How We Can Drive Financial Inclusion through Financial Literacy and Better Consumer Protection
Experts offer insights and recommend ways to address financial inclusion bottlenecks
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 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 programmes.
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 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.
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:
i. Immediate redress for consumer transactions below a threshold; while the operators resolve the issue separately
ii. 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.
iii. Establishment of a consumer ombudsman, mediation services, arbitral organs and courts that finalise consumer complaints within 21 days.
iv. Provision of cost-free consumer complaints resolution services, such as toll-free telephone lines.
v. 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.
vi. Promotion of financial literacy education, training and retraining for judicial officers, litigators, enforcers and prosecutors.
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.
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 combat and 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.