank" rel="noopener noreferrer">Client Protection Principles</a> to be used during their on-site visits. By doing so, they incorporated the new inspection sheets into their existing practices, reducing the extent of change management needed.
<h3>Leadership Engagement</h3>
Buy-in and active participation by leadership is key to gaining traction for change. In 2019, following the training and technical assistance activities, the general manager of ANSSFD issued a memorandum to make the new consumer protection inspection sheets mandatory for all inspection missions. The issuance of the memorandum addressed both resistance to change (on the part of a minority of inspectors) and inconsistent use of tools within ANSSFD (tools were partly used or not used at all in some inspection missions prior to the memorandum). The commitment of the general manager was essential to ensuring widespread use of the new inspection sheets and improving oversight of consumer protection practices.
<h3>Change Takes Time</h3>
The timeline for regulator or supervisor engagements must allow for multiple iterations. CFI’s engagements have found that behavior change and adoption of new techniques generally require multiple cycles of “test, learn, adjust.” In Benin, it took two years to see some tangible results.
<h3>Select Budget-Appropriate Supervisory Tools</h3>
Changing supervisory practices is likely to have significant budget implications, including costs associated with technical assistance or the adoption of new supervision tools, such as <a href="https://www.cgap.org/research/publication/mystery-shopping-financial-services" target="_blank" rel="noopener noreferrer">mystery shopping</a> and other survey methods. Tools and approaches should be proportionate with what fits for the supervisor, both technically and financially. Technical assistance providers should offer all necessary information on the costs and benefits of tools and make sure that the beneficiary agency makes informed decisions about the tools they choose to retain. In Benin, we did not recommend doing additional surveys or tools. Rather, we agreed to have an inspector that solely focuses on consumer protection and market conduct during routine inspection missions.
<h3>Progress, but the Journey is Not Yet Complete</h3>
As of today, all microfinance inspectors in Benin have been trained on market conduct supervision and the supervision tools are included in the inspection package of ANSSFD. All recent inspection reports include a market conduct section focused on consumer protection. This is tremendous progress and a great step forward.
<blockquote>All recent inspection reports include a market conduct section focused on consumer protection.</blockquote>
The promising results observed in Benin can serve as a model for other countries in the WAEMU region. The shared regulation among the countries should make it possible to leverage the process and tools developed for Benin to replicate this success in other countries. CFI held a workshop in October 2019 to share ANSSFD’s experience with sister supervisory agencies from Niger, Côte d’Ivoire, Guinea-Bissau, Mali, and Togo, which are facing similar gaps in market conduct supervision. Encouraging and guiding supervisory agencies to adopt market conduct supervision and the Client Protection Principles into their practices (as further outlined in CFI’s <a href="https://centerforfinancialinclusion.org/handbook-on-consumer-protection-for-inclusive-finance/" target="_blank" rel="noopener noreferrer">Handbook on Consumer Protection for Inclusive Finance</a>) would contribute to creating market conditions that are fair, protection regimes that are enforceable, and better outcomes for vulnerable customers.

<em>We’d like to thank the <a href="https://mastercardfdn.org/" target="_blank" rel="noopener noreferrer">Mastercard Foundation</a> for partnering with us on this journey.</em>

Improving Consumer Protection Market Conduct: Lessons Learned in Benin

Benin

Sub-Saharan Africa

Côte d'Ivoire

Ghana

Nigeria

Rwanda

Senegal

Uganda

Reflecting on the Smart Campaign: Lessons Learned

Client Treatment

Consumer Protection

Complaint Resolution

Enabling Environment

Policy, Regulation and Government Initiatives

Blog Post

Around the developing world, the use of mobile technology for financial services is skyrocketting. In Africa, the value of mobile money transactions has grown over <a href="https://qz.com/africa/1721818/africa-mobile-money-industry-is-entering-its-next-stage-of-growth/" target="_blank" rel="noopener noreferrer">890 percent since 2011</a>. App-based lenders in Kenya, Uganda, and elsewhere claim to leverage more than 10,000 data points as part of their <a href="https://www.mitpressjournals.org/doi/abs/10.1162/inov_a_00240" target="_blank" rel="noopener noreferrer">underwriting processes</a>, (though consumers are largely <a href="https://digital.hbs.edu/platform-digit/submission/tala-using-machine-learning-to-provide-access-to-credit-for-the-worlds-unbanked/" target="_blank" rel="noopener noreferrer">unaware of what data is being collected</a> from them). In Myanmar, where 20 years ago SIM cards cost $5,000, today, more than 75 percent of the population own (mostly) smartphones, and mobile money provider <a href="https://www.wavemoney.com.mm/wp-content/uploads/htd_Wave-Money-cements-mobile-money-leadership-with-stellar-2019-results-_FINAL.pdf" target="_blank" rel="noopener noreferrer">WAVE Money</a> has reached more than <a href="https://medium.com/@geoffcharles/from-zero-to-40-million-the-rise-of-digital-payments-in-myanmar-2499b488f871" target="_blank" rel="noopener noreferrer">17 million unique users</a>.

Consumers have had to adjust rapidly. For many, their first experience with financial services asks them to contend with new digital interfaces, complex products, nefariously creative forms of fraud, and detailed regulations with rights and responsibilities they <a href="https://gdpr-info.eu/" target="_blank" rel="noopener noreferrer">may not understand</a>.

This is not just a developing-world issue, of course. Carnegie Mellon researchers found that it would take the average American more than 76 working days annually to <a href="https://techland.time.com/2012/03/06/youd-need-76-work-days-to-read-all-your-privacy-policies-each-year/" target="_blank" rel="noopener noreferrer">fully read the privacy policies</a> they encountered on the internet. Underserved customers also often do not have actual people to engage with on <a href="https://customersguide.cgap.org/sites/customersguide.cgap.org/files/resource/2018/07/CGAP-Voice-of-Customer-Toolkit.pdf" target="_blank" rel="noopener noreferrer">questions, complaints, or feedback</a>.

This context served as the backdrop for CFI, in partnership with the Mastercard Foundation, to build and test a toolbox of consumer engagement channels to surface challenges clients face as financial services go digital. From <a href="https://centerforfinancialinclusion.org/clients-deserve-to-know-using-radio-to-educate-and-empower-consumers-in-africa/" target="_blank" rel="noopener noreferrer">radio campaigns</a> and client surveys to digital recourse channels for regulators and industry associations, these projects provided a set of valuable lessons about the increasing complexity of the sector and steps we must take to protect the well-being of customers. As the Smart Campaign winds down, CFI is reflecting on these lessons to inform the next stage of our consumer protection agenda.
<h2>Tailor Your Tools to Clients, Then Tailor Them Again</h2>
When done well, digital interactions with customers – whether it be financial products or surveys or other forms of communication – can provide immense value to both customers and providers. We learned from clients about the critical importance of being customer-centric in the design of these interactions. Investing in design upfront leads to better outcomes for all stakeholders, but most importantly, it can protect customers from negative consequences.

In our <a href="https://centerforfinancialinclusion.org/client-voices-rwandans-speak-on-digital-financial-services/" target="_blank" rel="noopener noreferrer">client survey on mobile money in Rwanda</a>, while most people reported that mobile money interfaces are easy to use, they worry that it’s also easy to make a mistake. Sixty-nine percent of clients believed it was easy to make a mistake and 17 percent have made an error. One issue is language: clients may select the wrong default language to begin with (English instead of Kinyarwanda, in our research in Rwanda, for instance), or even after selecting Kinyarwanda find that the language switches unexpectedly. Fear of making a mistake might be a disincentive for some users to engage with digital products, or worse, actually making a mistake could result in loss of funds or instances of fraud.

CFI also worked with three FSPs and the <a href="https://cma-network.org/" target="_blank" rel="noopener noreferrer">Cambodia Microfinance Association</a> to design and implement a survey, using the interactive voice response (IVR) method, with the goal of hearing directly from clients about the FSPs’ client protection practices. From the outset, we knew that precision in the survey’s language would be integral for the project’s success. But even with this expectation, we were surprised by how much it took to get it right. As my colleagues <a href="https://centerforfinancialinclusion.org/amplifying-client-voices-using-interactive-voice-response-ivr-technology-insights-from-cambodia/" target="_blank" rel="noopener noreferrer">pointed out in a CFI blog post</a>, pre-launch testing showed that while the Khmer jargon used in the survey was well-understood among microfinance staff, clients would either ask for help or skip questions altogether. Moreover, my colleagues observed that intonation and speech tempo of the voice talent behind the IVR recording made a significant difference in respondents’ successful completion of the survey. Seemingly small details such as this can easily prevent a project from achieving the intended results, further emphasizing the importance of upfront product design and testing with clients (not just MFI staff) before roll out.

In our <a href="https://www.centerforfinancialinclusion.org/clients-deserve-to-know-using-radio-to-educate-and-empower-consumers-in-africa#ghana:-you-deserve-to-know-campaign" target="_blank" rel="noopener noreferrer">Ghanaian radio campaign</a>, we partnered with local designers to create posters and animated videos to promote the broadcasts. For example, for the themes of fraud and privacy, we had a cartoon in Twi, the language spoken by over 10 million Ghanaians, depicting what happens when a family is called by a scammer (the family figures it out before they lose any money, fortunately). Our approach initially was to create purely educational social media content to drive listenernship, but we found more success with an edutainment approach, with the lively cartoons amplified by paid advertisting on Twitter and Facebook. In this case, it was important for the team to quickly learn from consumers what resonated and lean into that approach rather than simply stick with the original plan.
<h2>Fraud’s Digital Inroads</h2>
Financial fraud is <a href="https://www.cbsnews.com/media/top-14-financial-frauds-of-all-time/" target="_blank" rel="noopener noreferrer">nothing new</a>, but there are characteristics unique to digital finance that give it renewed virulence. These include less face-to face interaction between consumers and providers, a larger burden on clients to conduct transactions independently, and a wider network of entry points for fraudsters to gain access to clients’ data and scale their schemes.

Indeed, fraud was top of mind among partners and consumers in all of the markets where we implemented projects. In Rwanda, 39 percent of the clients surveyed perceived mobile money fraud to be a big problem and 10 percent reported being defrauded themselves. These frauds resulted in real financial harm for individuals, and we were troubled by how few were able to report it to authorities. One victim reported that the perpetrator claimed to be part of the Girinka “One Cow Per Poor Family” program and even invoked the involvement of Jeannette Kagame, First Lady of Rwanda, to gain the client’s trust.

In Uganda we heard of schemes including PIN fraud and false text messages stating users won a competition and would need to send a fee to claim a prize. Through a mix of dramatic storytelling, local reporting, expert interviews and social media public service announcements (PSAs), our three radio campaigns tried to impart on listeners how to distinguish fraudulent institutions from real ones and how to recognize mobile money scams.

The pervasiveness of fraud (especially digital) highlights real gaps in client capability. Schemes show that clients need a greater understanding of privacy risks and continued awareness campaigns about how to protect themselves as fraudsters evolve their tactics. We also found the burden of reporting fraud needs to be reduced to meet the constraints of this lower-income segment since opportuntiy costs for this group are steep.
<blockquote>Leveraging technology for consumer protection has great potential to meet consumer protection challenges.</blockquote>
Leveraging technology for consumer protection has great potential to meet these challenges, with, for example, chatbot-powered complaints management system. In this <a href="https://www.r2accelerator.org/chatbot-prototype-1" target="_blank" rel="noopener noreferrer">use case</a>, which has already been tested in markets like the Philippines, all actors could benefit - from the central bank to financial service providers to the consumers. Access to new quantitative and qualitative information can enable regulators to better understand customer experiences and more easily detect fraud in the market. We are eager to identify, test, and document more use cases around the use of technology to improve market monitoring and consumer protection.
<h2>Empowerment Comes from Long-Term Client Engagement</h2>
While we are excited by what CFI accomplished with the radio campaigns, we know that the length of the interventions, which ranged from six to 13 weeks, were likely not enough to catalyze long-term behavior change. However, we designed the radio campaigns with partners whom we hoped could continue to distribute and air the episodes and media content. In both Uganda and Ghana, government entities expressed interest in continuing to run the content. In Benin, we used a decentralized approach of training 19 radio journalists on the key client protection market issues, then managed a competition to see who could create the best educational content. The journalist competition allowed us to multiply our outreach efforts in a cost-effective, sustainable way.

With the Client Voices research, we worked closely with the National Bank of Rwanda (BNR) research unit in the hopes of embedding data collection as a regular occurance and not a one off, which they are currently exploring, though at a smaller scale. In Cambodia, the objective for the IVR was to pilot an effective tool for MFIs and others to take the pulse of their clients on an ongoing basis. Over the course of the project, we recognized that providing such feedback can have significant (and in our case unanticipated) cost implications for low-income households. For this reason, we had to reexamine the programing of the platform so that clients would not incur any charges for airtime used when they called in to complete the survey.
<h2>Looking Ahead: CFI Strategy &amp; Impact</h2>
CFI’s experience with client engagement under the Smart Campaign yielded several valuable lessons. First, engaging clients in the design and testing of any digital tool is essential to ensuring that the product features and safeguards work for them. Client engagement also helps providers prioritize what’s most helpful and rout out anything harmful, ideally in the design stage before any harm actually occurs. Second, direct client feedback should not be considered a one-time occurance during product design. Ongoing engagement can provide valuable lessons and ensure that client needs are being met. Finally, digitization has introduced an era of rapid change, made only more extreme by the impacts of the COVID-19 pandemic. We must be poised to listen to clients, and quickly adapt as needed to fulfill our commitment to the <a href="https://centerforfinancialinclusion.org/about/what-we-do/consumer-protection/" target="_blank" rel="noopener noreferrer">Client Protection Principles</a>.
<blockquote>CFI is incorporating these lessons across our work as we seek to understand the impact of COVID-19 on low-income customers.</blockquote>
CFI is incorporating these lessons across our work as we seek to understand the impact of COVID-19 on low-income customers. For example, we launched a series of policy papers examining policy measures to mitigate the impact of COVID-19 and understanding their impact on low-income customers. We are also collecting data on the impact of COVID-19 on MSMEs to help inform providers, investors, and policymakers about the depth and breadth of the impact on low-income customers. As the world faces unprecented times in the wake of COVID-19, we will continue to listen to customers and adapt our work. The customer voice — and engaging them at every step — is crucial for advancing financial inclusion, perhaps now more than ever.

<em>We’d like to thank the <a href="https://mastercardfdn.org/" target="_blank" rel="noopener noreferrer">Mastercard Foundation</a> for partnering with us on this journey.</em>

&nbsp;

Making Digitization Work for Clients Starts With Client Engagement

Mastercard Foundation

Cambodia

East Asia and Pacific

Myanmar

Responsible Digital Finance

Recent research on the <a href="https://www.centerforfinancialinclusion.org/making-digital-credit-truly-responsible">state of the digital consumer credit market in Kenya</a> has documented breakneck growth in mobile lenders and alarming levels of defaults and delinquency. These findings, coupled with <a href="https://www.bloomberg.com/news/features/2020-02-12/tech-startups-are-flooding-kenya-with-apps-offering-high-interest-loans">anecdotal reports</a> of aggressive sales tactics, abusive debt collections, and unacceptable levels of debt stress, raise an enormous red flag regarding digital consumer credit’s potential for financial inclusion.

The promise of digital credit is to make people with no documented financial history visible to the formal financial system, helping low-income people gain access to loans and other financial products. Microcredit started out with a similar promise to help people move out of poverty, but the microfinance industry learned the hard way that good intentions are insufficient. After microcredit-fueled, <a href="https://www.cgap.org/sites/default/files/CGAP-Focus-Note-Growth-and-Vulnerabilities-in-Microfinance-Feb-2010.pdf">overindebtedness crises</a> spiraled out of control, the industry introduced protective measures and formal regulation followed in many countries. The red flags appearing in Kenya’s digital credit market are familiar, but a host of new players beyond traditional banks and microfinance providers may not recognize the signs of a looming crisis.
<h2>New Entrants, New Credit Models</h2>
New tech players are flooding into markets like Kenya to offer scalable models for faster and more accurate loan products backed by big data. Mobile app-based lenders use nontraditional data to provide near-instant credit decisions for loans ranging from the equivalent of $5 to $100. The algorithms at the core of these products rely on unverified, self-reported user information and data scraped from users’ mobile phones, including call logs, contacts, location, social media activity, and text messages. An inherent flaw in these models is that they are built on data reflecting a consumer’s willingness to repay rather than their ability to repay. This is a crucial distinction representing the difference between a client that is willing to skip meals or borrow from other lenders to repay the original loan and a client that can afford the loan without experiencing such debt stress. Repayment rates may appear acceptable, but this flaw in the model masks a brewing overindebtedness crisis as repayment rates don’t account for loan stacking or abusive debt collection practices.

&nbsp;

It’s Time to Protect Kenyans from a Digital Lending Laboratory

Kenya

Over-indebtedness

Pakistan’s Client Voice research includes the voices of roughly 1,000 current and former microfinance clients to identify consumer protection challenges in the country. The Smart Campaign selected Pakistan as the market in Asia for the Client Voices project for several reasons. Notably, a priority objective of this research is to catalyze industry discussion, which requires strong and engaged local partners. The Pakistan Microfinance Network (PMN) has long-demonstrated its leadership and commitment to client protection among its members and was a natural partner for this exercise.
<blockquote>Top concerns among microfinance clients in Pakistan are transparency, fair and respectful treatment of clients, and mechanisms for resolving complaints.</blockquote>
Between March and October 2014, Bankable Frontier Associates conducted qualitative and quantitative research. The qualitative portion included individual interviews as well as participants taking photographs that represented their positive and negative experiences with microfinance. On the quantitative end, over 900 clients and 100 former clients participated in a survey expressing any concerns related to microfinance practices.

The research confirms Pakistan’s advanced consumer protection ecosystem while underlining the issues that persist. Key client protection risks emerged around the issues of harsh treatment of clients, inflexibility in the case of late repayment, and unclear terms and conditions. Unlike other markets, the regulatory environment for the microfinance industry is well-developed in Pakistan with the Credit Information Bureau (MF-CIB) exclusively monitoring activity.

Building on the country’s strong regulatory environment and addressing these client protection concerns requires a market-level approach that takes into consideration the unique role that regulators, local partners, microfinance institutions, networks, and clients themselves each must play.

Client Voices: Pakistan Country Report

Bankable Frontier Associates

The Smart Campaign

Pakistan

South Asia

Keeping Clients First

Transparency

Report

Benin’s Client Voice research includes the voices of over 1,500 current and former microfinance clients to understand the market’s consumer protection challenges. The Smart Campaign selected Benin as the African market for the Client Voices project for several reasons. First was the need for more demand-side research in Francophone West Africa, as relative to Anglophone East Africa. The Campaign also believed that the relevance of the Benin findings would likely extend beyond the country itself to the other seven members of the West African Economic and Monetary Union (WAEMU) given their operating under a common regulatory regime. Finally, Benin was selected because of the engagement of local stakeholders such as the Consortium Alafia – a 34-member local microfinance association.
<blockquote>Transparency, fair and respectful treatment of clients, and complaint resolutions mechanisms are the key consumer protection concerns for clients in Benin.</blockquote>
From May – October 2014, Bankable Frontier Associates (BFA) and its local research partner the Centre pour L’Environment et le Developpement en Afrique, Benin (CEDA Benin) carried out qualitative and quantitative research. The quantitative survey reached 1,733 Beninois (1,028 current MFI clients, 526 former clients, and 179 non-clients).

Key client protection risks emerged around the issues of transparency, fair treatment and complaint resolution mechanisms. Addressing these concerns requires a market-level approach that takes into consideration the unique role that regulators, the MFI industry, and clients themselves each must play. This page contains the results of the initial qualitative research, the follow-up quantitative survey and the final country report which weaves both pieces together. Finally the page has a link to the raw, anonymized data from the quantitative survey along with the survey instrument so that fellow researchers and client protection data wonks can play draw their own conclusions.

Client Voices: Benin Country Report

Financial Service Providers

Microfinance Institutions

The Smart Campaign conducted a study on the client protection practices of 12 microfinance institutions in Latin America and the Caribbean (LAC). This study looked at an assortment of organizations such as NGOs, banks, and credit unions in different countries, analyzing their client protection performance from the point of view of practitioners, offering recommendations to improve their client protection practices. The findings in this Study of Practices in LAC are intended to help stakeholders reflect on the current state of practice among microfinance institutions in LAC and how performance gaps can be addressed.

Overall, the MFIs studied in the report performed well in the principles of Preventing Over-Indebtedness, Responsible Pricing, and Ethical Staff Behavior, but there is (sometimes significant) room for improvement in the principles of Transparency, Appropriate Collections, and Mechanisms for Complaint Resolution. This report revealed that client protection performance is not easily generalized and improvement in certain principles is needed to meet the standards laid out.

We believe that reaching the Campaign’s standards of care in client protection across all seven principles is a possible objective for most organizations to achieve, provided enough time and dedication. Ultimately implementing the principles will strengthen institutions and improve client well-being.

&nbsp;

&nbsp;

&nbsp;

Study of Client Protection Practices in Latin America and the Caribbean (Spanish)

Appropriate Product Design and Delivery

Privacy

Product Pricing

The Smart Campaign conducted a study on the client protection practices of 12 microfinance institutions in Latin America and the Caribbean (LAC). This study looked at an assortment of organizations such as NGOs, banks, and credit unions in different countries, analyzing their client protection performance from the point of view of practitioners, offering recommendations to improve their client protection practices. The findings in this Study of Practices in LAC are intended to help stakeholders reflect on the current state of practice among microfinance institutions in LAC and how performance gaps can be addressed.

Overall, the MFIs studied in the report performed well in the principles of Preventing Over-Indebtedness, Responsible Pricing, and Ethical Staff Behavior, but there is (sometimes significant) room for improvement in the principles of Transparency, Appropriate Collections, and Mechanisms for Complaint Resolution. This report revealed that client protection performance is not easily generalized and improvement in certain principles is needed to meet the standards laid out.

We believe that reaching the Campaign’s standards of care in client protection across all seven principles is a possible objective for most organizations to achieve, provided enough time and dedication. Ultimately implementing the principles will strengthen institutions and improve client well-being.

&nbsp;

&nbsp;

&nbsp;

&nbsp;

Study of Client Protection Practices in Latin America and the Caribbean (English)

Latin America and The Caribbean

<em>&gt; Posted by Alex Rizzi and Leah Wardle, Deputy Director and Tool Development Specialist, The Smart Campaign, CFI</em>

<em><a href="http://www.transitionsabroad.com/listings/work/internships/articles/microfinance-internships-abroad.shtml"><img class="alignright  wp-image-8533" style="border:0" title="complaints resolution" alt="" src="http://centerforfinancialinclusionblog.files.wordpress.com/2012/11/complaints-resolution.jpg" width="280" /></a><a href="http://smartcampaign.org/">The Smart Campaign</a> 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. </em>

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 <a href="http://smartcampaign.org/about-the-campaign/2011-11-21-16-36-33">Smart Campaign Certification standards</a> 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.

At the Smart Campaign, we’ve observed many different complaint systems in the field, ranging from the high-touch/low-tech customer service desk, to the low-touch/high-tech Facebook page. In many cases there is no formal system at all and the staff receives verbal complaints from clients but does little to record the information for institutional use. Perhaps the most common complaints channel we’ve observed in the field is the office suggestion box. While easy for clients to understand and inexpensive for the institution, the Smart Campaign Certification standards do not consider a suggestion box an adequate standard of care. Suggestion boxes fall below an adequate standard because they do not provide an opportunity for individual clients to resolve their problems or to receive a response from an institution. In short, a suggestion box is not a problem resolution system.

The Smart Campaign Certification standards set benchmarks for problem resolution that allow for a range of solutions to be used depending on institution size and contextual issues, such as client literacy and preferred communications methods. Just as technology has revolutionized other aspects of microfinance, it offers innovative and user-friendly mechanisms for collecting and analyzing client complaints. A few innovations we have observed in the field include:
<ul>
	<li>Call centers with toll-free numbers. This works well in the many countries where clients have high access to cell phones (see <a href="http://smartcampaign.org/tools-a-resources/589">this Smart Note</a> for an example).</li>
</ul>
<ul>
	<li>Phone numbers that accept text messages from clients, including some which ask clients to respond to client satisfaction questions via text message (see <a href="http://smartcampaign.org/tools-a-resources/471">this Smart Note</a> for an example).</li>
</ul>
<ul>
	<li>Social media or email addresses that allow clients to send questions and complaints to the institution.</li>
</ul>
<ul>
	<li>Institution-sponsored events during which clients can make direct complaints or ask questions of senior management.</li>
</ul>
These systems are typically low-cost for clients, easy to access, and in most cases, give clients a way to make complaints privately and, if they wish, anonymously. They also create systems for data to be aggregated and used at the institutional level. With these criteria met, it’s safe to expect that an MFI will hear from clients before a situation gets so bad that the client leaves the institution. Such a system makes it more likely that when a client has a problem the institution can ask <em>“how can we fix this situation?”</em> rather than<em> “how can we get you back?”</em>

<em>Image credit: <a href="http://www.transitionsabroad.com/listings/work/internships/articles/microfinance-internships-abroad.shtml">Transitions Abroad</a></em>

<strong>Have you read?</strong>

<a href="http://cfi-blog.org/2012/10/25/straight-talk-on-client-protection-monitoring-client-indebtedness/">Straight Talk on Client Protection - Monitoring Client Indebtedness</a>

<a href="http://cfi-blog.org/2012/10/18/straight-talk-on-client-protection-hiding-fees-when-quoting-interest-rates/">Straight Talk on Client Protection - Hiding Fees When Quoting Interest Rates</a>

<a href="http://cfi-blog.org/2012/09/19/new-smart-note-responding-to-complaints-at-tameer-bank-pakistan/">New Smart Note: Responding to Complaints at Tameer Bank, Pakistan</a>

Straight Talk on Client Protection - Mechanisms for Complaints Resolution

Alexandra Rizzi

Senior Director, Smart Campaign 

Isabelle Barrès

Former Vice President and Campaign Director, Smart Campaign

Mayada El-Zoghbi

Managing Director

Boubacar Diallo

Malacci Ohrt

Alex Taylor

Jeffrey Riecke

Robin Brazier

Amelia Kuklewicz

Micol Pistelli

Josh Goldstein

Juan Blanco

North America

United States

Guatemala

Dominican Republic

Paraguay

Credit

Delivery Channels

Digital Credit

Digital Financial Services

Financial Capability

Fintechs

Fraud

Telcos

Agent Banking

Credit Provision

Mobile Banking

Payments

Underserved Groups

Nano Loans

Smart Certification

Customer Centricity

Though Nigeria’s government has set ambitious goals for financial inclusion, the majority of its people lack a formal bank account. Accion has worked in the country since 2007 to expand access to financial services.

<h1>Why Consumer Rights and Responsibilities?</h1>
The <a href="https://www.smartcampaign.org/about/smart-microfinance-and-the-client-protection-principles">Client Protection Principles</a> provide a common framework for financial service providers (FSPs), policymakers, and clients to better understand and discuss consumer protection issues. While much of the Center for Financial Inclusion’s (CFI) work with the financial inclusion industry has focused on providers and regulators, there is a third crucial constituency: clients.

Client awareness and capability is a critical component of effective financial consumer protection. Clients have the right to demand fair treatment and lodge complaints with government authorities, but these rights mean little if they don’t know what constitutes lawful treatment or how to access complaints channels. Similarly, clients play a role in protecting themselves by practicing behaviors to maintain their privacy and safety. While FSPs can institute protective processes and regulators can craft policy safeguards, improving client awareness of their rights and responsibilities helps consumers play their part to support a sustainable financial system.

This report provides lessons learned from initiatives in Ghana, Uganda, and Benin to raise consumer protection awareness among clients through multimedia campaigns, digital tools and other outreach strategies. It covers country-specific consumer protection issues and the individualized campaigns to address these issues. We also offer five key takeaways to help inform future client protection and empowerment awareness building activities.

Clients Deserve to Know: Using Radio to Educate and Empower Consumers in Africa

The majority of Kenyans have mobile money accounts; their activity demonstrates digital financial services’ potential. Accion helps Kenyan innovators harness emerging technologies to create new financial services.

Today there are close to 700 million mobile money accounts registered worldwide — a number that, if it were a population, would rank as the world’s third-largest country. East Africa continues to lead in digital financial innovations as well as account usage, with two-thirds of the combined adult populations of Kenya, Rwanda, Tanzania, and Uganda actively using mobile money. With the proliferation of mobile financial services, particularly among underserved populations, it is vital that users be treated fairly and with dignity. In the momentum to define responsible digital finance and recognize providers of high-quality financial services, the industry must not forget the consumer.
<h1>Client Voices: Why We Listened</h1>
<a href="/about/what-we-do/the-smart-campaign/">The Smart Campaign</a>, a global initiative to create an environment in which financial services are delivered safely and responsibly to low-income clients, has long recognized that client perspectives are often underrepresented in consumer protection discussions. With the Client Voices Project, the Campaign questions whether the industry’s assumptions about what constitutes problematic treatment rightly reflect what clients themselves worry about.

The dual objectives of the project are to solicit input from low-income clients about what they consider good and bad treatment in their interactions with financial service providers and to assess the prevalence of consumer protection problems among these clients, using quantitative surveys. The project is designed to act as a catalyst for financial service providers, regulators, industry associations, consumer advocacy groups, and others to improve client protection in ways that are grounded in client feedback.
<h1>Major Findings</h1>
Based on a survey of over 1,200 people in three districts in Rwanda, this report delves into the experiences of individuals who use digital financial services (DFS), the main client protection issues they are concerned about, and the impact and prevalence of negative experiences. We find that mobile money enjoys a high degree of satisfaction and trust from clients in Rwanda, even though 40 percent of clients report being targeted by fraudulent schemes, which have become increasingly sophisticated.
<blockquote>Customers report wising up to scams and fraud, but with a continuous influx of new mobile money users and fraudsters who innovate quickly, the threat is real and constant. Fraud represents the greatest potential to damage customer trust and engagement with mobile money in Rwanda.</blockquote>
However, there are many ways that DFS operations and practices can be improved to better protect clients and strengthen trust. Client recourse mechanisms, for example, represent an important area for improvement: many clients shared that they feel helpless and unsure about what to do after realizing they have been duped. Additionally, for business models that rely more on the mobile interface than on human interaction, clients increasingly rely on agents for information and guidance. This presents an opportunity to provide better service, as well as a risk for poor client treatment.

We hope that providers, industry associations, support organizations, regulators, consumer protection advocates, and clients can benefit from these findings to create a stronger, more inclusive client protection ecosystem. We offer specific recommendations for many of these stakeholders.

Client Voices: Rwandans Speak on Digital Financial Services

<a href="https://www.consumerfinance.gov/data-research/consumer-complaints/"><img class="wp-image-25519 alignright" src="https://centerforfinancialinclusionblog.files.wordpress.com/2018/05/cfpb1.png" alt="" width="615" height="379" /></a>Last week, Mick Mulvaney, interim director of the U.S. Consumer Financial Protection Bureau (CFPB) <a href="https://www.nytimes.com/2018/04/25/business/cfpb-complaints-database-mulvaney.html?rref=collection%2Fsectioncollection%2Fyour-money">said</a> in reference to the CFPB’s consumer complaints database, “I don’t see anything in [the Dodd-Frank Act] that says I have to run a Yelp for financial services sponsored by the federal government. I don’t see anything in here that says that I have to make all of those [complaints] public.”

Mulvaney’s comments refer to the complaints database CFPB has been running for several years, which allows anyone to view, sort, and filter complaints submitted by customers regarding their treatment by their financial service provider. Since the database was created, roughly <a href="https://www.regulations.gov/document?D=CFPB-2018-0014-0001">1.5 million complaints</a> have been logged. This database has functioned as a tremendous resource for prospective customers who want to check out financial institutions, for analysts of consumer risks in the U.S. financial system, and for financial institutions who want to see how they stack up against others. Its publication may also induce financial service providers to be more vigilant in avoiding bad practices and handling customer complaints well.

I share this because Mulvaney has put forth a <a href="https://www.regulations.gov/document?D=CFPB-2018-0014-0001">call for comments and information</a> from interested parties on how the CFPB handles consumer complaints. CFPB is required by law to collect, investigate, and respond to consumer complaints regarding financial products and services. But it isn’t legally required to make these comments public.

What do you think? Should the CFPB do away with the public side of the database? Mulvaney’s comment has sparked fierce debate in the country, including vehement opposition from consumer protection advocates.
<h3><strong>How the Consumer Complaints Database Works</strong></h3>
When a consumer lodges a complaint into the system, before the complaint is published, the CFPB verifies the relationship between the consumer and the financial service provider, and routes the complaint directly to the provider. The provider then has 15 days to respond to the complaint. The complaint is published once the provider responds, or after 15 days, whichever comes first. The consumer is invited to review and comment on the provider response and indicate whether their concern has been alleviated. This system is meant to allow both provider and customer to have a voice.

In addition to public uses of the database, CFPB uses it to identify patterns of bad behavior. It has prompted action against student loan services, debt collectors, mortgage lenders, and credit card companies, among others. For example, it <a href="https://www.politico.com/story/2018/04/30/mick-mulvaney-consumer-protection-507460">helped</a> the CFPB identify the systemic fraudulent activity of Wells Fargo employees opening bank accounts without consumer permission.

It’s estimated that <a href="http://www.post-gazette.com/opinion/2018/05/01/As-Others-See-It-Let-consumer-complaints-see-the-light-of-day/stories/201805010043">97 percent</a> of consumer complaints receive a timely response and 80 percent are resolved to the customer’s satisfaction. <a href="https://www.nytimes.com/2018/04/25/business/cfpb-complaints-database-mulvaney.html?rref=collection%2Fsectioncollection%2Fyour-money">Over 185,000 complaints</a> have resulted in some form of compensation or relief for the consumer complaint, including through monetary relief and the changing of the financial institution’s practices.

Use of the consumer complaints database is robust, with consumers submitting more than <a href="https://www.regulations.gov/document?D=CFPB-2018-0014-0001">320,000 complaints</a> in 2017. Each week CFPB sends <a href="https://www.consumerfinance.gov/data-research/consumer-complaints/">thousands of consumer complaints</a> about financial products and services to companies for response.
<h3><strong>The Case for Revoking Publication </strong></h3>
Opponents of publishing the database cite several concerns. The first question is whether the consumer complaints are substantiated. The CFPB might be able to verify that the consumer is a client of the institution, but it does not verify that the consumer’s complaint is valid before publishing. Even though the financial institution has the opportunity to respond before the complaint is published, publishing unsubstantiated complaints can create undeserved negative attention for the provider.

Another issue is that the database does not allow the frequency of complaints to be <a href="http://www.post-gazette.com/opinion/2018/05/01/As-Others-See-It-Let-consumer-complaints-see-the-light-of-day/stories/201805010043">adjusted for the size of the institution</a>. The biggest financial institutions in the country appear frequently in the database simply because they have so many more customers. It is not possible to determine the rate of complaints per customer.

Finally, some opponents question the need for complaint resolution channels beyond those financial services providers are already required to have. They argue that little is gained by using public funding for an additional level of complaints, and would prefer to see customers depend on privately managed online tools for consumers to rate financial institutions and products. Shouldn’t these be enough?
<h3><strong>The Case for Keeping It Public (Our View)</strong></h3>
“Daylight is a great disinfectant. And, you know, the American people have a right to know when tens of thousands of their fellow citizens are complaining about a financial institution,” <a href="https://www.politico.com/story/2018/04/30/mick-mulvaney-consumer-protection-507460">said</a> Karl Frisch of consumer advocacy group Allied Progress. Although it is not required by law, taking down the public database might reduce incentives for providers to behave fairly and respond adequately to complaints. Proponents of publication assert that the current approach helps to hold these institutions accountable.

Regulators around the world, as well as consumer protection organizations including <a href="http://smartcampaign.org/">the Smart Campaign</a>, generally create and support two tiers of grievance redressal, with primarily responsibility lying with providers, but appeals available from an independent ombudsman, either at a provider association level or at the regulatory level or both.

In regards to the concern about the proportionality of complaints to clients, this could be ameliorated with the inclusion on the platform of relevant ratios. Adding such information to the current site would not be difficult.

A <a href="https://www.documentcloud.org/documents/4449153-Breach-of-Trust-Equifax-Report.html">new report</a> by Senate Banking Committee members Elizabeth Warren, Robert Menendez, and Brian Schatz illustrated that complaints about Equifax to the CFPB nearly doubled after the data breach was announced in September. There were roughly 12,000 complaints in the six months preceding the company’s announcement, and in the six months thereafter the CFPB has received more than 7,000 complaints about Equifax’s improper use of credit reports, 7,000 complaints regarding incorrect information on credit reports, 3,000 complaints about Equifax’s measures taken to resolve issues related to the breach, and 1,500 complaints regarding Equifax’s identity theft protections. For example, we’re able to know that even though the CFPB has received over 20,000 complaints on the breach, it hasn’t yet taken public action against Equifax.

As to the argument that Yelp and other review sites are sufficient, we have reviewed the information on such sites, and we find often confusing and <a href="https://cfi-blog.org/2017/11/20/choosing-a-payday-lender-can-online-reviews-help/">disappointing</a>. Moreover, many of those sites are paid for by the very companies that are reviewed.

“Hiding this information from the public would directly harm consumers and allow financial institutions to shield even widespread scams from public view,” the three Senate Banking Committee members <a href="https://www.americanbanker.com/news/equifax-breach-shows-need-for-public-cfpb-complaints-dem-senators">assert</a>. We tend to agree.

<strong>Have you read?</strong>

<a href="https://cfi-blog.org/2018/02/02/exchanging-cash-for-freedom-predatory-bail-bonds-in-the-u-s-criminal-justice-system/">Exchanging Cash for Freedom: Predatory Bail Bonds in the U.S. Criminal Justice System</a>

<a href="https://cfi-blog.org/2017/01/19/what-a-repeal-of-the-affordable-care-act-would-mean-for-financial-inclusion-in-the-u-s/">What a Repeal of the Affordable Care Act Would Mean for Financial Inclusion in the U.S.</a>

<a href="https://cfi-blog.org/2017/02/09/the-u-s-consumer-financial-protection-bureau-and-the-smart-campaign/">The U.S. Consumer Financial Protection Bureau and the Smart Campaign</a>

&nbsp;

Should the CFPB Run a Yelp for Financial Services Providers?

March 15 is <a href="http://consumersinternational.org/what-we-do/world-consumer-rights-day/">World Consumer Rights Day</a> (WCRD), a day marked by the consumer movement each year to raise global awareness about consumer rights and needs. It’s an opportunity to demand that the rights of all consumers are respected and protected, and to protest against market abuses and social injustices which undermine those rights. The Smart Campaign marks this occasion by talking about the importance of transparency and grievance redressal as key tenets of client protection and building consumer trust.

WCRD’s theme this year is “Making Digital Marketplaces Fairer.” With the volume of online transactions increasing, consumers are exposed to new – sometimes not fully understood – risks. For this reason, WCRD 2018 is calling for access to fair and secure internet for all, action against scams and fraud, and better consumer protection online.

According to Consumers International, <a href="http://consumersinternational.org/media/154916/e-commerce-overview-report.pdf">nearly half</a> of consumers that have access to internet but do not shop online cite lack of trust as the reason. Similarly, <a href="http://consumersinternational.org/what-we-do/world-consumer-rights-day/2018-making-digital-marketplaces-fairer/">almost 70 percent</a> of online consumers worry their digital payments are unsafe. What contributes to this lack of trust? The causes vary, but they often hinge on two things: lack of transparency and insufficient grievance redressal mechanisms.
<h3>Transparency</h3>
For the Smart Campaign, transparency means much more than disclosure agreements. Even when these are in place, <a href="http://smartcampaign.org/storage/documents/Synthesis_Report_ENG_FINAL.pdf">research shows</a> that low-income clients rarely fully understand the terms and conditions (T&amp;Cs) of the product they purchased. Many times, when the T&amp;Cs are explained simply and thoroughly, they are <a href="https://www.itu.int/en/ITU-T/focusgroups/dfs/Documents/01_2017/ITU_FGDFS_Report-on-Review-of-DFS-User-Agreements-in-Africa.pdf">often in English</a> instead of in the language of the customer. Sometimes <a href="http://www.cgap.org/sites/default/files/Working-Paper-Competition-in-MFS-Kenya-Tanzania-Jan-2016.pdf">third-party charges or hidden fees</a> aren’t fully disclosed up front, but only after the purchase is finalized. In other cases, the entire price is hidden until <a href="http://www.cgap.org/sites/default/files/Focus-Note-Consumer-Protection-in-digital-Credit-Aug-2017.pdf">after the completion of the purchase</a>.

On World Consumer Rights Day, we remind digital financial service providers and online marketplaces to transparently and effectively convey important product information so their customers fully understand. As pointed out in our recent Smart Brief, <a href="http://smartcampaign.org/storage/documents/Smart_Brief_Tiny_Loans_Big_Questions_Final_092617.pdf">“<em>Tiny Loans, Big Questions</em>,”</a> clients should also be able to store and save T&amp;Cs related to their digital purchase or transaction, just as they should for a face-to-face one. If clients are confused or feel misled by the provider, trust is eroded. Alternatively, when providers meet consumers where they are by using their language and being completely transparent about business practices and pricing, they are taking an important step in building customer trust and loyalty.
<h3>Recourse Mechanisms</h3>
<img class="alignright wp-image-25279" style="border: 0 solid #000000" src="https://centerforfinancialinclusionblog.files.wordpress.com/2018/03/pull-quote-2.png" alt="" width="315" height="207" />Consumers of practically every product or service are bound to have complaints or questions regarding their purchase or transaction. This issue is especially relevant in digital marketplaces, since there tends to be limited human interaction. On top of that, customers who are new to the technology or not familiar with digital interfaces may be confused and are therefore likely to require customer service. <a href="http://smartcampaign.org/storage/documents/Smart_Brief_Tiny_Loans_Big_Questions_Final_092617.pdf">“<em>Tiny Loans, Big Questions</em>”</a> points out that problem resolution can be particularly difficult when clients are using a lending service that involves multiple companies, as in the case of mobile lenders using a mobile network operator’s agent network for cash-in and cash-out payments. Borrowers in this situation are interacting with agents who are not full-time employees and likely do not work for the lender. Although agents offer a human touch, as cash transactions are their primary duty, they may have little ability to field questions or resolve problems related to the loan product.

On World Consumer Rights Day, the Smart Campaign stresses the right of consumers to access simple, fair redress. We know that if customers do not have an easily accessible grievance redressal mechanism when things go wrong, they will be less likely to trust the product or service they’re buying. However, if the customer feels heard and sees that their needs are adequately addressed, trust is strengthened. Fair redress can be achieved by setting up well-staffed call enters or establishing online chats between staffers and customers, for example. <a href="http://www.centerforfinancialinclusion.org/storage/Uniting_TechandTouch_Kenya_FINAL.pdf">CFI Fellow Alexis Beggs Olsen</a> advocates for “centaur solutions” combining digital and human interfaces to best support low-income customers using digital financial services, while improving customer acquisition and retention.
<h3>Moving Forward</h3>
At the Smart Campaign, it’s our job to stay on top of risks to clients around the world and to work with financial service providers and other parties to help mitigate those risks.  While the risks themselves change over time, one thing remains constant: if consumers do not trust the service, product, provider or platform, these entities will struggle to reach their full potential and it will be harder to achieve meaningful financial inclusion.  At the end of the day, customers being heard and respected through grievance redressal channels and transparent business practices are two of the most critical components to building consumer trust. Only when this trust is in place can digital marketplaces and financial services providers do their part in making a <a href="https://twitter.com/search?q=%23BetterDigitalWorld&amp;src=tyah">#BetterDigitalWorld</a>.

<strong>Have you read?</strong>

<a href="https://cfi-blog.org/2017/06/05/the-smart-campaign-promotes-stronger-client-protection-and-sector-collaboration-in-uganda/">The Smart Campaign Promotes Stronger Client Protection and Sector Collaboration in Uganda</a>

<a href="https://cfi-blog.org/2017/08/03/the-microfinance-ceo-working-group-reports-out-consumer-protection-by-the-millions-and-other-updates/">The Microfinance CEO Working Group Reports Out: Consumer Protection By the Millions and Other Updates</a>

<a href="https://cfi-blog.org/2017/12/19/nigeria-needs-to-include-consumer-protection-in-its-ambitious-financial-inclusion-plans/">Nigeria Needs to Include Consumer Protection in Its Ambitious Financial Inclusion Plans</a>

&nbsp;

&nbsp;

&nbsp;

This World Consumer Rights Day, Let’s Build Trust

<em>&gt; Posted by Deepak Saxena, George Cheriyan and Amol Kulkarni, CUTS International, India</em>

[caption id="attachment_23292" align="alignright" width="330"]<a href="http://www.cuts-international.org/cart/Grahak_Suvidha_Kendra.htm"><img class="wp-image-23292" src="https://centerforfinancialinclusionblog.files.wordpress.com/2017/03/gskwebpage1.jpg" alt="" width="330" height="185" /></a> The Consumer Care Center managed by CUTS International in Jaipur, Rajasthan[/caption]

When a business makes a mistake, does that influence your decision to keep using its product or service? How about if that mistake costs you money and you can’t get the business to correct the mistake?

To date, the importance of efficient and effective grievance redress as a building block for consumer trust has unfortunately remained understated. Across sectors, focus remains predominantly on enabling access to goods and services, with limited thought on post-sale customer engagement and grievance redressal.

This holds true for the financial inclusion sector as well. The success of financial inclusion efforts have mostly been calculated in terms of number of accounts opened or the amount of credit disbursed. Limited thinking goes into putting in place timely and effective recourse processes capable of dealing with fraud and related consumer protection issues. In many countries, state capacity in managing consumer grievances has also remained limited. This is a huge missed opportunity. In the inclusive finance sector, more than in many other industries, establishing trust among first-time users of services is essential.

<strong> </strong>


<h3><strong>Consumer Care Centers in India</strong></h3>
In recent years the Government of India has decided to combat such shortcomings in recognition of the challenges faced by consumers in accessing grievance redress and obtaining speedy resolution of their complaints. There was also a recognition that the government had shortcomings in this area.

In 2015, the government launched a new initiative called Grahak Suvidha Kendra (GSK or Consumer Care Center) creating one-stop-centers providing a spectrum of services for consumer welfare across industries. The operation of the GSKs was outsourced to expert independent civil society organizations. The objective is to offer information and professional advice to citizens faced with every day practical consumer problems, thus promoting consumer education and empowerment. The GSKs offer consumers a wide range of services, such as information on consumer rights, one-on-one advice, guidance and assistance on consumer complaints through counseling and conciliation, and assisting consumers in approaching formal grievance redress mechanisms.
<h3><strong>Experiences in running the GSK</strong></h3>
<a href="http://www.cuts-international.org/">CUTS International</a>, an independent non-profit economic policy research and outreach organization, was one of the civil society organizations tasked with <a href="http://www.cuts-international.org/cart/Grahak_Suvidha_Kendra.htm">managing the regional GSK in western India</a>, based out of Jaipur, Rajasthan. It started operations in July 2015.

CUTS’ GSK accepts complaints in English and Hindi through a variety of mechanisms including walk-ins, online forms, telephone calls, emails, fax messages, and letters. It also has complaint collection centers in rural areas throughout Rajasthan including Bhilwara, Chittorgarh, Udaipur, Ajmer, Kota, and Sawai Madhopur.

In its 18 months of operation, the CUTS’ GSK received complaints pertaining to a range of sectors, with close to 11 percent of complaints related to the financial sector. Understandably, given the shift to digital payments following the government’s recent demonetization initiative, many of the recent complaints involved digital payments.

Here are some of our key findings from running the GSK to-date:
<ul>
 	<li><strong>Services quality remains a huge concern</strong> – Around 35 percent of the financial services complaints related to errors, missteps, and deficiencies in services, such as: mismanagement of accounts, non-receipt of periodic statements, withdrawals by unauthorized individuals, misselling of products, and overcharging. A significant proportion of complaints (12 percent) related to unauthorized/unexpected deductions from accounts (such as penalty deductions when users are unable to maintain minimum balances). Long wait times surrounding claims and refunds and related dues were also a focus of complaints.</li>
</ul>
[caption id="attachment_23285" align="aligncenter" width="614"]<a href="https://centerforfinancialinclusionblog.files.wordpress.com/2017/03/figure-1.png"><img class="wp-image-23285" src="https://centerforfinancialinclusionblog.files.wordpress.com/2017/03/figure-1.png" alt="" width="614" height="279" /></a> (click to enlarge)[/caption]
<ul>
 	<li><strong>Consumers need more information</strong> – Consumers did not use the GSK platform simply for registering complaints, but also for obtaining information and advice. The nature of inquiry varied, but we found significant information asymmetry exists with respect to charges involved in digital payments. Close to 11 percent of queries related to debit cards and credit cards. Additionally, as the Center was functioning during the demonetization period in India, it came as no surprise that a large number of queries (30 percent) related to shortage of currency, and alternatives to cash payments. This case of limited awareness was the same for the role of and mode of engagement with banking ombudsman.</li>
</ul>
[caption id="attachment_23286" align="aligncenter" width="614"]<a href="https://centerforfinancialinclusionblog.files.wordpress.com/2017/03/figure-2.png"><img class="wp-image-23286" src="https://centerforfinancialinclusionblog.files.wordpress.com/2017/03/figure-2.png" alt="" width="614" height="325" /></a> (click to enlarge)[/caption]
<ul>
 	<li><strong>Resolution of complaints takes time</strong> – The process of complaints resolution includes initiating conversations with service providers, furnishing necessary evidence of consumer grievances, and conducting follow up. In our experience, this process typically takes more than three months. As a result, only roughly 33 percent of complaints (across sectors, financial and otherwise) logged in the year ending June 2016 had been resolved as of December 2016. For the period July-September 2016, only 5 percent of complaints (across sectors) were resolved by December 2016. Generally, resolution is faster when government has enabled or deputized civil society organizations to carry out grievance redress.</li>
</ul>
<ul>
 	<li><strong>Most complaints are filed through letters while advice and clarification is sought in person</strong> – In our experience at the GSK, consumers are not adept in using technology for filing complaints or for obtaining information and advice from the GSK. More than 50 percent of complaints were filed through letters, perhaps indicating the seriousness and formality associated with complaint filing. In contrast, more than 90 percent of advice and information was sought through in-person visits to the Center. This perhaps is indicative of the informal nature of seeking advice. Alternatively, perhaps it indicates that people don’t want to make a trip just to file a complaint, while in seeking advice there is the possibility of instantly receiving valuable information and following up with further questions.</li>
</ul>
<h3><strong>Need for greater awareness </strong></h3>
GSK and similar initiatives have significant potential for resolving consumer complaints and encouraging communication between consumers and service providers. However, our experiences suggest that, owing to a lack of awareness and the absence of a ‘compliant filing culture’ in the country, such services are being sub-optimally utilized.

Another reason for sub-optimal usage of such platforms is the low priority attributed to grievance redress by service providers. This limited buy-in exacerbates difficulties navigating such platforms. Providers must begin to realize that one bad consumer experience can dissuade an entire extended family from using a particular product or service.

It is high time service providers in the financial sector get their act together with respect to grievance redress. High quality recourse mechanisms are an important tool to retain consumers and generate trust in formal financial services. It’s time financial service providers invested the time and money in such mechanisms to make them work well. This might not be possible without consumers demanding speedy and effective grievance redress mechanisms.

<em>Image credit: <a href="http://www.cuts-international.org/cart/Grahak_Suvidha_Kendra.htm">CUTS International</a></em>

<strong>Have you read?</strong>

<a href="https://cfi-blog.org/2017/01/18/what-does-effective-human-touch-look-like-in-indias-digital-age/">What Does Effective Human Touch Look Like in India's Digital Age?</a>

<a href="https://cfi-blog.org/2016/11/16/what-does-indias-demonetization-experiment-mean-for-financial-inclusion/">What Does India's Demonetization Experiment Mean for Financial Inclusion?</a>

<a href="https://cfi-blog.org/2016/06/13/indian-microfinance-gets-serious-about-grievance-redressal/">Indian Microfinance Gets Serious about Grievance Redressal</a>

Lessons from Running a Consumer Care Center in India

When most microfinance clients start out, they’re first-timers at a formal financial institution. Like anything unfamiliar, a first foray with banks can be intimidating. You don’t want to be duped or make a mistake and lose precious savings. Peace of mind was granted to clients of two microfinance institutions, one in Paraguay and the other in the Dominican Republic recently as the first <a href="http://smartcampaign.org/certification/">Smart Certifications</a> in those countries were awarded. Fundacion Paraguaya and Banco ADOPEM were certified as meeting all the standards needed to treat their clients with adequate care. This certification demonstrates to prospective clients as well as investors and other industry stakeholders that their institutions are operating responsibly.

Fundacion Paraguaya and Banco ADOPEM are both market leaders in their own right. Banco ADOPEM is one of the largest microfinance institutions in the Dominican Republic. According to the MIX, 351,000 depositors in the Dominican Republic bank with Banco ADOPEM. When Banco ADOPEM pursues and achieves Smart Certification, that sends a message to MFIs and other stakeholders in the country that client protection is a key priority. In 2014 ADOPEM was named “Most Innovative Microfinance Institution of the Year” by Citi, in part because of <a href="https://www.google.com/url?sa=t&amp;rct=j&amp;q=&amp;esrc=s&amp;source=web&amp;cd=1&amp;cad=rja&amp;uact=8&amp;ved=0ahUKEwiqm5rRtcvNAhVBVT4KHQJ6A7AQFggfMAA&amp;url=http%3A%2F%2Fwww.bancoadopem.com.do%2Fapp%2Fdo%2Fproductos.aspx%3Fid%3D1408%26iid%3D1406&amp;usg=AFQjCNGgptkSBD2J3D7ZsUJPbBnM2oBakA&amp;sig2=2F9CvETC8A2D75Fe1H3ozw">ATA-Movil</a>, a portable electronic application that allows credit advisers to assess customers in their businesses or in their homes. The mobile information system also allows for convenient and direct communication with clients.

Mercedes de Canalda, President and Founder of Banco ADOPEM, told the Smart Campaign that the MFI’s decision to pursue Smart Certification was to evaluate the institution’s policies and practices against the industry’s best practices in areas like transparency and communication with clients. She said, “The deep evaluation of our policies and procedures opened our eyes to what we can improve. The biggest advantage is that it gave us reasonable and concrete goals and a specific timeline to improve our practices. It was a detailed requirement. It challenged us to innovate and continue to improve to ensure that clients are treated well and that they are heard.”

Fundacion Paraguaya has long been a leader and innovator in microfinance and in the broader fight against poverty, contributing to areas like <a href="http://www.fundacionparaguaya.org.py/?page_id=490">poverty assessment</a>, <a href="https://cfi-blog.org/2013/09/05/disability-inclusivity-and-the-smart-campaign-at-fundacion-paraguaya/">financial inclusion for persons with disabilities</a>, and <a href="http://www.fundacionparaguaya.org.py/?page_id=77">youth empowerment</a>. The <a href="http://www.centerforfinancialinclusion.org/publications-a-resources/global-microscope"><em>Global Microscope</em></a><em> 2015</em> reports that client protection regulation in Paraguay is lacking. For example, it lacks strong grievance redressal mechanisms and does not adequately prevent aggressive collection practices. The report also finds there are mounting concerns over over-indebtedness among lower-income groups in the country and that the government needs to devise and implement a national program to ensure greater education about financial services. Fundacion Paraguaya, along with its strong client protection practices, offers <a href="http://www.fundacionparaguaya.org.py/?page_id=491">a range of financial education services</a>, including services to <a href="http://www.fundacionparaguaya.org.py/?page_id=517">children and youth</a> via uniquely structured, financially sustainable programs.

There have been a number of other recent Smart Certifications: Amret Microfinance, Prasac, Sathapana Bank, and VisionFund in Cambodia; Grooming Centre and Fortis Microfinance Bank in Nigeria; AgroInvest in Serbia; Pro Mujer in Nicaragua; FINCA in Georgia; Annapurna Microfinance in India; Tamwil El Fellah in Morocco; Pichincha Microfinanzas in Ecuador; and FINCA in Mexico. The total number of certified institutions is now 60, and together these institutions serve over 26 million consumer protected clients.

<em>For more on Smart Certification, including a listing of certified institutions, visit </em><a href="http://smartcampaign.org/certification/certified-organizations"><em>the Smart Campaign website</em></a><em>.</em>

<strong>Have you read?</strong>

<a href="https://cfi-blog.org/2016/03/21/a-client-protection-milestone-50-smart-certified-institutions-25-million-clients-covered/">Disability Inclusion, in Ecuador and Around the World: An Interview with Larry Reed</a>

<a href="https://cfi-blog.org/2016/03/21/a-client-protection-milestone-50-smart-certified-institutions-25-million-clients-covered/">A Client Protection Milestone: 50 Smart Certified Institutions; 25 Million Clients Covered</a>

<a href="https://cfi-blog.org/2015/03/26/smart-certification-kashf-foundation-takes-the-lead-in-pakistan/">Smart Certification: Kashf Foundation Takes the Lead in Pakistan</a>

&nbsp;

Client Protection Firsts in Paraguay and the Dominican Republic

<em>&gt; Posted by MFIN</em>

<img class="alignright wp-image-21457" style="border:0 solid #000000" src="https://centerforfinancialinclusionblog.files.wordpress.com/2016/06/thumb_75b1c30ce6f64bfa9c53d1ede899ae37.jpg" width="330" height="220" />In 2013, the Reserve Bank of India (RBI) announced a significant policy move in the form of Self Regulatory Organization (SRO) guidelines for the microfinance industry. An SRO is an organization that has been authorized by a regulator to exercise control and regulation on its behalf over certain aspects of an industry. In the case of Indian microfinance, an SRO supports the RBI in ensuring compliance with statutory regulations and the Industry Code of Conduct, while also taking up research, training, data analytics, and capacity building of the sector. The SRO architecture has dramatically altered the landscape of the Indian industry, providing stability to the industry, with more robust market discipline and customer protection.

<a href="http://mfinindia.org/">MFIN</a>, whose membership consists of 52 NBFC-MFIs which account for over 90 percent of India’s microfinance business, was recognized as an SRO by the RBI in June, 2014. Since then, MFIN has worked towards putting in place an effective SRO framework, with borrower protection as the focal point. One of the important obligations of the SRO in line with the RBI guidelines is to have an independent redressal mechanism for addressing the grievances of microfinance clients. In order to standardize the grievance redressal mechanism and to ensure a common minimum benchmark, MFIN drew on the existing grievance redressal mechanisms (GRMs) of 45 MFIs and worked in partnership with <a href="http://smartcampaign.org/index.php">the Smart Campaign</a> to cull out the good practice from these models. The idea was to put in place a three tier mechanism based on the capacity of the MFI concerned, and the Smart Campaign was asked to work on such a model whose aim was to standardize and ultimately strengthen the practices of the member institutions.

A diagnostic investigation and mapping of existing grievance redressal mechanism practices of MFIN member organizations formed the foundation of the study. This was based on self-reported data provided by the MFIs to MFIN, telephone interviews, Smart Assessments of MFIs’ practices, and field visits to MFIs. While self-reported data has its limitations, it enabled, in combination with the other data sources, the creation of a baseline for performance relevant for development of the Grievance Redressal Mechanism Framework.

The Smart Campaign combined these local inputs with global sources to arrive at standards of grievance redressal for the Indian microfinance industry. Good practices from within the microfinance industry in India, RBI regulation, India’s Industry Code of Conduct, and international quality standards were evaluated to build the broad framework. This framework was examined against the Smart Campaign’s standards and compliance criteria for the <a href="http://smartcampaign.org/about/smart-microfinance-and-the-client-protection-principles">Client Protection Principle on Mechanisms for Complaint Resolution</a> and best practices globally.

The Grievance Redressal Mechanism Framework that was created has 17 performance standards that are bucketed into 9 categories:
<ol>
 	<li><strong>Commitment:</strong> In order to demonstrate commitment, an institution is required to have a grievance redressal mechanism policy or framework in place, which needs to be approved by its board.</li>
 	<li><strong>Communication</strong><strong>:</strong> Much of the effectiveness of the grievance redressal mechanism of an institution depends on the way in which the frontline staff inform clients on how and where to submit a complaint or provide feedback.</li>
 	<li><strong>Visibility and Access:</strong> Institutions need to adequately display names and contact details to the clients.</li>
 	<li><strong>Use and Effectiveness:</strong> Institutions have multiple complaint resolution systems in place, and have set up procedures and allocated staff with responsibilities to ensure that complaints are resolved in time.</li>
 	<li><strong>Continuous Improvement:</strong> MFIs review their grievance redressal mechanism and make changes to the system on a regular basis.</li>
 	<li><strong>Resources:</strong> Grievance redressal mechanism systems are supported with sufficient resources like backend technology, systems to log and escalate complaints, and efficient outbound calling systems.</li>
 	<li><strong>Personnel and Training:</strong> Institutes appoint independent staff to register and resolve complaints; induction training for staff covers how the grievance redressal mechanism works; and there is a clear complaint escalation matrix.</li>
 	<li><strong>Remedies:</strong> Based on complaints, MFIs make corrections to their policies and staff are appropriately penalized.</li>
 	<li><strong>External Review:</strong> Internal audit monitors the system through sample checks of clients to determine if complaints have been addressed satisfactorily.</li>
</ol>
A first of its kind globally, the framework that evolved is a<strong> ‘Three Level Progressive Framework’</strong>, consisting of the above nine broad parameters with three progressive levels. Within the framework, Level III demonstrates ‘Adequate Indicators’ for Grievance Redressal Mechanism Framework; Level II shows that the institution is making progress and is categorized as ‘Intermediate Level’; and Level I, the most ‘Basic Level’, demonstrates the minimum specifications that all institutions irrespective of size need to satisfy.

MFIN’s 52 members are spread across the length and breadth of the country; they are diverse in size, geographic presence, and organizational capacity. Hence, the framework factors in the capacity of different MFIs and provides guidance to the MFIs to reach the next level in a frame of roughly a year’s time.

Commenting on the Grievance Redressal Mechanism Framework, Ms Ratna Vishwanathan, CEO of MFIN said: “As there were already existing mechanisms in place, there was little point in reinventing the wheel. Since MFIs were comfortable with their GRMs, it was decided that the base of the structure needs to be existing good practice. What we have effectively managed to do is cull out good practice, standardize it and add value by incorporating global good practice.”

In order to share the framework with MFIN members and strengthen grievance redressal practices in the industry, three regional workshops were conducted by the Smart Campaign and MFIN between August and December 2015. The objective of these one-day workshops was not only to disseminate the framework, but to also support peer learning and good practices existing amongst members.

To ensure that the MFI staff is empowered to scale up and strengthen the systems and processes for grievance redressal mechanisms in their institutions, MFIN developed a tool called the “Grievance Redressal Mechanism Accelerator”, which helps to monitor the progress of the Grievance Redressal Mechanism Framework. The tool has a dashboard and gives a graphical overview of the organizational performance on various parameters.

<em>Image credit: Accion</em>

<strong>Have you read?</strong>

<a href="https://cfi-blog.org/2016/04/12/a-change-in-behavior-innovations-in-financial-capability/">A Change in Behavior: Innovations in Financial Capability</a>

<a href="https://cfi-blog.org/2015/12/16/country-of-the-year-india/">Country of the Year: India</a>

<a href="https://cfi-blog.org/2015/09/03/in-the-case-of-indias-pmjdy-considerations-for-avoiding-account-dormancy/">In the Case of India’s PMJDY, Considerations for Avoiding Account Dormancy</a>

Indian Microfinance Gets Serious about Grievance Redressal

<em>&gt; Posted by the Smart Campaign</em>

For a brief moment on Monday, all eyes in Tbilisi, Georgia were on the Smart Campaign and its findings on the well-being of microfinance clients. The Campaign presented its <a href="http://smartcampaign.org/tools-a-resources/1075">Client Voices</a> report in a high-profile event at the Georgian Parliament. Joining the event were 12 Members of Parliament from both majority and minority factions of the Government; leadership from the Central Bank, Ministry of Finance and Ministry of Agriculture; a multitude of microfinance practitioners; press and three television stations. This was the first time government representatives of the majority party, minority party, executive branch, industry, and Central Bank all got together to talk about how microfinance clients are treated. Needless to say, it was immensely encouraging to witness this demonstrated interest in the fair and responsible treatment of microfinance clients in Georgia.

The Client Voices project is a four-country research investigation that directly asked microfinance clients about their experiences and treatment. Along with Georgia, the studied countries are Benin, Pakistan, and Peru. Georgia was selected because its market hosts strong and representative institutions conducive to consensus building, and the industry’s decision-makers are currently working to update its regulatory and legal framework. The launch of the Client Voices report positioned the market to act on the project’s recommendations.

The event was co-hosted by the Business and Economic Center (BEC), a non-partisan, not-for-profit institution that works to facilitate understanding and discussion among MPs around financial, economic, and business topics. Following opening remarks by Natia Katsiashvili, Executive Director of BEC, and Giorgi Volski, MP and Chairman of the majority Georgian Dream faction (think Majority Leader in the U.S. House of Representatives), the main findings from the Client Voices project were presented. Here are a few of the key findings:


<ul>
 	<li><u>Georgian Clients Are Generally Happy with their Lenders</u>: Clients were generally satisfied by how MFIs treated them. Only 5 percent said they had a “bad” or “very bad” experience with MFIs. Compared with the project countries of Pakistan and Benin, aggressive and overt client abuse is rare.</li>
 	<li><u>Client Understanding of Loan Terms and Conditions Is Lacking</u>: Twenty-eight percent of clients did not know the interest rate on their loan, and another 22 percent could not recall the total amount to be paid on their loan.</li>
 	<li><u>Overindebtedness Is an Issue</u>: Households with active credit report a median monthly debt-to-income ratio of 37 percent of monthly income allocated to debt repayment. Thirty-seven percent of clients have taken a loan from another source to pay a debt to an MFI, and 21 percent reported reducing food consumption to repay a debt.</li>
 	<li><u>Clients Are Not Well-Informed on Credit Bureaus</u>: Clients are not aware of how CreditInfo Georgia, the only Georgian credit bureau, works. Many MFI clients fear the negative repercussions of paying late and do not have a clear idea of how credit histories are recorded and used. As a result of this fear, clients may be making extreme sacrifices to comply with tight repayment schedules.</li>
 	<li><u>Risky Behavior: Taking Out Loans for Others</u>: Ten percent of loans were taken out in someone else’s name, usually by another household member or family member. A relatively higher proportion of these respondents have had a negative record with CreditInfo Georgia. They may have chosen to borrow via another formal borrower because they are unable to borrow themselves.</li>
 	<li><u>Complaints Mechanisms Are Lacking</u>: Only 4 percent of respondents said that they have ever had a reason to complain to an MFI. This suggests that treatment by MFIs is generally positive. However, only 38 percent were told where to complain, and the vast majority of these were directed to a loan officer or group leader, which may deter clients from voicing concerns.</li>
</ul>
The most fervently debated topic was the dollarization of loans. MFIs in Georgia receive investments denominated in U.S. dollars, so their incentives are to give out dollarized loans. Many MFIs also issue dollar-denominated loans to hedge against currency risk. However, this risk is passed entirely to borrowers. Generally, clients don’t understand what this means and are not fully aware of the high risks associated with taking loans in U.S. dollars. They often take dollarized loans out of ignorance or pressure from the loan officer. As the currency fluctuates, they end up paying back far more than they expected. Out of those surveyed in the Client Voices project in Georgia, 30 percent of clients have a U.S. dollar-denominated loan outstanding, and 13 percent of these did not realize the risks prior to taking the loan.

Between January and October 2015, the Lari depreciated 27 percent compared with the U.S. dollar. Just recently, this practice caused widespread defaults next door in Baku, as Azerbaijan’s currency devaluation led to mass defaults. During the event discussion, the case of Azerbaijan was mentioned as a warning of what could happen if this issue wasn’t controlled in Georgia.

To respond to this problem, a focus on transparency was suggested. If clients have to bear the risk of dollarization they should know and fully understand what they are getting into and what the consequences can be. Additionally, some countries have chosen to limit dollarized loan disbursal, and some MFIs have relied on foreign-exchange swaps to enable them to lend in local currency.

Given the political divisions that exist in Georgia, it is notable that representatives came together from across Georgia’s political spectrum, including the ruling Georgian Dream faction, the Free Democrats, and the United National Movement. There were a number of people asking when Parliament is going to act on client protection, and what changes they’re going to make. A new client protection bill is long overdue.

The Client Voices report was featured on prime-time Georgian TV Monday evening with an interview of  the Smart Campaign’s Eastern Europe and Central Asia Lead, Daniel Balson, on Maestro TV, which you can watch, here: http://bit.ly/1Uv0hck

<em>For more, including additional findings, read the</em><em> </em><a href="http://smartcampaign.org/storage/documents/Voices_from_Georgia.pdf"><em>Georgia report</em></a><em> </em><em>from the Client Voices project.</em>

<strong>Have you read?</strong>

<a href="http://cfi-blog.org/2016/02/18/my-turn-to-speak-voices-of-microfinance-clients-in-benin-pakistan-peru-and-georgia/">My Turn to Speak: Voices of Microfinance Clients in Benin, Pakistan, Peru, and Georgia</a>

<a href="http://cfi-blog.org/2015/10/22/what-do-clients-care-about-results-from-benin/">What Do Clients Care About? Results from Benin</a>

<a href="http://cfi-blog.org/2015/11/09/what-do-clients-care-about-results-from-research-in-pakistan/">What Do Clients Care About? Results from Research in Pakistan</a>

“Client Voices” at the Georgian Parliament

<em><a href="http://smartcampaign.org/storage/documents/Voices_from_Georgia.pdf"><img class="alignright wp-image-20758" style="border:0 solid #000000" src="https://centerforfinancialinclusionblog.files.wordpress.com/2016/02/georgia-cv.png?w=490" alt="" width="275" height="355" /></a>&gt; Posted by the Smart Campaign</em>

What’s the state of client protection in Georgia? A few weeks ago we launched our <a href="http://smartcampaign.org/tools-a-resources/1075">Clients Voices</a> project, a four-country research investigation that directly asked clients about their experiences with financial providers and their thoughts on what constitutes good and bad treatment. The four countries studied in the project are Benin, Pakistan, Peru, and Georgia. After previously spotlighting <a href="http://cfi-blog.org/2015/10/22/what-do-clients-care-about-results-from-benin/">Benin</a> and <a href="http://cfi-blog.org/2015/11/09/what-do-clients-care-about-results-from-research-in-pakistan/">Pakistan</a> on this blog, today we’ll take a look at some of the research findings specific to Georgia.

The research was carried out by Bankable Frontier Associates (BFA) and IPM Research. In the qualitative research phase, they used focus group discussions, individual interviews, and a photography exercise to understand what constitutes good and bad treatment by MFIs from the clients’ perspective. The quantitative survey that followed included a sample of 800 current microfinance clients and 200 former clients.

What were the results?

Overwhelmingly, microfinance clients in Georgia are satisfied with their MFIs. The large majority of respondents rated their experiences as “good” or “very good,” with only 5 percent of all respondents expressing a “bad” or “very bad” experience. In Georgia, clients appear to value maintaining a long-term relationship with MFIs. Sixty-six percent are happy with their institutions and stay with them for a long time. In the quantitative survey, approximately 60 percent of respondents had taken multiple loans with the same MFI over time. This is in contrast with findings in Pakistan showing that clients maintain short-term relationships. Microfinance institutions’ service and treatment was ranked as matching or exceeding that of commercial banks. Clients repeatedly ranked microfinance organizations as among the institutions (both financial and non-financial) that treated them best.

As we found in every country, client understanding of loan terms and conditions is lacking. Only 4 percent of respondents claim that MFIs did not provide them information on loan features such as the total amount to be repaid, penalties, or other consequences of late repayments. However, 28 percent of clients did not know the interest rate on their loan, and another 22 percent could not recall the total amount to be paid on their loan. Other clients appear confused by terms such as interest rate, fees and commissions, or insurance, and many lack sufficient confidence to ask clarifying questions. This lack of understanding may facilitate greater client dissatisfaction which can lead to feeling cheated or frustrated. Survey data shows that better informed clients are happier clients.

“The contract is written in such a way that it’s hard to understand what it means. You should have special education to understand this terminology.” - Male, Urban Kutaisi

In particular, many clients did not sufficiently understand the high risks associated with taking loans in U.S. dollars. About 30 percent of clients have a USD loan outstanding, and 13 percent of these did not realize this prior to taking the loan. A relatively large percentage of those with USD loans (18 percent) did not think they would pay more. Unfortunately, between January and October 2015, the Lari depreciated 27 percent compared with the U.S. dollar, causing monthly payments to jump by a similar amount – eating deeply into the available income of many borrowers.

“Those who have borrowed in Lari will have fewer problems. Lari [loans] are also expensive but [borrowing in] dollars cause more losses.” - Female, Urban Tbilisi

Households that currently have a line of MFI credit report a median ratio of 37 percent of monthly income allocated to debt repayment. Thirty-seven percent of clients have also had to take a loan from another source to pay a debt to an MFI, and 21 percent also reported reducing food consumption to repay a debt. In addition to servicing MFI credit, nearly half of all respondents owe money for installment purchases, 22 percent of clients owe money to pawn shops, and 21 percent are borrowing from commercial banks. In the quantitative sample, the average number of credit sources per household is two, and 15 percent of households have four or more different types of credit instruments. MFI marketing practices – such as frequent credit offers via text messages and pre-approved cards - may tempt clients to borrow more.

“Now we are finishing repayment of a [MFI] loan, so they are calling and offering us to take a new loan, but currently we do not have need.” - Female, Rural Telavi

Clients are not aware of how CreditInfo Georgia, the only Georgian credit bureau, works. Many MFI clients are preoccupied with the negative consequences of what they refer to as the “blacklist”. As a result of this fear, clients may be making sacrifices to comply with tight repayment schedules. One of the positive consequences of having a credit reporting system in place is that the MFIs do not need to resort to harsher methods to convince clients to repay on time.

“No matter whether you don’t pay once or 10 times, if you violate [the repayment terms] once they will make you finalize that loan and will never issue a loan again.” - Male, Rural Gurjaani

Clients’ willingness to take out loans for others may present risks to clients and providers<strong>.</strong> Ten percent of loans were taken out in someone else’s name, usually by another household member or family member. While clients may view this type of behavior as a favor, a relatively higher proportion of these respondents have a negative record with CreditInfo Georgia. This suggests that they may be borrowing via another formal borrower because they are unable to borrow themselves. Clients may not be aware of the risk of borrowing for others. Providing more information to clients about the risks of sharing loans would help to reduce the practice of borrowing in others’ names.

Most clients do not need to complain, but if they do, channels are lacking. Only 4 percent of respondents said that they have ever had a reason to complain to an MFI. This suggests that treatment by MFIs is generally positive. However, only 38 percent were told where to complain, and almost all of these were directed to a loan officer or group leader, rather than to a specialized complaints channel. Additionally, some clients feel that their voice would not be heard if they were to file a complaint.

Respondent: “As for complaining… I can’t complain and sue such a big company.”

Moderator: “Why? Won’t your claim be satisfied?”

Respondent: “I think I can’t win against them… they are able to hire an expensive lawyer and we are not.” - Male, Telavi

<em>For more details and additional findings, read the </em><a href="http://smartcampaign.org/storage/documents/Voices_from_Georgia.pdf"><em>Georgia report</em></a><em> from the Client Voices project.</em>

<strong>Have you read?</strong>

<a href="http://cfi-blog.org/2016/02/18/my-turn-to-speak-voices-of-microfinance-clients-in-benin-pakistan-peru-and-georgia/">My Turn to Speak: Voices of Microfinance Clients in Benin, Pakistan, Peru, and Georgia</a>

<a href="http://cfi-blog.org/2015/10/22/what-do-clients-care-about-results-from-benin/">What Do Clients Care About? Results from Benin</a>

<a href="http://cfi-blog.org/2015/11/09/what-do-clients-care-about-results-from-research-in-pakistan/">What Do Clients Care About? Results from Research in Pakistan</a>

Client Protection in Georgia: A Responsible Market with Opportunities for Improvement

<em>&gt; Posted by the Smart Campaign</em>

<img class="alignright wp-image-20644" style="border:0 solid #000000" src="https://centerforfinancialinclusionblog.files.wordpress.com/2016/02/cv-cover.png" alt="" width="275" height="356" />What are microfinance clients’ thoughts on fair treatment from financial services providers?

Today the Smart Campaign is proud to present the results from the Client Voices project, a four-country research investigation that directly asked clients about their experiences with financial providers and their thoughts on what constitutes good and bad treatment.

Today’s release includes the main synthesis report as well as country reports from Georgia and Peru. The Campaign has already released comprehensive country reports for the other two countries in which research took place, Benin and Pakistan.

The Campaign commissioned Bankable Frontier Associates (BFA), as research partner on the project, to talk with thousands of lower-income microfinance clients face-to-face in the four diverse country markets. The intent was to hear from clients in an open-ended way, without pre-judging their concerns, and then to follow-up this qualitative work with quantitative surveys to determine how representative the concerns expressed were. The intensive research captures, first-hand, clients’ interactions with the institutions that lend them money and keep their savings, and are therefore instrumental in their lives.

Through the project, the Campaign sought to learn whether assumptions made about what constitutes problematic treatment of poor clients (such as those embodied in the <a href="http://smartcampaign.org/about/smart-microfinance-and-the-client-protection-principles">Client Protection Principles</a>) rightly reflected what clients themselves worry about. The research was conducted so that it might serve as a catalyst for improvement in client protection by financial service providers, regulators, industry associations, consumer advocacy groups, and others – not only in these four countries, but as guidelines for the protection of lower-income clients around the world.

Here is some of what we found.

The research in all four countries found that clients are generally satisfied with their financial institutions. Many respondents described the important and beneficial role microfinance plays in their lives. However, some troubling themes arose that damage client trust, such as inadequate explanations of loan terms, lack of redress mechanisms and opportunities, and disrespectful treatment.

<strong>Transparency</strong>. As you might have read in our <a href="http://cfi-blog.org/2016/02/12/the-client-voices-project-launches-next-week/">post</a> last week, clients in all four countries have an inadequate understanding of the basic attributes of their microfinance products. In Benin, Pakistan, and Peru, for example, 50 percent, 49 percent, and 43 percent of respondents reported that they understood loan terms only somewhat or not at all at the time of taking the loan. This lack of understanding exists even when institutions follow mandated disclosure rules. Because transparency efforts have focused on complying with disclosure requirements, rather than making sure users understand, information provided tends to be copious, technical, and complicated.

“[Microfinance providers] don´t inform you, they should give you complete information [about the loan charges]… There is an easier way: we should be able to understand, to see what our options are and what is best for us, to find the [product] that suits us best.” -Woman, Juliaca, Peru

Low levels of client understanding of compulsory savings in Benin and loans issued in U.S. dollars in Georgia reveal the high stakes of a failure to communicate basic information to clients. In Benin, 9 percent of current clients and 17 percent of former borrowers reported being unable to withdraw all of their savings. In Georgia, 13 percent of clients were surprised to learn that they had borrowed in U.S. dollars instead of Georgian Lari, a misunderstanding with considerable financial repercussions following a major devaluation.

<strong>Respectful treatment</strong>. A basic demand from clients is for respectful and humane treatment. Clients view the public shaming that is used in Benin and Pakistan extremely unfavorably. It causes long-lasting social stress for the clients who experience it, and damages the reputation of financial service providers. Poor treatment is most often experienced when consumers are late with loan payments. In Pakistan and Benin for instance, clients told us of the social and psychological pain they suffered from being publicly shamed for late payments. While extreme incidents were rare, the rigidity in loan collections can create a problematic and stressful cycle for clients, even those who pay on time.

“My son was suffering from cancer. He died. They did not leave. They said they just want their money. They insulted me so much. They did not even understand that one brother of five sisters had died — everyone depended on him! They had no sympathies. Then what’s the use of this bank? They take money from us and on the top of that they insult us so badly.” -Male, Karachi, Pakistan

The reports offer broad-reaching recommendations for improving client protection in the areas of transparency and respectful treatment. These range from a radical reframing of transparency and disclosure requirements and practices, to the abolishment of practices that could incentivize collections agents to shame clients. The reports also counsel that financial products should build in grace periods for a small number of repayments, which would satisfy clients’ demand for more flexibility and understanding in the event of emergencies.

<strong>Credit bureaus</strong> play an increasing and valuable role in protecting clients, helping to leverage their desires for continued access to credit to induce repayment. Credit reporting can reduce the need to rely on social shaming to force clients to repay, which clients find objectionable in Benin and Pakistan. Indeed, problems of shaming clients in collections that we found in Benin and Pakistan are almost entirely absent in Peru and Georgia, countries with strong credit bureaus and regulation.

However, clients lack information about how credit bureaus work, and seem unaware that they can build a positive as well as negative credit history. In Peru and Georgia, for example, clients report confusion about the consequences of having a negative record in the credit bureau, and how to clear one’s name.

Researcher: “What happens if you miss a payment?

Respondent: “They notify you at home. They write in the walls ‘delinquent,’ the bank tells you that you should pay. They put you in INFOCORP. And that is it, you don´t get out of there! Sometimes I would like to know how much time does it takes for you to get out of there, and nobody tells you anything.” -Woman, Urban Juliaca, Peru

<strong>Complaints</strong>. Most clients don’t know how and where to complain, and given the poor quality of recourse they experience with all kinds of formal institutions (schools, clinics, etc.), they do not think their complaints will be resolved by financial service providers. Across all countries, less than one-fourth of those who reported having a reason to complain actually filed a complaint. The ‘complaints book’ in Peru is one example of a complaints mechanism that clients view as largely symbolic and ineffective.

Where recourse channels exist, clients are not sufficiently informed about them. In Benin, only 14 percent of respondents recall being told by financial institutions who to consult in case a problem arose. Even in Peru and Georgia, with strong microfinance and consumer protection regulatory environments, only 25 percent and 38 percent of clients recall being told where or how to address concerns.

“If you go to complain to [the financial institution] office, or elsewhere, you won’t get another loan.” -Male Respondent, Parakou, Benin

The reports suggest a broad array of actions that actors in the financial inclusion sector should take to address these challenges. Stay tuned in the coming weeks for more posts on the project, including deep-dives into the results from specific countries.

<em>For the report, My Turn to Speak: Voices of Microfinance Clients in Benin, Pakistan, Peru and Georgia, <a href="http://www.smartcampaign.org/my-turn-to-speak">click here</a></em><em>, and for the four individual country reports, available in English and in their national language, head to the Client Voices page on the Smart Campaign website: </em><a href="http://www.smartcampaign.org/client-voice"><em>www.smartcampaign.org/client-voice</em></a><em>.</em>

<strong>Have you read?</strong>

<a href="http://cfi-blog.org/2015/10/22/what-do-clients-care-about-results-from-benin/">What Do Clients Care About? Results from Benin</a>

<a href="http://cfi-blog.org/2015/11/09/what-do-clients-care-about-results-from-research-in-pakistan/">What Do Clients Care About? Results from Research in Pakistan</a>

<a href="http://cfi-blog.org/2016/02/12/the-client-voices-project-launches-next-week/">The Client Voices Project Launches Next Week</a>

My Turn to Speak: Voices of Microfinance Clients in Benin, Pakistan, Peru, and Georgia

<em>&gt; Posted by Micol Pistelli, Social Performance Director, MIX</em>

<img class="alignright wp-image-20172" style="border:0 solid #000000" src="https://centerforfinancialinclusionblog.files.wordpress.com/2015/12/thumb_6c8ca458bdc143a98de7dc6a611f471d.jpg" alt="" width="330" height="220" />Customer retention is a key objective for any business, and microfinance institutions (MFIs) are no exception. Whether you are a shareholder, board member, CEO, or head of operations at a microfinance institution, your strategy must rely on retaining most of your clients that still need financial services. But what happens when many of your clients stop using your services? How do you determine whether they left because they no longer need financial services or because they prefer a competitor? How do you know whether they were dissatisfied with your customer service?

Answering these questions can be difficult. Some organizations conduct exit surveys over the phone or in-person through their customer service departments. However, due to the expense and time required to conduct such research, many MFIs are only able to reach a small number of clients, which may not be representative of the whole. Additionally, the quality of the data collected can be lacking due to inaccuracies because clients may not feel comfortable being candid with representatives of the MFI they are leaving.

Of the thousand-plus institutions reporting consumer protection data to MIX, 65 percent of them have set-up complaint mechanisms that offer some form of redress for clients, such as hotlines, call centers, or customer service representatives. However these feedback tools are functional only when clients proactively use them and when MFIs manage to gather data and solve issues in a timely fashion. What often happens is that MFIs are left with questions about their clients’ satisfaction and can only guess at the root causes for their drop-out.

To help MFIs better understand their clients’ needs, preferences, and experience with their financial institution, Hivos and MIX developed the Voice of the Client (VoC). This initiative leverages mobile technology for MFIs to proactively reach out to clients in a non-intrusive manner to uncover potential issues affecting client satisfaction with the organization’s suite of products and services. Using mobile technology results in a low-cost, scalable method for producing valuable, timely, and relevant market research.

Built on Hivos’ experience with citizen monitoring and MIX’s experience with collecting data and providing insights on the performance of financial service providers, VoC uses an independent monitoring approach to data collection, which ensures a high level of data quality and reliable benchmark information by country, so that institutions can not only gain information about their clients’ needs but can also compare the information with other market peers.

VoC was tested for the first time in India last year with four microfinance institutions, on a sample of almost 6,000 clients. The results of the analysis, covering 33 questions on customer satisfaction and consumer protection, are published on <a href="http://www.themix.org/sites/default/files/Voice%20of%20the%20Client_An%20analysis%20of%20client%20satisfaction%20and%20consumer%20protection%20across%20four%20microfinance%20institutions%20in%20India.pdf">MIX Market</a>.

Three different methods of data collection were tested: interactive voice response mobile phone surveys (IVR), call center telephone surveys, and in-person interviews captured via smart phones. The majority of clients were interviewed via IVR as we were specifically interested in testing this approach due to its potential for scalability, lower cost per survey, and lack of interviewer bias. Twenty percent of clients receiving the IVR cards called the number and took part in the survey.

One of the lessons learnt when testing these survey methods was that, in some instances, clients who responded via IVR tended to provide less positive answers to the more sensitive questions - for instance, those related to their relationship with their loan officers. This was consistent across all four MFIs, thereby suggesting that clients might be inclined to provide more candid responses to sensitive questions when they perceive themselves to be answering under conditions of anonymity.

For example, to the question whether a loan officer ever demanded commission or intimidated/mistreated a client, a considerably higher percentage of clients interviewed via IVR provided a positive answer (see figure below).

[caption id="attachment_20163" align="aligncenter" width="621"]<a href="https://centerforfinancialinclusionblog.files.wordpress.com/2015/12/graph-1.png"><img class="wp-image-20163" style="border:0 solid #000000" src="https://centerforfinancialinclusionblog.files.wordpress.com/2015/12/graph-1.png" alt="" width="621" height="342" /></a> (click to enlarge)[/caption]

When clients were asked about their satisfaction with the loan installment payments, a much smaller number of clients interviewed via IVR reported it to be the correct size, with respect to clients interviewed using the other two methodologies.

The VoC project represents a departure from the often expensive, time-consuming, and unreliable or low quality alternative methods for collecting client-level data. This new approach creates actionable insights and benchmarks that can be used by financial service providers, funders, and investors to better understand the operating environment, marketplace, and consumer experience. Additionally, this information can lead to improvements in operating procedures, staff training, and product development.

While our main focus has been on client protection data, VoC is well-suited for research related to outcome data as well, including poverty assessment, savings, or women’s empowerment, to name a few. We have worked closely with the Smart Campaign to select consumer protection indicators and are now exploring how the VoC initiative can help it include client voices in its assessments and certifications. We are also completing our second pilot in Peru and hope to expand the project by partnering with a larger number of financial service providers across the world. Now that we’ve shown the power of this approach to measuring client satisfaction, we hope to engage more service providers and networks to help them better understand their customers and strengthen their businesses.

<em>Image credit: Accion</em>

<strong>Have you read?</strong>

<a href="http://cfi-blog.org/2015/11/12/why-does-consumer-protection-lag-in-africa/">Why Does Consumer Protection Lag in Africa</a>

<a href="http://cfi-blog.org/2015/11/20/my-weeks-in-customer-service-hell/">My Weeks in Customer Service Hell</a>

<a href="http://cfi-blog.org/2015/11/09/what-do-clients-care-about-results-from-research-in-pakistan/">What Do Clients Care About? Results from Research in Pakistan</a>

MFIs: Are Your Customers Satisfied?

<em>&gt; Posted by Joshua Goldstein aka Mr. Provocative</em>

In the seventh <a href="http://smartcampaign.org/about/smart-microfinance-and-the-client-protection-principles">Client Protection Principle</a>, the Smart Campaign lays out the way that financial services providers should handle complaints: 1) Effective client feedback mechanisms are in place; 2) Clients are aware of how to submit complaints and do so as needed; and, 3) Complaints are handled promptly and adequately.

Seems easy and straightforward enough. But making this process truly client friendly is truly a daunting challenge. On the “demand side,” poor customers may feel ill-equipped to pose questions to company representatives who come from a different class, caste, or ethnicity. The Smart Campaign’s <a href="http://smartcampaign.org/tools-a-resources/1075">Client Voice</a> research found as much in both Asian and African markets. It may be psychologically next to impossible—even in the most client friendly institution.

And if the psychological issue is not an obstacle, the technical and procedural challenges may be opaque enough to lead to failure anyway.

Even educated and savvy consumers can get lost in the complex maze of call center options delivered by that hideously cheerful computer voice - you know the one. “Lower touch” often means “no touch.” And even if a well-meaning customer service representative finally answers the phone and tries to help, he or she may be just a cog in a far flung system – unable to get the needed answers.

I experienced this maddening complexity first hand when I joined a new health plan with a “cost saving” mail order prescription plan. A common medication that cost $75 for a three month supply under my old plan cost $600 under my new plan, or more than seven times as much, according to the health plan website.

“It has to be a mistake, right?”, I said to the call center representative after a long time on hold. When you actually reach a human being, there is almost a kind of species recognition–the excitement of speaking to a fellow human. You want to hug them over the phone.

“Well, no, sir, I looked at your plan again, and that is what it says.”He was truly sorry. I could hear it in his voice. Sympathy among members of the family of the great apes.

Now what? I was not going to take this lying down. Not a master of the universe like me with a litigator’s zeal for combat. I would get the system to see that something had gone out of whack.

The drug plan rep advised me to take up my complaint with the health plan of which the mail order prescription company is a mere subcontractor. The health plan set the rates for the medication, not them. This shuffling between companies also arises in digital financial services, when banks, telcos and third party agents are all involved in a digital transaction and it is hard to determine who is responsible to solve which problem.

When I called the health plan the next day a representative answered within just a few seconds. He was sympathetic, and agreed that this seemed very strange.“I’m gonna put you on hold for a few minutes and get this sorted out,” he assured me. So far, so good.

When he came back on the phone a few minutes later, he said that the price was correct: this was the price the health plan charged for this particular medicine. No mistake. He was sorry but that was the way it was.

At this point, my anxiety was ramping up. Hyperventilation and out of control cortisol levels were surely next. “Oh come on. This is crazy. You can’t do anything? Ok, then who can do something?”

“You can appeal. You need to have your physician send a letter to our review board.”

“And where is that located?”

He wasn’t sure. He thought Salt Lake City. But all the necessary instructions to initiate an appeal could be found on their website.

Don’t panic, I said to myself, panicking. Do I just somehow absorb this extra cost? I had been told by my employer a couple of months before that my new plan’s benefits virtually matched the old benefits with only minor differences. Was this price discrepancy considered a minor difference? Didn’t seem minor to my wallet.

I found information on the website about how to file the appeal. And I contacted my physician’s office and had them “do the paper work.”

Weeks went by and I heard nothing. At this point I reluctantly decided it was time to bother someone from my employer’s human resources department to see if they could expedite things. By this time I was nearly running out of pills. She was great, immediately calling her contact with the health plan. She couldn’t have been more sympathetic or determined to help.

I had a warm feeling inside. Finally, I was on the right track.

Another couple of weeks passed with no response. So she called again and the rep said the appeal was still going on in the Salt Lake City office or wherever it was. Though she didn’t really know, and in any case, there was nothing she could do. It was up to me to get in touch with them directly. “Up to me? Up to me?” I was fuming. What kind of nonsense was this? My HR colleague agreed and promised to put the pressure on. We were not a negligible account and should have some clout.

By then only a couple of pills were left. So should I just pay $600 and get the meds? No. I was going to keep fighting even if my cholesterol (the reason for the pills) was going to spike. This had to have a just resolution. I believed that if I paid I would have no leverage to pursue the fight further. I would have been exhausted into acquiescence. But social justice fighters like me don’t give up on righteous causes easily, especially when it costs us more than $2,000 a year.

In a week my HR friend emailed me sorrowfully to say my appeal in Salt Lake City had been turned down. By now I was in a cardiac red zone, the ticker revving out of control. And I repeated my cri de coeur that by now she had heard ad nauseam about how outrageous this was. But she promised to figure out how to appeal the appeal.

Suddenly, on a day like any other day, the unexpected happened: my HR colleague emailed me that health care account managers urgently needed to speak with me. Something was up. Had the tariff gone even higher because of my complaining?

When I called the health plan not one but two representatives got on the line. People with names, yes names—both first and last. They began by apologizing and continued to apologize throughout the call. It turned out that there was a “coding error,” made no doubt in another far flung office, which had put my common generic drug in the “highest tier.” Clearly, up to this point, no human in the appeals process had ever checked the amount the computer spat out as the price. Not the call representatives, the doctors, the account executives.  Not anyone. Computer says, hominid do.

“What can we do to make this up to you? Our company puts our clients first. We are very embarrassed.” The “touch” that had been almost no touch couldn’t have been higher now.

I said something like make sure that you correct your processes so nothing like this happens to anyone else. That is the way you can thank me.

Even an arrogant, Ivy-educated SOB like me was brought to his sobbing knees by this ordeal. Most people would have in resignation submitted to the system long before I did. They would have assumed they were wrong. They might have seen it through the lens of fatalism.

Low income financial services clients don’t have a chance when a system goes as wrong as it did in my case. So setting up a complaint mechanism, as well intended as it is, may not be nearly enough. Say one of our poor customers overpays a loan due to a “coding error” made by some back office operator hitting the wrong key. What happens if this customer calls the complaint hotline? Will they get anywhere? Imagine encountering such a problem with the first financial institution you’ve ever used, and not having a formal education or an employer with business clout.

Big data, big systems, and poor human oversight make it all but impossible for everyone but the most privileged to have a fighting chance to redress their grievances. It is a terrible problem that is only getting worse.

Postscript:

Following this episode, the beleaguered health plan did a thorough review. It turned out that “coding errors” had infected a number of my claims and indeed the claims of some of my colleagues. I recently got a check in the mail for more than $100 for overpayments I hadn’t even known about, let alone challenged. I will let this speak for itself.

Editor: I think Josh feels that vindication is very sweet.

<strong>Have you read?</strong>

<a href="http://cfi-blog.org/2015/11/12/why-does-consumer-protection-lag-in-africa/">Why Does Consumer Protection Lag in Africa</a>

<a href="http://cfi-blog.org/2015/10/08/why-we-gave-consumer-protection-a-5/">Why We Gave Consumer Protection a 5</a>

<a href="http://cfi-blog.org/2015/11/09/what-do-clients-care-about-results-from-research-in-pakistan/">What Do Clients Care About? Results from Research in Pakistan</a>

My Weeks in Customer Service Hell

<em>&gt; Posted by Juan Blanco, Associate, Financial Inclusion 2020, CFI</em>

[getty src="103296657?et=VS68mXYrTPlVBAjPSoWq5A&amp;sig=gdiLmOlSyIL0q77_pVwQCwV3ViButLECBR-_J7HP_2M=" width="594" height="396"]

In the <a href="http://centerforfinancialinclusionblog.files.wordpress.com/2013/10/client-protection.pdf">client protection section of the FI2020 Roadmap to Financial Inclusion</a>, a specific recommendation was made for financial providers to embrace consumer protection as part of their professional identity, and applying a “financial consumer bill of rights” was identified as a key action point.

Looking into the state of this industry area for our upcoming FI2020 Progress Report on Financial Inclusion, I came to realize that the subject of consumers’ bills of rights is not as straightforward as it seems. Although the recommendation from the roadmap was aimed specifically at providers, the truth is that this is an area where a diversity of players is getting involved. I found a range of approaches: codes of conduct, codes of ethics, charters of rights, and bills of rights, coming from a <a href="http://www.smartcampaign.org/search?searchword=code+conduct+ethics&amp;ordering=newest&amp;searchphrase=any&amp;limit=20">wide spread of stakeholders</a>, from MFIs to global associations to governments. At the heart of each of these initiatives was the same objective: for service providers to operate ethically and responsibly.

Isabelle Barres, Director of the Smart Campaign, pointed out the distinction between codes of conduct and a client bill of rights: codes of conduct tend to be inward-facing, targeting the institution's employees, while clients’ bills of rights are outward-facing and have the mission of informing the institution’s clients. An example of a code of conduct from Ujjivan, in India, can be found <a href="http://www.ujjivan.com/content/fair-practices-code-and-client-protection-principles">here</a>, and a client bill of rights from Finamerica, in Colombia, <a href="http://www.finamerica.com.co/doc/derechos_consumidor_financiero.pdf">here</a>. Other recent developments in this sphere include the release of a <a href="http://www.asbanc.pe/ContenidoWeb/Default.aspx?ref=8&amp;cont=184">Code for Consumer Relationships</a> from the Association of Banks of Peru for all their member institutions, which focuses on ensuring that consumers have access to clear and simple information in order to make better financial decisions. And moving into the digital financial services world, GSMA recently released a <a href="http://www.gsma.com/mobilefordevelopment/wp-content/uploads/2014/11/Code-of-Conduct-for-Mobile-Money-Providers.pdf">code of conduct for mobile money providers.</a> This code has been endorsed by Airtel, Avea, Axiata, Etisalat, Millicom, MTN, Ooredoo, Orange, Telenor, Vodafone, and Zain.

A consumer bill of rights originating at the government level is different from institutional versions because of its greater authority and widespread applicability. Like the <a href="http://rbidocs.rbi.org.in/rdocs/content/pdfs/CCSR03122014_1.pdf">Charter of Customer Rights</a> released by the Reserve Bank of India at the end of last year, a client bill of rights should be enforceable and countrywide in scope.

Although there are numerous examples of these codes and bills, this doesn’t necessarily mean that institutions are actively applying these principles. As Susy Cheston, Senior Advisor with FI2020, remarked: “Just because an institution has a code of conduct doesn’t mean they are keeping their clients in mind and vice versa.” The real question is, how are these codes shared with institutions' staff and how are they enforced? Likewise, how are bills of rights marketed to clients and how can they effectively operationalize those rights?

That is where certification comes in. The Smart Campaign’s <a href="http://www.smartcampaign.org/certification" target="_blank">certification program</a> provides a third-party confirmation that an institution actually lives by its code of conduct. Daniel Balson, Lead Specialist for the Smart Campaign, <a href="http://cfi-blog.org/2014/12/08/smart-certification-the-view-from-azerbaijan/">interviewed</a> VisionFund Azercredit, which recently achieved Smart Certification. VisionFund Azercredit pointed out that being certified has been important for recruiting and retaining staff, for clients increasing their financial literacy, and it has helped them hone their messages to investors.

Ujjivan, which is also Smart Certified, offers a noteworthy example. The Ujjivan code of conduct includes six sections: Integrity, Quality of Service, Transparency, Fair Practices and Ethical Behavior, Privacy of Client Information, and Feedback and Grievance Redressal Mechanisms. The code drills down into each section, outlining core values and operating guidelines. The Ujjivan code of conduct encompasses the RBI’s Fair Practices Code for NBFC-MFIs, a code of conduct developed by MFIN and Sa-Dhan, and presumably it will implement a policy enshrining what’s included in the RBI’s new Charter of Customer Rights.

Indeed this will remain an industry area to watch as the importance of ensuring client protection continues to gain traction among more players.

We would love to hear more examples for our FI2020 Progress Report. Do you know of any institutions that have improved their operations and client relationships through some kind of client bill of rights or code of conduct?

<strong>Have you read?</strong>

<a href="http://cfi-blog.org/2014/08/26/ecpps-how-a-principles-approach-to-client-protection-is-built-for-the-digital-age/">eCPPs: How a Principles Approach to Client Protection Is Built for the Digital Age</a>

<a href="http://cfi-blog.org/2014/08/18/behavioral-research-and-the-client-protection-principles/" target="_blank">Behavioral Research and the Client Protection Principles</a>

<a href="http://cfi-blog.org/2014/08/12/evidence-on-the-business-case-for-client-protection/" target="_blank">Evidence on the Business Case for Client Protection</a>

How Is Your Institution Protecting Its Clients?