BusinessDay 25 Oct 2017

Wednesday 25 October 2017
32 BUSINESS DAY
C002D5556
Financial Inclusion
& Innovation Weekly
Supported
ANALYSIS
How we can drive financial inclusion through
financial literacy and better consumer protection
Experts offer insights and recommend ways to fix financial inclusion bottlenecks
IBUKUN TAIWO &
OLAYINKA DAVID-WEST
The jury is still out
on the ability of
the Central Bank
of Nigeria (CBN) to
fulfil its goal of 20
percent financial exclusion by
the year 2020. In various consultations,
industry experts
have highlighted some financial
inclusion bottlenecks and
offered recommendations on
circumventing them. Two of
these critical bottlenecks are
financial (il)literacy and consumer
protection.
FINANCIAL LITERACY
Financial inclusion refers
to levels of access to financial
services while financial
literacy encompasses the
knowledge and education
that fosters understanding of
the requirements and benefits
of these financial products
and services. The hypothesis
is that literacy increases the
demand for financial services.
Nonetheless, financial literacy
is not just about education
in the academic sense; effective
financial literacy addresses
deeply entrenched
behavioural and psychological
factors hindering individuals
from participating in the
financial system.
The solution proposals/
recommendations to improve
financial literacy levels are:
1. Improve the implementation
of the CBN’s National
Financial Literacy Framework
by adapting financial literacy
and consumer education content
into local Nigerian languages
and context. That way,
the information resonates
with the target audience.
2. Develop a robust, interactive
and localised National
Financial Education Curriculum
managed by the Financial
Inclusion Secretariat (FIS).
The Curriculum should not
only cater to the different financial
services but should be
accessible on digital and social
media platforms. Another suggestion
to enhance the efficacy
of this would be to make the
FIS an independent Agency
of Government while incorporating
all critical players in
the DFS ecosystem. Also, there
should be a dedicated funding
pool for the implementation
of consumer education pro-
grammes.
3. The Consumer Protection
Council (CPC) should
provide a legal framework
and guidance notes for terms
and conditions obligations in
order to protect consumers.
In addition, the guidelines
would require that service
provider terms and conditions
be written in simple, legible
and accessible language for
consumers. Furthermore,
the burden of vagueness and
ambiguity that results in poor
understanding of the legal
import and effect of terms and
conditions should be placed
on service providers.
CONSUMER PROTEC-
TION
Consumer protection on
the other hand, seeks to level
the playing field between
providers of financial services
and consumers. Consumers
have less information about
their financial transactions
than the financial institutions
providing these services. This
can lead to excessively high interest
rates, a dearth of understanding
about financial options
and insufficient avenues
for redress. Our efforts toward
widespread financial inclusion
must be complemented
with checks and balances that
ensure a responsible provision
of financial services and
products.
This helps to preserve the
integrity and stability of the
financial sector by preventing
financial crime and protecting
financial consumers.
Dispute Resolution
Proper consumer protection
practises create a stable
and more secure financial
services ecosystem while engendering
trust among consumers.
A key component
of any consumer protection
framework is an effective dispute
resolution mechanism.
Its availability is essential as
its absence could lead to loss
of confidence in the financial
system, prompting people to
move away from it. This would
be a serious setback to current
financial inclusion initiatives.
Current mechanisms for redress
and complaints resolution
in Nigeria are inadequate.
For example, USSD fees
borne by consumers for failed
transactions breed lack of
trust in digital financial services.
Thankfully, in September
2017, the CBN introduced
a regulatory framework to
guide the operation of USSD
for financial institutions. This
was long overdue.
To promote a proactive
consumer protection environment,
solution proposals
/ recommendations are listed
below:
1. While the Central Bank
has regulatory oversight of the
financial services sector, Nigerian
Communications Commission
(NCC) is responsible
for the technology financial
services providers use to deliver
digital financial products
to consumers. As an example,
the USSD regulatory framework
would be even more
effective if the CBN partners
with the NCC.
2. Consumer dispute resolution
systems would be so
much better if the following
policy and guideline amendments
were considered:
Immediate redress for consumer
transactions below a
threshold; while the operators
resolve the issue separately
Provisions in the complaints
management and dispute
resolution guidelines that
empowers Agents to handle
first-level complaints without
reverting to the DFS provider.
Such complaints can thereafter
be escalated.
Establishment of a consumer
ombudsman, mediation
services, arbitral organs and
courts that finalise consumer
complaints within 21 days.
Provision of cost-free consumer
complaints resolution
services, such as toll-free telephone
lines.
Senior/competent officers
should be designated in all relevant
organisations to handle
customer complaints and
timelines for effective resolution
of complaints should be
instituted by policy.
Promotion of financial literacy
education, training and
retraining for judicial officers,
litigators, enforcers and prosecutors.
Cybercrime
Still on improving consumer
protection, the prevalence
of cybercrime has been
a deterrent to adoption and
popularity of electronic transactions.
Cyber criminals these
days use diverse social engineering
techniques which are
generally beyond the knowledge-levels
of consumers
and designated enforcement
agencies. Advanced techniques
and practices of cyber
criminals, which involve
emotional manipulation and
use of social media to steal
information from unsuspecting
consumers, are common.
Poor motivation and capacity
of law enforcement officials
further increases the problems
of cybercrime.
Recommendations
Regulatory policies and
oversight activities should:
1. Enhance the capacity of
law enforcement officers at the
Special Fraud Unit (SFU), Economic
and Financial Crimes
Commission (EFCC) and other
law enforcement agencies
to fight cybercrimes.
2. Require operators to train
and retrain their staff on the
latest security measures.
3. Review existing regulation
on SIM card re-assignment.
NCC should consider
the possibility of blacklisting
rather than re-assignment.
4. Promote cooperation between
banks and law enforcement
agents.
5. Engage the National Judicial
Commission (NJC) to put
in place a policy framework for
cyber crime training of judicial
officers. Seek intervention/
assistance from international
agencies for training of law
enforcement personnel in the
EFCC, ICPC, NPF, SFU, etc.
6. Develop a framework that
guides a working relationship
between the ecosystem and
law enforcement agencies
that makes interaction less
cumbersome.
Olayinka David-West and
Ibukun Taiwo are members
of the Sustainable and Inclusive
Digital Financial
Services Initiative at Lagos
Business School