RETHINKING FINANCIAL CONSUMER

PROTECTION IN UGANDA

KELVIN KIZITO KIYINGI

DEPUTY DIRECTOR – COMMUNICATIONS DEPARTMENT

JANUARY 2017

Microfinance CEO Working Group

in cooperation with

We need to rethink financial

consumer protection in order to make

inclusive finance efforts more

effective.

Key Elements

Policy & Regulation

Financial Institutions & Self-

regulation

Communications & Consumer

Empowerment

M&E and Behavioral Research

Policy & Regulation

Currently, there is neither a legal framework (no law) that covers financial consumer protection issues nor a consumer protection body/authority and this makes it difficult to address such related issues. Financial consumer protection should be implemented in a unified/holistic manner.

I recommend establishing an integrated supervisory body for Uganda’s financial sector – supervising securities trading and several financial institutions – with the objective of ensuring the proper functioning , stability and integrity of Uganda’s financial system.

Example : The Federal Financial Supervisory Authority of Germany (BaFin)

Other examples: Financial Consumer Protection in Bulgaria Banking Sector; Insurance, Social Insurance and Investment Sector. Financial Consumer Protection Bureau in the U.K.

German Government’s Coalition Agreement (17/12/2013) - BaFin has always pursued Consumer Protection, but without explicit CP mandate until 2015.

“National financial market supervision in its structure to date, comprising the BaFin and the Deutsche Bundesbank, has prove effective and is an essential part of the concept for the new European supervisory structure. The BaFin will be given the opportunity to restrict or prohibit the sale of complex and non-transparent financial products in accordance with European regulations in cases where such products threaten the stability of financial markets or entail disproportionate risks for investors. It will be assigned collective protection for consumers as an important objective in its supervisory activity.”

Key Action Points: How do we

ensure that a legal framework

that protects consumers of

financial products and services is

put in place? How do we put in

place a supervisory body that

protects consumers in the entire

financial sector?

Financial Institutions & Self-regulation

Financial institutions need to seek out relationships with their clients. They need to be more transparent in their dealings and must comply with the consumer protection legal framework. Trust and responsibility have to be emphasized.

I recommend a three-pronged approach to financial consumer protection in Uganda, as is already being done by the Bank of Uganda , Supervised Financial Institutions and the Consumers.

Example: Key facts documents; under the Financial Consumer Protection Guidelines.

Where a financial services provider (bank) gives advice to a consumer, the financial services provider (bank) shall ensure that: (i) the advice is suitable, taking into account the circumstances and needs of the consumer; (ii) any product or service which the provider recommends a consumer to buy is suitable for the consumer; (iii) there is no other product or service available to the financial services provider that would be more suitable for the consumer; (iv) the provider keeps sufficient records of each piece of advice it has given to a consumer to enable it to demonstrate that it clearly informs the consumer of any actual or potential conflict of interest.

Key Action Points: What measures must be put in place to foster good relations between financial

institutions and their clients? What can be done to boost compliance and self-regulation among

financial institutions? How can we ensure that financial institutions are an integral part of consumer

protection efforts?

Suitability of advice

Communication & Consumer

Empowerment

Empowered consumers are easy to protect; are less

susceptible to exploitation.

I recommend the adoption of the financial citizenship

concept. This is a concept related to the full exercise

of the citizens’ rights and duties with respect to their

financial life.

Example 1: Central Bank of Brazil

2012 – Area of Institutional Relations and Citizenship

Integrated approach – 3 Departments: Financial Education, Communication and

Client Relationship (complaints)

Example 2: Bank of Uganda FCP Communications Strategy

Rolling out the Financial Consumer Protection Guidelines

Guarantor, Cooling-off period, Key Facts Document

Integrated approach – 3 Players: BoU, SFIs and Consumers

Financial Inclusion

Consumer Protection

Financial Education

Key Action Points: How do we empower consumers? How do we

ensure that consumers are aware of their rights and

responsibilities? How do we make sure that consumers are part of

the financial products and services chain of production?

M&E and Behavioral Research

Current challenges in the financial sector are due to , in large measure, the behavioral of consumers and lack of measurement of inclusive finance efforts.

Therefore, I recommend integrating behavioral research in all inclusive finance efforts in tandem with putting in place measures to monitor and assess the impact of such efforts. Main areas of focus: disclosure and transparency; complaints handling and recourse; debt stress (loan management); and fair treatment.

Example: AMFIU Complaints Handling System.

Complaints are received at AMFIU’s office in Kampala.

AMFIU office captures the information related to the case

The process hinges on establishing whether clarification or real disagreement

In case of conflict, AMFIU documents the case and hears both sides.

The Committee on Complaints Handling at AMFIU discusses unresolved issues

Key Action Points: How can we ensure that behavioral research efforts are integral

to inclusive finance initiatives? What is the best way of measuring and assessing the

impact of inclusive finance efforts? How can we use/know the form of complaints

handling preferred by the clients?

Complaints Handling

Recap

We need to rethink financial consumer protection in order to make inclusive finance efforts more effective.

Currently, there is neither a legal framework (no law) that covers financial consumer protection issues nor a consumer protection body/authority and this makes it difficult to address such related issues. Financial consumer protection should be implemented in a unified/holistic manner.

I recommend establishing an integrated supervisory body for Uganda’s financial sector – supervising securities trading and several financial institutions – with the objective of ensuring the proper functioning , stability and integrity of Uganda’s financial system.

Financial institutions need to seek out relationships with their clients. They need to be more transparent in their dealings and must comply with the consumer protection legal framework.

I recommend a three-pronged approach to financial consumer protection in Uganda, as is already being done by the Bank of Uganda , Supervised Financial Institutions and the Consumers.

Empowered consumers are easy to protect; are less susceptible to exploitation. Making consumers aware of their rights and responsibilities make inclusive finance efforts more successful.

I recommend the adoption of the financial citizenship concept. This is a concept related to the full exercise of the citizens’ rights and duties with respect to their financial life.

Current challenges in the financial sector are due to , in large measure, the behavioral of consumers and lack of measurement of inclusive finance efforts.

Therefore, I recommend integrating behavioral research in all inclusive finance efforts in tandem with putting in place measures to monitor and assess the impact of such efforts. Main areas of focus: disclosure and transparency; complaints handling and recourse; debt stress; and fair treatment.

Thank you, open for

Q&A