Global Financial Inclusion and Consumer Protection Survey 2017 Report RESPONSIBLE FINANCIAL ACCESS Finance & Markets Global Practice Global Financial Inclusion and Consumer Protection Survey 2017 Report © 2017 International Bank for Reconstruction and Development / The World Bank Group 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org DISCLAIMER This work is a product of the staff of The World Bank Group. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank Group, its Board of Executive Directors, or the governments they represent. The World Bank Group does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank Group concerning the legal status of any territory or the endorsement or acceptance of such boundaries. 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CONTENTS Acknowledgments vi Abbreviations vii EXECUTIVE SUMMARY 1 1 INTRODUCTION 7 2 FINANCIAL SECTOR LEGAL, REGULATORY, AND SUPERVISORY FRAMEWORKS 11 2.1 Financial Sector Landscape 11 2.2 Permitted Activities across Institutional Categories 14 2.3 Institutional Arrangements 15 3 SELECTED APPROACHES TO ADVANCE FINANCIAL INCLUSION 17 3.1 National Strategies to Promote Financial Inclusion 17 3.2 Regulation of E-Money 19 3.3 Use of Agents and Other Third Parties 21 3.4 Definitions of Microfinance, Microcredit, and Microsavings 22 3.5 Product Regulation 24 3.6 Credit Reporting Systems 25 3.7 Simplified Customer Due Diligence 27 3.8 Additional Policies to Advance Financial Inclusion 28 4 FINANCIAL CONSUMER PROTECTION 31 4.1 Legal and Regulatory Frameworks 31 4.2 Institutional Arrangements 32 4.3 Supervision and Enforcement 34 4.4 Disclosure and Transparency 37 4.5 Fair Treatment and Business Conduct 42 4.6 Complaints Handling, Dispute Resolution, and Recourse 45 5 FINANCIAL CAPABILITY 51 6 REFERENCES 55   iii iv   Global Financial Inclusion and Consumer Protection Survey Report ANNEX A  List of Responding Jurisdictions 58 ANNEX B  Institutional Arrangements for Financial Consumer Protection 62 ANNEX C  Data by Region and Income Group 63 LIST OF FIGURES Figure 2.1 Jurisdictions that Allow Nonbanks to Issue E-Money 13 Figure 3.1 National Strategies to Promote Financial Inclusion 18 Figure 3.2 Requirements for Safeguarding of Customer E-Money Funds 20 Figure 3.3 Requirements for Types of Accounts Used for Safeguarding of Customer E-Money Funds 20 Figure 3.4 Allowance of Interest Payments and Profit Sharing on Customer E-Money Accounts 20 Figure 3.5 Permitted Use of Retail Agents as Third-Party Delivery Channels 21 Figure 3.6 Definitions of Microfinance, Microcredit, and Microsavings 23 Figure 3.7 Interest Rate Caps and Pricing Limits on Loans 24 Figure 3.8 Interest Rate Caps and Pricing Limits on Loans for Commercial Banks 25 Figure 3.9 Account Cost Regulations 26 Figure 3.10 Credit Reporting Systems 26 Figure 3.11 Documentation Requirements for Account Opening at Commercial Banks 27 Figure 3.12 Simplifications or Exemptions to Customer Due Diligence Requirements 28 Figure 4.1 Institutional Arrangement Models for Financial Consumer Protection 33 Figure 4.2 Supervisory Activities of Financial Consumer Protection Units 35 Figure 4.3 Supervisory Activities of Financial Consumer Protection Unit, Over Time 36 Figure 4.4 Financial Consumer Protection Enforcement Powers, Over Time 36 Figure 4.5 Key Fact Statement Requirements 40 Figure 4.6 Key Fact Statement Requirements by Institutional Categories 41 Figure 4.7 Required Content for Credit Product Statements for Commercial Banks 42 Figure 4.8 Product Suitability Requirements 43 Figure 4.9 Restrictions or Prohibitions on Unfair Business Practices 43 Figure 4.10 Requirements for Internal Dispute Resolution 45 Figure 4.11 Prevalence of Alternative Dispute Resolution Entities 46 Figure 4.12 Functions of Alternative Dispute Resolution Entities 46 Figure 4.13 Models of Alternative Dispute Resolution Entities 47 Figure 4.14 Functions of Alternative Dispute Resolution Entities with Respect to Complaints Data 48 Figure 4.15 Issues Frequently Complained About 48 Figure 4.16 Financial Products Frequently Complained About 49 Figure 5.1 Institutional Arrangements for Leading and/or Coordinating Financial Education 52 Figure 5.2 Coordination Structure to Promote and Coordinate Financial Education 52 Figure 5.3 Elements of Monitoring and Evaluation Systems for Financial Education 53 Figure 5.4 Approaches to Improve the Quality, Consistency, and Reach of Financial Education 54 LIST OF TABLES Table 2.1 Financial Service Provider Institutional Categories and Definitions 12 Table 2.2 Financial Sector Landscape 12 Table 2.3 Number of Providers and Customers across Institutional Categories 13 Table 2.4 Permitted Activities Across Institutional Categories 14 Table 3.1 Elements of National Financial Inclusion Strategies, Overall and in Selected Jurisdictions 18 Table 3.2 Permitted Activities of Agents and Other Third Parties 22 Table 3.3 Rules Regulating Relationships among FSP, Agent, and Customer 22 Table 3.4 Definitional Parameters for Microfinance, Microcredit, and Microsavings 23 Table 3.5 Product Authorization Requirements 25 Table 3.6 Selected Policy Approaches to Advance Financial Inclusion 29 Contents  v Table 4.1 Approaches to Financial Consumer Protection Legal Frameworks 32 Table 4.2 Institutional Arrangement Models for Financial Consumer Protection 34 Table 4.3 Disclosure Requirements, by Stage of Customer Relationship 37 Table 4.4 Disclosure Requirements for Deposit Products 38 Table 4.5 Disclosure Requirements for Credit Products 39 Table 4.6 Requirements for Manner of Disclosure 39 Table 4.7 Requirements for FSPs to Provide Customers with Account Statements 41 BOXES Box 2.1 Definitions of E-Money 13 Box 3.1 Gender in National Financial Inclusion Strategies 19 Box 3.2 Pakistan: Simplified Customer Due Diligence 28 Box 4.1 Côte d’Ivoire: Collecting and Disseminating Product Information 35 Box 4.2 Kenya: Disclosure Requirements for Transactions Delivered via Mobile Phones 38 Box 4.3 Rwanda: Key Facts Statements 40 Box 4.4 European Union: Customer Mobility 44   v ACKNOWLEDGMENTS This report is a product of the Responsible Financial tes, Nataliya Mylenko, and Siegfried Zottel. Tora Estep Access team in the World Bank Group’s Finance and Mar- provided editorial assistance, and Naylor Design, Inc. kets Global Practice. The 2017 Global Financial Inclusion provided design and layout assistance. The team bene- and Consumer Protection Survey project was undertaken fited from the overall guidance of Douglas Pearce and by a team led by Douglas Randall and Oya Ardic Alper Sebastian-A Molineus. and comprising Minita Varghese and Marco Traversa. The team gratefully acknowledges the generous finan- The team is grateful for the substantive inputs from cial support of the Swiss State Secretariat for Economic Emily Rose Adeleke, Jennifer Chien, Denise Dias, Juan Affairs (SECO). Carlos Izaguirre, Ligia Lopes, Fredesvinda Montes, and Finally, the team would like to thank the officials in the Siegfried Zottel in the questionnaire development stage, 124 responding jurisdictions for their generous contribu- and to the peer reviewers of this report: Kuntay Celik, tions of time and expertise in responding to the Survey. Jennifer Chien, Juan Carlos Izaguirre, Fredesvinda Mon- vi ACRONYMS AND ABBREVIATIONS ADR alternate dispute resolution AML/CFT anti-money laundering/combating the financing of terrorism ATM automated teller machine BCEAO Central Bank of West African States BEAC Bank of Central African States CDD customer due diligence CGAP Consultative Group to Assist the Poor CPMI Committee on Payments and Market Infrastructures ECCB Eastern Caribbean Central Bank FATF Financial Action Task Force FSP financial service provider KFS key facts statement KYC know your customer MCI Microcredit Institution MNO mobile network operator NBEI Nonbank E-Money Issuer NFIS national financial inclusion strategy ODTI Other Deposit-Taking Institution SME small and medium enterprise WBG World Bank Group   vii EXECUTIVE SUMMARY Financial sector authorities increasingly prioritize financial This report presents main findings from financial sector inclusion and financial consumer protection, alongside authorities in 124 jurisdictions, representing 141 econo- existing priorities of stability and integrity. An enabling mies and more than 90 percent of the world’s unbanked environment that facilitates competition, promotes inno- adult population. The main findings include the following. vation and the use of technology, addresses risks in a pro- portionate manner, and empowers financial consumers to make informed choices is critical to improving financial FINANCIAL INCLUSION inclusion and consumer protection. Financial sector authorities have pursued a range of enabling environ- Financial Sector Landscape. Diverse financial markets can ment reforms but progress has been uneven: in more lead to innovation and improved consumer choice. On than 65 economies, the majority of adults remain average, responding jurisdictions report having a regula- excluded from the formal financial system (Demirguc- tory framework in place for four of the six institutional cate- Kunt et al. 2015). gories of financial service providers (FSPs) used to structure The objective of the 2017 Global Financial Inclusion the Survey. The most common institutional categories and Consumer Protection (FICP) Survey is to provide a beyond Commercial Banks (present in all jurisdictions) are timely source of global data to benchmark efforts by Financial Cooperatives (present in 65 percent of respond- financial sector authorities to improve the enabling envi- ing jurisdictions), Nonbank E-Money Issuers (NBEIs, 59 ronment for financial inclusion and consumer protection. percent), Other Banks (57 percent), Other Deposit-Taking The 2017 Global FICP Survey (“Survey”) questionnaire Institutions (ODTIs, 56 percent), and Microcredit Institu- covers key topics related to financial inclusion and finan- tions (MCIs, 52 percent). Commercial Banks generally have cial consumer protection and aligns with international the widest reach in terms of customers, though in several guidance to financial sector authorities in these areas, jurisdictions other institutional categories—NBEIs in partic- including the 2017 World Bank Group (WBG) Good Prac- ular—have more customers than Commercial Banks. The tices for Financial Consumer Protection, the 2016 G-20 permitted activities of these institutional categories range High-Level Principles for Digital Financial Inclusion, the widely, an important aspect of a proportionate approach 2016 WBG–CPMI Payment Aspects of Financial Inclusion, to regulation. and the 2016 Guidance on the Application of the Core Principles for Effective Banking Supervision to the Regula- Nonbank E-Money Issuers. NBEIs are a critical driver of tion and Supervision of Institutions Relevant to Financial digital financial services in many jurisdictions. Seven- Inclusion published by the Basel Committee on Banking ty-three responding jurisdictions (59 percent) report hav- Supervision at the Bank for International Settlements. The ing a regulatory framework for NBEIs, including over 70 Survey covers regulated retail institutions that provide percent of jurisdictions in Sub-Saharan Africa and East Asia standard loan, deposit, or payment services. and the Pacific. Among the 60 jurisdictions with NBEIs that provided information on ownership structures, 63 percent   1 2   Global Financial Inclusion and Consumer Protection Survey  |  2017 Report report that at least some NBEIs in their jurisdiction are Simplified Customer Due Diligence. Documentation mobile network operators (MNOs) or their subsidiaries. requirements can serve as a barrier to financial inclusion, particularly for low-income and rural consumer segments. National Financial Inclusion Strategies. National finan- Survey responses confirm that many jurisdictions require cial inclusion strategies (NFISs) are an increasingly com- proof of address, income, or employment, in addition to mon tool to establish national financial inclusion objectives, basic identification documents, to open an account. The strengthen reform efforts, and improve coordination responses suggest that the documentation requirements among stakeholders. Thirty-four responding jurisdictions in many jurisdictions go beyond what is recommended by (27 percent) report having an NFIS in place, and 29 juris- the Financial Action Task Force. However, 60 responding dictions (23 percent) report such a strategy to be under jurisdictions (50 percent) have established simplifications development. The trend toward developing NFISs has or exceptions to customer due diligence requirements for accelerated in recent years, with 12 jurisdictions launching certain types of customers (e.g., low income) or account an NFIS in 2016. There is significant variation across products (e.g., small-value, low-risk transactions), as relates responding jurisdictions in the approval processes, coordi- to Commercial Banks. Such simplifications or exceptions nation structures, and other key elements of NFIS. Just 14 are most commonly reported in upper-middle-income NFISs include a gender dimension. General financial sec- jurisdictions (57 percent) and in the Latin America and tor development strategies with a financial inclusion com- Caribbean region (61 percent). ponent, national development strategies with a financial inclusion component, and microfinance strategies are rela- Product Regulation. Some financial sector authorities tively less common, reported to be in place or in develop- employ policy or regulatory tools to influence product ment in 45, 39, and 33 responding jurisdictions, respectively. design and pricing directly, though such approaches can have unintended effects. Overall, 81 responding jurisdic- Regulation of E-Money Funds. The safeguarding of cus- tions (65 percent) report some form of caps on interest tomers’ e-money funds and whether or not NBEIs can pay rates or pricing limits on loans. The majority of responding interest or share profits on e-money funds are key ele- jurisdictions also have some form of product authorization ments of e-money regulatory frameworks. Sixty-one rele- requirements: for Commercial Banks, 39 responding juris- vant responding jurisdictions1 (86 percent) have put in dictions (33 percent) report that regulation in their jurisdic- place requirements that some or all of a customer’s tion explicitly requires authorization of all new or modified e-money funds be separated from the funds of the e-money financial products, and 30 jurisdictions (25 percent) report issuer and placed in a prudentially regulated financial insti- that such regulations apply for some new or modified tution. In 86 percent of relevant responding jurisdictions, products. Finally, 52 responding jurisdictions (42 percent) NBEIs are prohibited by law from using customer funds for report some form of pricing regulations on deposit or purposes other than redeeming e-money and executing transaction accounts. fund transfers. In 13 percent of relevant responding juris- dictions, the law/regulation allows NBEIs to pay interest Credit Reporting Systems. As compared with Commer- on customers’ e-money accounts; in 8 percent of relevant cial Banks, institutional categories of FSPs that typically responding jurisdictions, the law/regulation allows NBEIs target underserved consumers are significantly less likely to share profits with their e-money customers. to be integrated into credit reporting systems. According to results from the Survey, 56 percent of jurisdictions Use of Agents and Other Third Parties. Several jurisdic- require Commercial Banks to check / report credit bureau tions have successfully leveraged agent networks to information for some or all loans. The same applies to just cost-effectively expand the physical reach of the financial 36 percent of jurisdictions with Financial Cooperatives sector. One hundred and five responding jurisdictions (85 and 46 percent of jurisdictions with MCIs. This trend holds percent) report that some institutional categories of FSPs across income categories and highlights a key challenge are permitted to contract with retail agents as third-party for policymakers: broadening the coverage of credit delivery channels. The permitted activities of such agents reporting systems to enable lenders to make better credit and third parties varies widely across institutional catego- decisions for a wider segment of consumers. ries and jurisdictions. The use of agents also introduces new risks and many jurisdictions have established rules Microfinance, Microcredit, and Microsavings. Despite that regulate the relationships among FSPs, agents, and the relative prevalence of MCIs and “micro” products in customers. For example, more than 75 percent of respond- many jurisdictions, significant variation remains in how ing jurisdictions that permit agent relationships have rules these terms are defined, or whether they are defined at in place that hold a financial institution liable for its agents’ all. Forty-four responding jurisdictions (36 percent) report actions or omissions. formal definitions for “microfinance,” 50 jurisdictions (41 Executive Summary   3 percent) for “microcredit,” and 16 jurisdictions (13 per- Supervision and Enforcement. Effective financial con- cent) for “microsavings.” The prevalence of defining these sumer protection requires robust supervision and enforce- terms is higher in lower-income jurisdictions and in juris- ment. Commonly reported supervisory activities for dictions with MCIs, though more than 30 percent of juris- entities tasked with financial consumer protection include dictions with MCIs do not report having formal definitions onsite and offsite examinations, the collection of data of these terms. For those jurisdictions that do explicitly from FSPs (e.g., on fees or complaints), and market moni- define these terms in law or regulation, how the terms are toring. Less than 30 percent of jurisdictions report under- defined varies meaningfully, including by the value or taking mystery shopping or conducting consumer amount of the product or by criteria such as target clien- research. The prevalence of some supervisory activities tele (e.g., low income), product purpose (e.g., microenter- (e.g., market monitoring) has increased slightly since prise), and/or product design (e.g., unsecured). 2013. The most commonly reported enforcement pow- ers for financial consumer protection include the issu- ance of warnings and the imposition of fines and FINANCIAL CONSUMER penalties; these powers are also those most commonly PROTECTION AND CAPABILITY reported to have been applied in recent years. Enforce- ment powers for financial consumer protection have Legal and Regulatory Frameworks for Financial Con- increased since 2013. sumer Protection. Over 95 percent of responding juris- dictions have some form of legal framework for financial Disclosure and Transparency. Financial consumers ben- consumer protection, though approaches vary. Nine- efit from clear and comparable information about finan- ty-four responding jurisdictions (76 percent) report that cial products and services. Nearly all responding their legal framework includes consumer protection pro- jurisdictions (94 percent) have some requirements for visions within one or more financial sector laws (e.g., Commercial Banks to provide customers, in paper or within a banking law). Twenty-six responding jurisdic- electronic form, specific types of information (e.g. inter- tions (21 percent)—almost entirely high income and est rate, fees and penalties, etc.) of the relevant financial upper-middle income—report having one or more product. The content, timing, and format of such disclo- standalone laws for financial consumer protection. For- sure requirements vary considerably. For credit products, ty-two jurisdictions (34 percent) report having a general the most common disclosure requirements across all consumer protection law with explicit references to institutional categories relates to disclosure of effective financial services. Many jurisdictions employ several interest rate, fees, and penalties. The required use of a approaches. The Survey results indicate—and diagnostic key facts statement (or similar) for at least one product is work by the WBG confirms—that many jurisdictions have reported by 81 responding jurisdictions (65 percent) as it overlapping, conflicting, or incomplete legal frameworks relates to Commercial Banks, but is significantly less for financial consumer protection. reported for other institutional categories, even for com- mon financial products and services. Institutional Arrangements for Financial Consumer Protection. Which financial sector authorities are respon- Fair Treatment and Business Conduct. The fair treatment sible for financial consumer protection varies consider- of customers is a core tenet of financial consumer protec- ably across jurisdictions. Responding jurisdictions tion. In 90 responding jurisdictions (75 percent), FSPs are classified their institutional arrangements for financial prohibited from using any term or condition that is unfair, consumer protection into five broad categories. The excessively unbalanced, or abusive in a customer agree- most common approach is an Integrated Sectoral Finan- ment. One hundred and ten responding jurisdictions (90 cial Sector Authority model, reported by 55 responding percent) report having some provisions in existing law or jurisdictions (45 percent). In this model, financial con- regulations that restrict excessive borrowing by individu- sumer protection supervision responsibilities fall under als. The majority of these jurisdictions require the lending multiple financial sector authorities, each responsible for institution to assess borrower ability to repay but do not all aspects of supervision (e.g., prudential and financial set specific limits or ratios. consumer protection) for FSPs operating within a given financial subsector (e.g., banking). Eighty-six relevant Complaints Handling and Dispute Resolution. Accessi- responding jurisdictions (75 percent) report having a ble and efficient dispute resolution mechanisms allow specialized unit dedicated to financial consumer protec- financial consumers to resolve disputes with their FSP. tion within an institution that has a broader remit; 17 Eighty-seven responding jurisdictions (74 percent) jurisdictions (21 percent) report having established the require FSPs to implement procedures and processes for unit since 2013. 4   Global Financial Inclusion and Consumer Protection Survey  |  2017 Report resolving customer complaints. Eighty responding juris- Financial Capability. Financially capable consumers have dictions (65 percent) report having an out-of-court alter- the knowledge, skills, attitudes, and confidence to make nate dispute resolution (ADR) entity (e.g., a financial informed decisions and act in their own best financial ombudsman) in place for financial consumers who can- interest. Financial capability (or literacy or education) strat- not resolve their disputes with their FSP. The most com- egies are reported to be in place in 44 jurisdictions and mon topics of complaint among the 51 jurisdictions that under development in 27 jurisdictions. Eighty responding provided data are (i) excessive interest or fees, (ii) unclear jurisdictions (67 percent) report having undertaken a interest or fees, (iii) mistaken or unauthorized transac- nationally representative survey of individuals and/or tions, (iv) automated teller machine (ATM) transactions, households covering financial capability. In 35 responding and (v) fraud. jurisdictions (30 percent), financial education has been integrated into at least one government-provided social assistance program. NOTE “Relevant responding jurisdiction” is used throughout the report to refer to the subset of responding jurisdictions that respond to a 1.  given question, which may be filtered from a previous question. In this case, the term refers to responding jurisdictions that report having NBEIs. 1 INTRODUCTION Efforts to increase financial inclusion and financial con- ful business practices. Financial consumer protection is sumer protection have never been greater. More than 60 particularly important as policymakers aim to expand the jurisdictions have launched or are in the process of formal financial sector to reach massive numbers of previ- developing national financial inclusion strategies. The ously unserved or underserved consumers and confront private sector is rapidly innovating to develop and scale new risks associated with digital financial services (World new digital financial products and delivery channels to Bank Group 2017). reach previously underserved consumers. And financial Financial sector authorities confront a difficult and sector authorities are increasingly focused on enabling complex task in seeking to expand financial inclusion innovation while managing risks, improving financial responsibly and sustainably. They must simultaneously consumer protections, and enhancing the financial capa- encourage innovation and competition, protect the stabil- bilities of consumers to ensure that the benefits of finan- ity and integrity of the financial system, and ensure that cial inclusion are fully realized. Impressive progress has financial consumers are protected. When allowing new been made: between 2011 and 2014, the share of providers or products into the market, financial sector unbanked adults fell from 49 percent to 38 percent authorities must develop regulatory and supervisory worldwide (Demirguc-Kunt, et al. 2015). approaches proportionate to the risks involved—an Yet with more than two billion individuals still finan- undertaking that is far easier said than done. cially excluded, efforts must continue to accelerate. To That said, several approaches have been deployed that end, World Bank Group (WBG) President Jim Kim across jurisdictions in recent years, with many pursuing established an initiative in 2013 to achieve Universal simultaneous and related reforms. These include the Financial Access by 2020, whereby all adults own an licensing of Nonbank E-Money Issuers (NBEIs), the use account that allows them to store value and make and of retail agents to expand the physical reach of the finan- receive payments. The achievement of Universal Financial cial sector, simplified customer due diligence (CDD), and Access would be a significant milestone toward reaching the development of “basic” or “micro” products. For full financial inclusion, whereby all consumers have access financial consumer protection, efforts have been under- to a range of appropriate financial products, delivered in taken to enhance disclosure and transparency, fair treat- a responsible and sustainable manner. ment, and internal and external dispute resolution. As demonstrated by robust research, financial inclu- Progress across jurisdictions has been uneven, with some sion can enable individuals to smooth consumption; man- authorities leading the way and others just beginning to age economic shocks; and invest in their education, develop their financial inclusion and financial consumer health, and economic well-being (World Bank Group protection agendas. 2014). The sustainable and responsible achievement of The objective of the 2017 Global Financial Inclusion financial inclusion objectives requires strong consumer and Consumer Protection (FICP) Survey is to provide a protection regimes that enable consumers to make timely source of global data for benchmarking advance- informed financial decisions and protect them from harm- ments in key topics related to the enabling environment   7 8   Global Financial Inclusion and Consumer Protection Survey  |  2017 Report for financial inclusion and consumer protection. An effec- includes time-series analysis for selected indicators. tive enabling environment facilitates the uptake and usage The development of the questionnaire and analysis of of a range of appropriate financial products that can be the results was undertaken in close coordination with the conveniently accessed by consumers and delivered in a development of the WBG’s 2017 edition of the Good responsible and sustainable manner. The enabling envi- Practices for Financial Consumer Protection (2017 Good ronment comprises legal, regulatory, and supervisory Practices). The Survey covers key topics from the 2017 frameworks; financial infrastructure (e.g., national pay- Good Practices and can therefore serve as a high-level, ments systems and credit reporting systems); and public baseline benchmarking tool for assessing country-level and private sector commitment to financial inclusion. and global progress toward adopting recommendations The 2017 Global FICP Survey (“Survey”) question- set forth in the 2017 Good Practices. The development of naire covers the following key topics that are relevant to the Survey was also informed by other recent global stan- improving the enabling environment for financial inclu- dards and principles, including the 2016 G-20 High-Level sion: national financial inclusion strategies (NFISs), regu- Principles for Digital Financial Inclusion, the 2016 Pay- lation and supervision of providers relevant to financial ment Aspects of Financial Inclusion report from the joint inclusion (including nonbank e-money issuers), e-money task force of the Committee for Payments and Markets and “micro” products, alternative delivery channels, Infrastructure (CPMI) and the World Bank Group, and the credit reporting systems, and simplified customer due 2016 Guidance on the Application of the Core Principles diligence (CDD).2 With respect to financial consumer for Effective Banking Supervision to the Regulation and protection, the questionnaire covers the following key Supervision of Institutions Relevant to Financial Inclusion topics: institutional and supervisory arrangements for published by the Basel Committee on Banking Supervi- financial consumer protection, disclosure and transpar- sion at the Bank for International Settlements. ency, fair treatment, and dispute resolution. Selected Institutional mandates for financial inclusion and finan- issues in financial capability and education are also cial consumer protection vary widely among jurisdictions addressed. and in most cases include several financial sector authori- The Survey covers regulated retail institutions that pro- ties and multiple other agencies, for example competition vide standard loan, deposit, and/or payment services. In authorities, data protection authorities, and general finan- order to manage the complexity and length of the Survey, cial consumer protection authorities. Surveys were sent providers of insurance, pension, and investment products primarily to central banks and other lead financial sector are not covered. Unregulated financial service providers authorities, and respondents were asked to consult with (e.g., rotating savings and credit associations) are also not relevant agencies and submit a joint response. Most juris- included. dictions made great efforts to do so, but gaps remain in To structure responses and gather information on the several instances. The analysis in this report therefore various types of relevant financial service providers that highlights the number of responding jurisdictions when operate within a given jurisdiction, respondents were discussing each topic and indicator. asked to use six common institutional categories: (i) Com- The 2017 Global FICP Survey includes responses from mercial Banks, (ii) Other Banks, (iii) Financial Cooperatives, 124 jurisdictions, representing 141 economies and over (iv) Other Deposit Taking Institutions (ODTIs), (v) Microcre- 90 percent of the world’s unbanked adult population.5 A dit Institutions (MCIs), and (vi) Nonbank E-Money Issuers jurisdiction refers to the remit of the responding authority; (NBEIs). Section 2.1 defines these categories. for example, the Central Bank of West African States Recent, related measurement efforts by the World (BCEAO) is considered a single jurisdiction although it Bank Group and others informed the development of covers eight economies.6 The other multi-economy juris- the 2017 Global FICP Survey questionnaire. The core set dictions included in the Survey are the Bank of Central of questions were derived from the 2013 Global Survey African States (BEAC) and the Eastern Caribbean Central on Consumer Protection and Financial Literacy under- Bank (ECCB). Members of the European Union, including taken by the World Bank Group3 and the 2013 Range of those in the Eurosystem, responded separately to the Sur- Practice Survey undertaken by the Basel Committee on vey, as financial consumer protection is still largely under Banking Supervision at the Bank for International Settle- the remit of national financial sector authorities (the survey ments.4 In several cases, questions from these previous was sent to all 28 member states). See Annex A for a com- surveys were revised or expanded. The Survey also plete list of Survey respondents. includes new questions and modules, including on The reporting period for the Survey covers November national financial inclusion strategies, Nonbank E-Money 2016 to June 2017. Data are self-reported and have not Issuers, simplified CDD, alternative dispute resolution been independently verified by the World Bank Group. (ADR) entities, and financial education. Where compara- However, efforts were made to work with responding juris- ble questions and respondent coverage allow, the report dictions to clarify responses and ensure the completeness Introduction  9 and consistency of submissions. Jurisdictions submitted national financial inclusion strategies, regulation of responses via an online platform. e-money, product authorization, the use of agent-based This report summarizes main findings from the 2017 models, credit reporting systems, and simplified customer Global FICP Survey. Additional in-depth analyses will be due diligence. Chapter 4 covers selected issues in finan- undertaken through a forthcoming series of technical cial consumer protection, including legal and regulatory notes. Chapter 2 provides an overview of the institutional frameworks, institutional arrangements, disclosure and diversity and reach of financial sectors and summarizes transparency, dispute resolution, and fair treatment. legal, regulatory, and supervisory frameworks. Chapter 3 Chapter 5 covers selected issues in financial capability. covers selected issues in financial inclusion, including . NOTES Topics that other data collection efforts (e.g., World Bank Group Global Payment Systems Survey, the World Bank Group Doing 2.  Business project) address are covered in relatively less detail in the 2017 Global FICP Survey. The Survey was designed to be complementary to these initiatives. Earlier World Bank Group and CGAP survey efforts also informed the Survey. See for example, Ardic et al. 2011 3.  The Range of Practice Survey was undertaken to inform the subsequent 2016 Guidance on the Application of the Core Principles 4.  for Effective Banking Supervision to the Regulation and Supervision of Institutions Relevant to Financial Inclusion. 5.  Authors’ calculations based on 2014 Global Findex data (Demirguc-Kunt et al. 2015). Three jurisdictions span several economies: the BCEAO covers Benin, Burkina Faso, Côte d’Ivoire, Guinea-Bissau, Mali, Niger, 6.  Senegal, and Togo; the BEAC covers Cameroon, Central African Republic, Chad, Equatorial Guinea, Gabon, and Republic of Congo; and the ECCB covers Anguilla, Antigua and Barbuda, Dominica, Grenada, Montserrat, St Kitts and Nevis, St. Lucia, and St. Vincent and the Grenadines. For more information on how the World Bank Group defines and classifies “economies,” see https://datahelpdesk.worldbank.org/knowledgebase/articles/378834-how-does-the-world-bank-classify-countries. 2  INANCIAL SECTOR LEGAL, REGULATORY, F AND SUPERVISORY FRAMEWORKS 2.1  FINANCIAL SECTOR LANDSCAPE institutional categories under their legal and regulatory frameworks. On average, responding jurisdictions reported Financial sector authorities increasingly recognize the four of the six institutional categories, ranging from Leba- value of diverse financial markets that include a range of non, which has only Commercial Banks, to Peru, which has institutional categories. Indeed, an acknowledgement all six institutional categories. exists that Commercial Banks are not able or willing to The most common institutional categories beyond serve all consumer segments fully, particularly in middle- or Commercial Banks are Financial Cooperatives (81 respond- low-income jurisdictions where many consumers have low ing jurisdictions; 65 percent) followed by NBEIs (present in and irregular income streams and limited sources of credit 73 responding jurisdictions or 59 percent), Other Banks (71 information. Over the past several decades, many financial responding jurisdictions; 57 percent), ODTIs (69 respond- sector authorities have pursued reforms to allow additional ing jurisdictions; 56 percent), and MCIs (65 responding institutional categories of financial service providers to jurisdictions; 52 percent).8 Worth noting is that even the enter the market, including microfinance institutions and least commonly reported institutional category—MCIs— nonbank e-money issuers. As further discussed in Section exist in the majority of responding jurisdictions. Financial 2.2, a proportionate regulatory approach allows many of cooperatives are particularly prevalent in low-income juris- these noncommercial bank institutions greater flexibility to dictions, East Asia and Pacific jurisdictions, Latin America innovate and target underserved consumer segments. and Caribbean jurisdictions, and Sub-Saharan Africa juris- For the purposes of the Survey, respondents were dictions.9 More than 70 percent of jurisdictions in Europe asked to segment financial service providers regulated in and Central Asia and in East Asia and Pacific report having their jurisdiction into six institutional categories: (i) Com- MCIs (Table 2.2). mercial Banks, (ii) Other Banks, (iii) Financial Cooperatives, NBEIs are an important driver of digital financial ser- (iv) Other Deposit-Taking Institutions (ODTIs), (v) Microcre- vices in many jurisdictions. The NBEI category is broadly dit Institutions (MCIs), and (vi) Nonbank E-Money Issuers defined in the Survey to accommodate the variation in (NBEIs). Table 2.1 outlines the defining parameters of how e-money is conceptualized, defined, and regulated these institutional categories and lists country exam- across jurisdictions (see Box 2.1). That said, most defini- ples.7 Insurance companies, mutual funds, investment tions of e-money employ the concept of monetary value banks, and private equity funds fall outside the scope of being electronically stored on a device or server, which the Survey. can be redeemed for its full value, including to make pay- The legal and regulatory frameworks in all responding ments. Common examples of e-money accounts include jurisdictions allow for Commercial Banks. However, in nine mobile wallets, internet-based wallets, and prepaid cards. responding jurisdictions out of 124 (seven percent), Com- Seventy-three responding jurisdictions (59 percent) mercial Banks are the only institutional category offering report having a regulatory framework for NBEIs, including retail credit, savings, and payment products; the remaining over 70 percent of jurisdictions in Sub-Saharan Africa and 115 responding jurisdictions (93 percent) have additional East Asia and the Pacific (Figure 2.1).   11 12   Global Financial Inclusion and Consumer Protection Survey  |  2017 Report TABLE 2.1 Financial Service Provider Institutional Categories and Definitions INSTITUTIONAL CATEGORY DEFINITIONS COUNTRY EXAMPLES Commercial Banks A Commercial Bank is an institution licensed for taking Commercial Banks (Turkey), Universal Banks deposits from the general public that is subject to supervision (Brazil) in the meaning of the Basel Core Principles for Effective Banking Supervision (BCBS 2012). A Commercial Bank is (i) not subject by law or regulation to a specified maximum size of loan or savings product or any limitation on the type of client that may be served and (ii) is not tasked by law or regulation with serving any particular industry. Other Banks A bank other than a Commercial Bank. Regional Rural Banks (India), Agriculture Bank (Egypt), Postal Bank (Japan) Financial Cooperatives A member-owned and member-controlled financial Savings and Credit Cooperatives (Bolivia), institution governed by the “one member one vote” rule. Credit Unions (Australia), Cooperative Financial Cooperatives often take deposits or similar repayable Financial Institutions (South Africa) funds from and make loans only to members, although some also serve nonmembers. Other Deposit Taking An institution authorized to collect deposits or savings that Deposit-taking Microfinance Companies Institutions (ODTIs) does not fit the definition of bank or Financial Cooperative. (Rwanda), Microcredit Deposit Organizations (Tajikistan), Sociedades Financieras Populares (Mexico) Microcredit Institutions (MCIs) A financial institution that does not take deposits and Microcredit Companies (China), provides microcredit targeting low-income customers. Microcredit Institutions (Vietnam), Microlenders (Namibia) Nonbank E-Money Issuers An issuer of e-money that is not a bank. Specialized E-Money Issuers (Peru), (NBEIs) Mobile Money Service Providers (Uganda), Non-bank E-Money Institution (Zambia) TABLE 2.2 Financial Sector Landscape % of responding jurisdictions with with legal/regulatory framework for institutional category, by income and regional group LATIN MIDDLE UPPER- LOWER- EUROPE & EAST AMERICA EAST & SUB- HIGH MIDDLE MIDDLE LOW CENTRAL ASIA & & NORTH SOUTH SAHARAN INSTITUTIONAL CATEGORY ALL INCOME INCOME INCOME INCOME ASIA PACIFIC CARIBBEAN AFRICA ASIA AFRICA Commercial Banks 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Other Banks 57% 46% 59% 68% 45% 29% 82% 78% 44% 71% 70% Financial Cooperatives 65% 67% 57% 68% 73% 53% 82% 83% 22% 57% 70% Other Deposit-Taking Institutions 56% 33% 57% 71% 73% 41% 82% 78% 33% 71% 78% Microcredit Institutions 52% 33% 49% 71% 64% 71% 73% 44% 56% 57% 65% Nonbank E-Money Issuers 59% 64% 54% 59% 64% 53% 82% 44% 33% 43% 70% Average # of institutional categories 3.9 3.4 3.8 4.4 4.2 3.5 5.0 4.3 2.9 4.0 4.5 Number of responding jurisdictions 124 39 37 34 11 17 11 18 9 7 23 Note: The three multi-economy respondents (Central Bank of West African States, Bank of Central African States, and Eastern Caribbean Central Bank) are not included in income group classifications. High-income jurisdictions are not included in regional classifications. Among the 60 jurisdictions with NBEIs that provided e-money, for example Smart Axiata in Cambodia, which information on ownership structures, 38 jurisdictions (63 has a partnership with Canadia Bank. From the customer percent) report that at least some NBEIs in their jurisdic- perspective, the distinction between a Nonbank E-Money tions are mobile network operators (MNOs) or their sub- Issuer and a nonbank e-money distributor may not be sidiaries, for example Tigo in El Salvador or Airtel in straightforward. However, for the purposes of the Survey, Uganda. Examples of NBEIs that are not subsidiaries of such arrangements are considered agent relationships MNOs include AliPay in China (part of the Alibaba con- and are therefore discussed in Section 3.3. glomerate) and Qiwi Wallet Europe in Latvia (a payments Beyond the existence of each institutional category in company). a given jurisdiction, the number of providers and custom- In some jurisdictions, MNOs serve as distributors or ers reached vary meaningfully across institutional catego- agents of Commercial Banks or other FSPs that issue ries (Table 2.3). The median number of Commercial Bank Financial Sector Legal, Regulatory, and Supervisory Frameworks   13 BOX 2.1 Definitions of E-Money The 2016 CPMI-WBG Payment Aspects of Financial Inclusion report defines e-money as value stored electron- ically in a device such as a chip card or a hard drive in a personal computer. The European Central Bank defines e-money as an electronic store of monetary value on a technical device that may be widely used for making payments to entities other than the e-money issuer. The device acts as a pre- paid bearer instrument that does not necessarily involve bank accounts in transactions. The Central Bank of Kenya defines e-money as monetary value represented by a claim on its issuer that is (i) electronically, including magnetically, stored; (ii) issued against receipt of currency of Kenya; and (iii) accepted as a means of payment by persons other than the issuer. According to the Central Bank of Philippines (Bangko Sentral ng Pilipinas), e-money is monetary value electron- ically stored in convenient payment instruments that consumers can use to buy or pay for goods and services, to transfer or remit funds, and/or to withdraw funds. E-Money instruments include cash cards, e-wallets acces- sible via mobile phones or other access device, stored value cards, and other similar products. FIGURE 2.1 Issuance of E-Money by Nonbanks % of responding jurisdictions that have a have a legal/regulatory framework for Nonbank E-money Issuers, by income and regional group 100% 80% 82% 70% 60% 64% 64% 59% 59% 54% 53% 40% 44% 43% 33% 20% 0% All High Upper- Lower- Low Europe & East Latin Middle East South Sub-Saharan Income Middle Middle Income Central Asia & America & & North Asia Africa Income Income Asia Pacific Caribbean Africa Note: Percentages are based on 124 jurisdictions (all), 39 high income, 37 upper-middle income, 34 lower-middle income, 11 low income, 17 Europe and Central Asia, 11 East Asia and Pacific, 18 Latin America and Caribbean, 9 Middle East and North Africa, 7 South Asia, and 23 Sub-Saharan Africa. TABLE 2.3 Number of Providers and Customers across Institutional Categories PROVIDERS AND COMMERCIAL OTHER FINANCIAL CUSTOMERS BANKS BANKS COOPERATIVES ODTIs MCIs NBEIs Median number of providers 23 2 85 11 42 4 Median number of providers, as 100% 7% 370% 48% 183% 17% a percentage of Commercial Bank providers Median estimated number of 5,006,581 126,333 755,820 125,392 355,627 626,522 customers Median estimated number of 100% 3% 15% 3% 7% 13% customers, as a percentage of Commercial Bank customers Note: The indicators on number of providers are based on 68 jurisdictions (Commercial Banks), 24 jurisdictions (Other Banks), 45 jurisdictions (Financial Cooperatives), 33 jurisdictions (ODTIs), 28 jurisdictions (MCIs), and 25 jurisdictions (NBEIs). The indicators on number of c   ustomers are based on 68 jurisdictions (Commercial Banks), 23 jurisdictions (Other Banks), 43 jurisdictions (Financial Cooperatives), 3  3 jurisdictions (ODTIs), 28 jurisdictions (MCIs), and 25 jurisdictions (NBEIs). 14   Global Financial Inclusion and Consumer Protection Survey  |  2017 Report providers in responding jurisdictions is 23, ranging from in line with the risks associated with a given activity and the three in Lesotho and Swaziland to 180 ommercial bank capacity and complexity of a given institutional category, providers in Italy. Compared with Commercial Banks, a as noted in the 2016 Guidance on the Application of the typical jurisdiction has significantly fewer Other Bank pro- Core Principles for Effective Banking Supervision to the viders (a median of two), NBEI providers (a median of Regulation and Supervision of Institutions Relevant to four), and ODTI providers (a median of 11).10 Jurisdictions Financial Inclusion published by the Basel Committee on with Financial Cooperatives and MCIs report significantly Banking Supervision at the Bank for International Settle- more providers in those categories (medians of 85 and 42, ments (BCBS 2015). respectively), as compared with Commercial Banks. Not surprisingly, Commercial Banks have the widest In the majority of jurisdictions, Commercial Banks have range of permitted activities. In all or nearly all responding the widest reach in terms of customers. There are excep- jurisdictions, Commercial Banks are permitted to (i) pro- tions, however: in several jurisdictions other institutional vide checking or current accounts, (ii) transfer domestic categories—NBEIs in particular—have the largest cus- remittances, (iii) transfer international remittances, and (iv) tomer base. Uganda, for example, reports 25 Commercial issue payment cards. The distribution of insurance or pri- Bank providers and seven NBEI providers, but NBEIs vate pensions is relatively less common as a permitted cumulatively have more than 19 million registered cus- activity for Commercial Banks. tomers as compared with the 5.5 million depositors of Other institutional categories are significantly less Commercial Banks. likely to be permitted to conduct higher-risk activities. For example, ODTIs, Financial Cooperatives, and MCIs are less likely than Commercial Banks to be able to transfer PERMITTED ACTIVITIES ACROSS 2.2  international remittances or issue payment cards. INSTITUTIONAL CATEGORIES Overall, 105 jurisdictions allow at least some institu- tional categories to use retail agents as third-party deliv- While 115 responding jurisdictions out of 124 (93 percent) ery channels. Significant variation exists across institutional have more than just Commercial Banks within their legal categories, however, with Commercial Banks and NBEIs and regulatory frameworks, the types of activities that most likely to be able to use retail agents. ODTIs and other institutional categories are permitted to perform var- MCIs are typically more likely to be permitted to act as ies widely, both within and across jurisdictions. In these agents of another FSP than to contract with retail agents jurisdictions, the range of permitted activities for different as third-party delivery channels for their own products and institutional categories is an important aspect of develop- services. Section 3.3 discusses agents in more detail. ing a proportionate approach to regulation and supervi- The degree to which different institutional categories sion. Such a proportionate approach should be determined are allowed to issue e-money varies significantly. Beyond TABLE 2.4 Permitted Activities % of responding jurisdictions with that permit FSPs to perform activity, by institutional category COMMERCIAL OTHER FINANCIAL PERMITTED ACTIVITY BANKS BANKS COOPERATIVES ODTIs MCIs NBEIs Provide checking or current accounts 100% 70% 62% 50% 7% 34% Contract with retail agents as third- 81% 70% 65% 61% 47% 91% party delivery channels Act as an agent of a FSP 78% 64% 64% 73% 60% 74% Transfer domestic remittances 99% 77% 72% 66% 34% 89% Transfer international remittances 98% 71% 54% 50% 21% 71% Issue payment cards 99% 68% 61% 59% 23% 55% Issue e-money 82% 54% 46% 38% 18% 100% Distribute insurance 71% 55% 56% 43% 32% 36% Distribute pension products 69% 47% 48% 39% 15% 29% Number of Responding Jurisdictions 123 67 73 60 58 72 Note: The Survey asked respondents to note whether each institutional category was permitted to perform each activity, selecting from “yes”; “yes, but restricted”; and “no.” For the purposes of this analysis, “yes, but restricted” is considered an affirmative response. For example, MCIs in Bolivia and Peru can offer checking or current accounts with special authorization from the regulator and so are included in the analysis as “yes.” Number of jurisdictions varies by question; the given number represents the question with the most responses. Financial Sector Legal, Regulatory, and Supervisory Frameworks   15 NBEIs (which, by definition, are all permitted to issue have more specialized authorities, including for financial e-money), Commercial Banks are the next institutional cat- consumer protection and data protection.12 Section 4.1 egory most likely to be able to issue e-money (82 per- discusses the institutional arrangements for financial cent), followed by other banks (54 percent). In the majority consumer protection. of relevant responding jurisdictions, Financial Coopera- With respect to prudential regulation and supervi- tives, ODTIs, and MCIs are not permitted to issue e-money sion, responding jurisdictions report an average of two (Table 2.4). authorities across all institutional categories. These authorities include central banks and banking supervi- sors, as well as specialized nonbank regulators (e.g., the 2.3  INSTITUTIONAL ARRANGEMENTS Malaysia Co-operative Societies Commission). Some degree of specialization often exists within pru- A range of regulatory and supervisory authorities are dential supervisory authorities that cover multiple cate- present in most jurisdictions. In addition to prudential gories of FSPs. Of the 113 jurisdictions where the regulation and supervision, there are typically a number prudential supervisory authority that supervises Com- of other authorities that regulate and supervise FSPs with mercial Banks also supervises other institutional catego- respect to financial consumer protection, financial integ- ries, at least one other supervisory department is rity, competition, and data protection. On average, four separate from the banking supervision department in 67 distinct authorities are involved in the regulation and responding jurisdictions (59 percent). For example, the supervision of the aforementioned areas and the institu- National Bank of Rwanda supervises Commercial Banks, tional categories included in the Survey. As expected, Other Banks, MCIs, Financial Cooperatives, and NBEIs, the number of regulatory and supervisory authorities but these duties are spread across three supervisory tends to rise in line with the number of institutional cate- departments (Banking, Microfinance, and Payments Sys- gories present in a given jurisdiction.11 The number of tems). In the remaining 46 jurisdictions (41 percent), a authorities also generally rises with the income level of single department covers all supervised institutions. the jurisdiction, as higher-income jurisdictions tend to NOTES These institutional categories are based on those used in the 2013 Range of Practice Survey (BCBS 2015). 7.  In some instances, respondents indicated that an institutional category was present in their jurisdiction but were not able to 8.  gather responses for the subsequent questions concerning that institutional category. Therefore, in some cases the number of responding jurisdictions for a given institutional category in a given jurisdiction is less than what is indicated in Table 2.2, which summarizes whether the institutional category exists. For example, 73 percent of responding jurisdictions indicated that NBEIs exist in their jurisdictions, but only 67 percent provided information in response to subsequent questions on regulation, etc. Given that the Survey covers financial service providers (FSPs) that are in some way regulated or supervised, there are likely 9.  additional jurisdictions wherein financial service providers (e.g., Financial Cooperatives or moneylenders) are present but operate outside the legal framework. 10. The analysis includes only jurisdictions that report a given institutional category. For example, among jurisdictions with 1–2 categories of FSPs, there are on average 2.77 distinct regulatory and supervisory 11.  authorities; among jurisdictions with 5–6 categories of FSPs, there are 3.72 distinct regulatory and supervisory authorities. 12.  For example, in high-income jurisdictions there are 4 distinct regulatory and supervisory authorities on average, compared with 2.53 among low-income jurisdictions. 3 SELECTED APPROACHES TO ADVANCE FINANCIAL INCLUSION 3.1 NATIONAL STRATEGIES gies are relatively less common, reported to be in place or in development by 45 (36 percent), 39 (31 percent), As financial inclusion becomes an increasingly common and 33 (27 percent) of responding jurisdictions, respec- and high-profile policy objective, many financial sector tively (Figure 3.1). policymakers have sought to establish national strategies Low-income jurisdictions most commonly report hav- or similar instruments to outline a strategic framework, set ing national financial inclusion strategies (55 percent of actions, monitoring and evaluation framework, and report having an NFIS in place, and 27 percent report an coordination structure to accelerate progress toward NFIS in development). Regionally, more than half of meeting national financial inclusion objectives. In some responding jurisdictions in Sub-Saharan Africa and East jurisdictions, this has taken the form of a standalone Asian and Pacific regions report having an NFIS in place, national financial inclusion strategy (NFIS), while other while just 11–12 percent of jurisdictions in East Europe jurisdictions have incorporated financial inclusion compo- and Central Asia and the Middle East and North Africa nents into general financial sector development strategies report the same. or national development strategies. Other jurisdictions For the 34 jurisdictions that provided additional have pursued narrower but complementary national strat- details on these NFISs (i.e., those with an NFIS currently egies, including financial capability strategies or microfi- in place), it is clear that the trend towards developing nance strategies, sometimes coupled with these other such strategies has accelerated in recent years. While all strategies. of the active NFISs were established since 2010, a nota- Overall, 104 of 124 responding jurisdictions (84 per- ble uptick has occurred in recent years: seven jurisdic- cent) have at least one of these national strategies in tions established an NFIS in 2014 and in 2015, while in place or are in the process of developing one. Financial 2016, an NFIS was established in 12 jurisdictions. capability (or literacy or education) strategies are the The key elements of NFISs vary significantly. The most common, reported to be in place in 44 jurisdictions average term of a NFIS is four years, though in Botswana (35 percent) and “in development” in 27 jurisdictions (22 and Mauritania the NFIS is for just one year and in Malay- percent). sia the NFIS term is nine years. Sixty-three responding jurisdictions (51 percent) Significant variation was also reported in NFIS leader- report having an NFIS in place or under development. ship. Out of the jurisdictions that report having an NFIS Of these, 34 responding jurisdictions (27 percent) report and provided additional details, 11 responding jurisdic- an NFIS, and 29 jurisdictions (23 percent) report such a tions (37 percent) report that the central bank was the strategy to be under development. General financial organization or entity leading the strategy (e.g., Brazil sector development strategies with a financial inclusion and the Philippines), six jurisdictions (20 percent) component, national development strategies with a reported it to be a multi-stakeholder entity (e.g., Mex- financial inclusion component, and microfinance strate- ico), seven jurisdictions (23 percent) reported that it was   17 18   Global Financial Inclusion and Consumer Protection Survey  |  2017 Report FIGURE 3.1 National Strategies to Promote Financial Inclusion the Ministry of Finance (e.g., Sweden), five jurisdictions # of responding jurisdictions with strategy in place or under development (17 percent) reported that it was another ministry (e.g., 80 the Coordinating Ministry for Economic Affairs in Indo- nesia), and one jurisdiction (3 percent) reported another Under development financial sector regulator (e.g., South Korea). However, In place 27 for several jurisdictions that identified a single leading 60 29 institution (e.g., a central bank), the leadership is likely within the context of a multi-stakeholder coordination structure (Table 3.1). 40 11 44 Jurisdictions also follow a range of approaches when 7 it comes to securing final approval of the NFIS prior to 34 34 8 32 launch. As shown in Table 3.1, approximately 18 jurisdic- 20 25 tions (72 percent) report that their NFIS was approved by a single institution or a multi-stakeholder entity (e.g., the Ministry of Finance in Pakistan or the National Council of Financial Inclusion in Mexico). Some jurisdictions secured 0 a higher-level approval: four jurisdictions (16 percent) National National National National National financial Financial financial sector development microfinance capability, report that their NFIS was approved by the cabinet (e.g., Inclusion strategy with strategy with a strategy literacy, or Strategy a financial financial inclusion education Jamaica and Thailand) and three jurisdictions (12 per- inclusion component strategy cent) report that their NFIS was approved by presidential component decree (e.g., Indonesia and Turkey). TABLE 3.1 Elements of National Financial Inclusion Strategies, Overall and in Selected Jurisdictions % of relevant responding jurisdictions LEAD ENTITY LEVEL OF APPROVAL NFIS OTHER BY SINGLE CONTAINS FINANCIAL MINISTRY INSTITUTION TERM OF SPECIFIC, CENTRAL SECTOR OF FINANCE MULTI- /MULTI- BY NFIS NUMERIC BANK REGULATORY OR OTHER STAKEHOLDER STAKEHOLDER BY PRESIDENTIAL (YEARS) TARGETS AUTHORITY MINISTRY ENTITY ENTITY CABINET DECREE All 4 years (average) 71% 37% 3% 40% 20% 72% 16% 12% Indonesia 2016–2019  Yes ✔ ✔ Jamaica 2016–2020 Yes ✔ ✔ Kyrgyz Republic 2012–2017 Yes ✔ ✔ Lesotho 2017–2022 No ✔ ✔ Mexico 2016– No ✔ ✔ Nigeria 2012–2020  Yes ✔ ✔ Pakistan 2015–2020  Yes ✔ Thailand 2016–2021  Yes ✔ ✔ Turkey 2014–2017  No ✔ ✔ Note: The “all” value reflects 34 jurisdictions that report having an NFIS in place at the time of the Survey. n.a. = not applicable. As highlighted in Principle 8 of the G-20 High-Level ation system for financial inclusion also requires a data Principles for Digital Financial Inclusion (G-20 2016), infrastructure, of which demand-side data on the uptake tracking financial inclusion progress through a compre- and usage of financial services by individuals, households, hensive and robust monitoring and evaluation system is and firms is one component. Among all responding juris- critical (see Box 3.1). While determining the scope and dictions, 71 jurisdictions (59 percent) report that a govern- quality of NFIS monitoring and evaluation systems was ment agency has conducted or coordinated a demand-side not possible via the Survey, 24 responding jurisdictions survey of households or individuals with questions relevant (71 percent) with an NFIS in place indicated that the NFIS to financial inclusion; approximately 43 jurisdictions (36 contained specific numeric targets. Regardless of whether percent) report the same with respect to firms / small and or not an NFIS is in place, a robust monitoring and evalu- medium enterprises (SMEs). Selected Approaches to Advance Financial Inclusion    19 BOX 3.1 Gender in National Financial Inclusion Strategies Women represent a disproportionately large share of the world’s unbanked adults. According the 2014 Global Findex, women are 11 percent less likely than men to report owning an account at a formal financial institution; in some jurisdictions, the gap is significantly larger (Demirguc-Kunt et al. 2015). National financial inclusion strategies represent an opportunity to address the gender gap in financial inclusion. An analysis of the 34 juris- dictions that report having an NFIS in place shows that 14 NFISs include a gender dimension. Twelve jurisdic- tions have a thematic focus on gender, 10 jurisdictions include specific actions to increase financial inclusion among women, and eight jurisdictions include indicators to monitor financial inclusion progress among women. FIGURE B3.1.1 Gender in National Financial Inclusion Strategies # of relevant responding jurisdictions NFIS in place 34 NFIS includes gender-specific indicator(s) 8 NFIS includes gender-specific 10 action(s) NIFS includes gender thematic focus 12 NFIS includes gender dimension (any) 14 0 5 10 15 20 25 30 35 For example, Nigeria’s NFIS prioritizes the improvement of financial inclusion for women. To implement the NFIS, the Central Bank of Nigeria established several working groups including a “Special Interventions” Working Group that focuses primarily on the inclusion of youth and women. Nigeria’s NFIS calls for 60 per- cent of loans disbursed through the Micro, Small and Medium Enterprises Development Fund to be directed to women or women-owned enterprises. The NFIS also establishes a goal for 30 percent of staff in microfi- nance banks to be women. The monitoring and evaluation framework of the NFIS includes of several gender- disaggregated indicators. 3.2  REGULATION OF E-MONEY requirements that some or all of a customer’s e-money funds be separated from the operating funds of the As noted in the Payment Aspects of Financial Inclusion e-money issuer and placed in a prudentially regulated report, the growth of e-money products and the increas- financial institution. The most common approach (reported ingly large aggregate value of funds stored in the underly- by 61 jurisdictions or 86 percent) is a requirement that 100 ing e-money accounts have led financial sector authorities percent of customer e-money funds be kept in an account to address the risk of misuse or loss of these customer at a prudentially regulated FSP (which may include the cen- funds (CPMI-WBG 2016). Some financial sector authorities tral bank). Among these 61 jurisdictions, 15 jurisdictions have also addressed the question of whether e-money specify that customer e-money funds must be spread providers can pay interest of share profits on e-money across accounts at more than one prudentially regulated funds. Both of these issues highlight the distinctions financial institution. between e-money funds and traditional deposits. Four jurisdictions (6 percent) report that a fraction of According to the Survey results, 65 responding jurisdic- customer e-money funds (i.e., less than 100 percent) must tions (92 percent of those with NBEIs) have established be kept in one or more prudentially regulated FSP (which 20   Global Financial Inclusion and Consumer Protection Survey  |  2017 Report may include the central bank) (Figure 3.2). While e-money percent of relevant responding jurisdictions, a “regular” accounts are generally not directly covered by deposit account can be used; in 22 percent of relevant respond- insurance schemes, the storage of e-money funds in pru- ing jurisdictions, an escrow account must be used; in 6 dentially regulated financial institutions may allow percent of relevant responding jurisdictions, an account e-money funds to benefit from “pass-through” deposit at the central bank must be used (Figure 3.3). insurance. The distinction between e-money funds and deposits In almost all responding jurisdictions that have is also relevant for how Nonbank E-Money Issuers (NBEIs) requirements for the safeguarding of customer e-money can use customer funds and whether customers holding funds, the type of account in which customer e-money e-money funds can receive interest or shared profits on funds must be deposited is also specified in law or regu- these funds. E-Money funds, unlike traditional deposits, lation. In 43 percent of relevant responding jurisdictions, are generally not meant to facilitate intermediation and a trust account must be used to safeguard funds; in 23 therefore the lending of e-money funds may constitute fund misuse. In 59 relevant responding jurisdictions (86 FIGURE 3.2 Requirements for Safeguarding of Customer percent), NBEIs are prohibited by law from using cus- E-Money Funds tomer e-money funds for purposes other than redeeming % of relevant responding jurisdictions e-money and executing fund transfers. In 8 relevant responding jurisdictions (13 percent), 100% of the customers’ funds 7% must be kept in accounts at a NBEIs are allowed to pay interest on customers’ e-money 6% prudentially regulated financial accounts; while in 5 relevant responding jurisdictions (8 institution percent), NBEIs are allowed to share profits with their e-money customers (Figure 3.4). As noted in the 2015 A fraction of customer e-money funds must be kept in an GSMA State of the Industry Report on Mobile Money, account at a prudentially there are a range regulatory approaches to facilitate this; regulated financial institution in Liberia, for example, the Central Bank must approve the provider’s proposal for how to use the funds to 86% No requirement that customer e-money funds must be directly benefit customers. separated from the funds of the e-money issuer Note: Percentages are based on 71 responding jurisdictions. FIGURE 3.4 Interest Payments or Profit Sharing FIGURE 3.3 Types of Accounts for Safeguarding on Customer E-Money Funds of Customer E-Money Funds % of relevant responding jurisdictions % of relevant responding jurisdictions that specify use of account to safeguard customer e-money funds 100% 50% 80% 85% 40% 43% 60% 30% 40% 20% 22% 23% 22% 20% 13% 10% 8% 0% NBEIs can NBEIs can NBEIs are not allowed 6% 2% pay interest share profits to pay interest on on customer with their customer e-money 0% e-money accounts e-money accounts or share Trust Escrow Regular Account at Law or Other type customers profits with e-money account account account the Central Regulation of account customers Bank does not specify Note: Percentages are based on 62 responding jurisdictions. 4 jurisdictions (6 percent) allow NBEIs to pay interest and share Note: Percentages are based on 65 responding jurisdictions. Respondents were able to profits with their e-money customers. select more than one option. Selected Approaches to Advance Financial Inclusion    21 USE OF AGENTS AND OTHER 3.3  However, variation does exist across institutional cat- THIRD PARTIES egories within jurisdictions. In 61 relevant responding jurisdictions (91 percent), NBEIs are permitted to con- In many jurisdictions, distribution models for financial tract with retail agents as third-party delivery channels, products and services based on brick-and-mortar branches which is often an integral component of the NBEI busi- are not cost-effective strategies to reach underserved seg- ness model. Ninety-six responding jurisdictions (81 per- ments, particularly those who reside in rural areas and cent) allow Commercial Banks to use retail agents as have small and irregular income streams. Financial sector third-party delivery channels. Retail agent arrangements authorities in many jurisdictions have therefore allowed are less common for other institutional categories, but FSPs to use agents such as retail outlets to facilitate cus- still permitted for Other Banks, Financial Cooperatives, tomer transactions and increase the physical reach of the and ODTIs in more than 60 percent of relevant respond- formal financial sector. As noted in a 2016 white paper ing jurisdictions (Figure 3.5). released by the Global Partnership for Financial Inclusion, While jurisdictions that allow agent relationships typi- agents are a key element of digital financial inclusion cally allow those agents to perform cash-out transac- models in many jurisdictions (GPFI 2016). Indeed, the tions, the other types of activities that can be outsourced financial inclusion successes of several jurisdictions have to agents and other third parties vary significantly, both been enabled by vast agent networks, including in Brazil, across jurisdictions and across institutional categories China, Kenya, Peru, and elsewhere. Regulatory frame- within a given jurisdiction. works in some jurisdictions also allow FSPs to use third For example, more than half of responding jurisdic- parties for other activities, including related to identity tions report that Commercial Banks are allowed to out- verification. source customer identification processes, receipt of As highlighted in Section 2.3, 105 responding jurisdic- deposits, and receipt of deposit account and loan appli- tions (85 percent) report that at least some institutional cations to third parties. Forty-six responding jurisdictions categories are permitted to contract with retail agents as (49 percent) report that third parties can also disburse third-party delivery channels. Relatively little variation loans. Thirty-nine jurisdictions (42 percent) allow Com- exists across income groups or regions with respect to this mercial Banks to outsource the account opening process indicator: with the exception of jurisdictions in the Middle itself, while fewer allow agents or other third parties to East and North Africa region, more than 80 percent of analyze or approve loans following the institution’s poli- jurisdictions across all income groups and regions allow at cies and limits (Table 3.2). least some institutional categories to contract with retail The use of agents also introduces new risks, including agents as third-party delivery channels. risk of fraud and theft, lack of transparency, unfair treat- FIGURE 3.5 Use of Retail Agents % of responding jurisdictions that permit use of retail agents as third-party delivery channels, by institutional category 100% 91% 80% 81% 70% 60% 65% 61% 40% 47% 20% 0% Commercial Other Banks Financial ODTIs MCIs NBEIs Banks Cooperatives Note: Percentages are based on 118 responding jurisdictions for Commercial Banks, 64 for Other Banks, 71 for Financial Cooperatives, 57 for ODTIs, 57 for MCIs, and 67 for NBEIs. 22   Global Financial Inclusion and Consumer Protection Survey  |  2017 Report TABLE 3.2 Permitted Activities of Agents and Other Third Parties % of relevant responding jurisdictions that permit agents and other third parties to perform activity, by institutional category COMMERCIAL OTHER FINANCIAL PERMITTED ACTIVITIES BANKS BANKS COOPERATIVES ODTIs MCIs NBEIs Identify and/or verify the identity 65% 60% 67% 72% 89% 76% of the customer Receive and submit to the institution 74% 79% 85% 88% — — a deposit account application Receive and submit to the institution 74% 71% 88% 88% 74% — a loan application Open a customer account following 42% 45% 66% 52% 45% 54% the institution’s policies Open a basic account (e.g., a low- 49% 56% 68% 61% — 51% value account or an account with a limited set of transactions) Analyze and approve a loan follow- 34% 28% 52% 33% 42% — ing the institution’s policies and limits Receive deposits 65% 74% 68% 85% — — Disburse loans 49% 49% 61% 61% 70% — Number of responding jurisdictions 93 43 42 32 27 58 Note: Number of jurisdictions varies by question; the given number represents the question with the most responses. TABLE 3.3 Rules Regulating Relationships among FSP, Agent, and Customer % of relevant responding jurisdictions that have requirement in place, by institutional category COMMERCIAL OTHER FINANCIAL REQUIREMENTS BANKS BANKS COOPERATIVES ODTIs MCIs NBEIs Requirements exist that indicate 90% 92% 79% 80% 83% 91% that financial service providers are liable for any actions or omissions of the agent Requirements exist for the financial 86% 83% 77% 83% 79% 84% service provider to monitor its agents Requirements exist for the financial 78% 79% 67% 73% 71% 81% service provider to have a mechanism in place to prevent agents’ fraud Requirements exist for the financial 42% 41% 45% 47% 36% 29% service provider to have a remuneration policy for their agents Number of responding jurisdictions 88 36 39 30 25 58 Note: Number of jurisdictions varies by question; the given number represents the question with the most responses. ment of customers, anti-money laundering/combating prevent agent fraud. Fewer than half of relevant respond- financing of terrorism (AML/CFT) risks, and poor cash ing jurisdictions have requirements for financial service management (CPMI-WBG 2016). To protect consumers providers to have remuneration policies for their agents and manage risks, many financial sector authorities have (Table 3.3). established rules that regulate the relationships among FSPs, agents, and customers. For example, the majority of responding jurisdictions that permit agent relationships DEFINITIONS OF MICROFINANCE, 3.4  have rules that hold FSPs liable for actions or omissions of MICROCREDIT, AND MICROSAVINGS its agents; this ranges from 79 percent for financial coop- eratives to 91 percent for NBEIs across relevant respond- Financial inclusion as a policy objective in some ways rep- ing jurisdictions. Similarly, the majority of relevant resents a broadening of earlier efforts focused on microfi- responding jurisdictions report having specific obligations nance. Indeed, the concept of “micro” products has been for FSPs to monitor their agents and have a mechanism to around for several decades, and in many jurisdictions Selected Approaches to Advance Financial Inclusion    23 these concepts have been defined in legal or regulatory in how the terms are defined. For “microcredit,” jurisdic- frameworks with corresponding implications for how tions most commonly define this term by the value or “micro” products and the institutions that offer them are amount of the product—41 jurisdictions (82 percent) regulated. report doing so. Target clientele and product use/pur- However, despite the relative prevalence of MCIs and pose are also relatively commonly used to define micro- “micro” products in many jurisdictions, how these terms credit, with approximately 32 jurisdictions (64 percent) are defined, or whether they are defined at all, continues using these dimensions in their definition. Approximately to vary significantly. Sixty-seven responding jurisdictions 23 responding jurisdictions (46 percent) use the features, (54 percent) report that either “microcredit,” “microfi- terms, or conditions of a product (e.g., unsecured) to nance,” or “microsavings” is explicitly defined in law or define microcredit (Table 3.4). regulation. Forty-four responding jurisdictions (36 per- Compared with “microcredit,” the use of target clien- cent) report formal definitions for “microfinance,” 50 juris- tele to define “microfinance” is relatively more com- dictions (41 percent) for “microcredit,” and 16 jurisdictions mon—this is logical given that microfinance encompasses (13 percent) for “microsavings.” The prevalence of defini- a wider range of products, making use of product-re- tions for these terms is higher in lower-income jurisdic- lated criteria to define it more difficult. Finally, while rel- tions and in jurisdictions with MCIs, though more than 30 atively few responding jurisdictions report explicitly percent of jurisdictions with MCIs do not report having defining “microsavings” in law or regulation, those that formal definitions of these terms (Figure 3.6). do define the term most commonly use target clientele For those jurisdictions that do explicitly define these and product value/amount dimensions in their definition terms in law or regulation, there is meaningful variation (Table 3.4). FIGURE 3.6 Definitions of Microfinance, Microcredit, and Microsavings % of responding jurisdictions that define term in law or regulation 100% All Middle-Income jurisdictions 80% 82% Low-Income jurisdictions Jurisdictions with MCIs 60% 57% 52% 47% 45% 40% 43% 41% 36% 36% 20% 17% 13% 14% 0% Microfinance Microcredit Microsavings Note: Percentages are based on 123 responding jurisdictions, 71 middle income, 11 low income, and 61 jurisdictions with MCIs. Number of jurisdictions varies by question; the given number represents the question with the most responses. TABLE 3.4 Definitional Parameters for Microfinance, Microcredit, and Microsavings % of relevant responding jurisdictions that use definitional parameter to define term DEFINITIONAL PARAMETER MICROFINANCE MICROCREDIT MICROSAVINGS Term is defined by value/amount of product (e.g., maximum loan size or maximum deposit amount) 64% 82% 69% Term is defined by target clientele (e.g., low-income individual, micro or small enterprise, or “unbanked”) 77% 64% 75% Term is defined by purpose/use of product (e.g., productive enterprise) 55% 64% 44% Term is defined by product features, terms, or conditions of product (e.g., unsecured) 41% 46% 44% Number of responding jurisdictions 44 50 16 24   Global Financial Inclusion and Consumer Protection Survey  |  2017 Report 3.5  PRODUCT REGULATION limits and 33 responding jurisdictions (28 percent) report that all lending by Commercial Banks is subject to inter- Some financial sector authorities employ policy or regula- est rate caps or pricing limits. Fifty-seven responding tory tools to influence product design and pricing directly. jurisdictions (49 percent) report no interest rate caps or These include interest rate caps, product authorization pricing limits of any kind for Commercial Banks. These requirements, and limitations on account fees and charges. trends are relatively constant across institutional catego- This analysis does not assess the degree to which such ries (Figure 3.8). policies are effective, enable/limit innovation, or may cre- Financial sector authorities may also require that new ate market distortions; rather the objective is to better or modified products be approved prior to their launch. understand their design and application given their rela- On the one hand, such procedures can allow regulators tive prevalence across jurisdictions. to assess product risks (e.g., related to AML/CFT or con- Some financial sector authorities apply caps on inter- sumer protection) and ensure that excessively risky est rates on loans to protect consumers from excessive products do not enter the market or do so with appropri- interest rates, support a specific industry or sector, or ate risk-mitigating measures. On the other hand, such reduce the market power of credit providers. Generally product authorization procedures could limit innovation speaking, interest rate caps can have market-distorting by market players if processes are overly burdensome or effects and reduce access to finance for some borrowers time-consuming or the authorizing authorities take an (Maimbo et al. 2014). inappropriately risk-averse approach to the process. Overall, 81 responding jurisdictions (65 percent) Overall, the majority of responding jurisdictions have report some form of caps on interest rates or pricing lim- some form of product authorization requirements: for its on loans for some or all lending for least one institu- Commercial Banks, 39 responding jurisdictions (33 per- tional category. Jurisdictions in the Middle East and cent) report that regulation in their jurisdiction explicitly North Africa and South Asia are relatively more likely to requires authorization of all new or modified financial report some form of interest rate caps or pricing limits products, and 30 jurisdictions (25 percent) report that (Figure 3.7). such regulations apply for some new or modified prod- When the analysis is limited to Commercial Banks, the ucts. In 52 jurisdictions (43 percent), no regulations exist Survey responses indicate that 60 jurisdictions (51 per- that require authorization of new or modified financial cent) report that some or all lending is subject to interest products for Commercial Banks. Financial Cooperatives rate caps or pricing limits. Twenty-seven responding juris- and MCIs in the relevant responding jurisdictions are rel- dictions (23 percent) report that some lending by Com- atively less likely to be subject to product authorization mercial Banks is subject to interest rate caps or pricing requirements (Table 3.6). FIGURE 3.7 Interest Rate Caps and Pricing Limits on Loans % of responding jurisdictions that have some forms of interest rate caps or pricing limits in place, by income and regional group 80% 77% 78% 71% 60% 65% 64% 64% 62% 61% 57% 53% 47% 40% 20% 0% All High Upper- Lower- Low Europe & East Latin Middle East South Sub-Saharan Income Middle Middle Income Central Asia & America & & North Asia Africa Income Income Asia Pacific Caribbean Africa Note: The three multi-jurisdiction respondents (Central Bank of West African States or BCEAO, Bank of Central African States or BEAC, and Eastern Caribbean Central Bank or ECCB) are not included in income group classifications. High-income jurisdictions are not included in regional classifications. Percentages are based on 124 jurisdictions (all), 39 high income, 37 upper-middle income, 34 lower-middle income, 11 low income, 17 Europe and Central Asia, 11 East Asia and Pacific, 18 Latin America and Caribbean, 9 Middle East and North Africa, 7 South Asia, and 23 Sub-Saharan Africa. Selected Approaches to Advance Financial Inclusion    25 FIGURE 3.8 Interest Rate Caps and Pricing Limits on Loans for Commercial Banks % of responding jurisdictions with type of interest rate cap or pricing limit in place, for Commercial Banks No interest rate caps or pricing limits of any kind 28% Some interest rate caps or pricing limits apply to certain products or consumer segments 49% All lending is subject to interest rate caps or pricing limits 23% Note: Percentages are based on 117 jurisdictions. TABLE 3.5 Product Authorization Requirements % of responding jurisdictions with product authorization approach, by institutional category APPROACH TO PRODUCT COMMERCIAL OTHER FINANCIAL AUTHORIZATION BANKS BANKS COOPERATIVES ODTIs MCIs NBEIs Regulation explicitly requires 33% 30% 20% 33% 22% 39% authorization of all new or modified financial products Regulation explicitly requires 25% 26% 12% 25% 17% 20% authorization of some new or modified financial products Regulation does not explicitly 43% 42% 58% 38% 55% 34% require authorization of new or modified financial products Number of responding jurisdictions 120 66 76 64 60 70 What types of risks are assessed during the authoriza- mum balance penalties are regulated. Less than 10 per- tion processes for new or modified financial products? In cent of responding jurisdictions report regulations that 71 responding jurisdictions (93 percent) with product address the maximum cost of account opening or a ceil- authorization requirements, the process assesses opera- ing on minimum balance requirements (Figure 3.9). tional risk; in 69 jurisdictions (91 percent), AML/CFT risks Approximately one-third of jurisdictions reported a are assessed; and in 64 jurisdictions (84 percent), con- type of cost regulation not described in the Survey, includ- sumer risks (e.g., related to transparency, fairness, and ing three jurisdictions that reported regulations that ensure product suitability) are assessed. no cost for customers to open an account. Jurisdictions in Worldwide, more than 20 percent of unbanked adults the Middle East and North Africa are significantly more report that a major reason why they do not have an likely to report at least some regulations on account costs, account is excessive cost (Demirguc-Kunt, et al. 2015). with more than 20 percent of jurisdictions in that region Some financial sector authorities attempt to make basic reporting each type of regulation. No low-income jurisdic- financial products more affordable by directly regulating tions report any of the regulations. Overall, 72 responding the costs and fees of products like deposit and transaction jurisdictions (58 percent) report that no law or regulation accounts. Overall, 52 responding jurisdictions (42 percent) addresses the costs of customer accounts (Figure 3.9). report some form of pricing regulations on deposit or transaction accounts. Financial sector authorities in approximately 13 3.6  CREDIT REPORTING SYSTEMS responding jurisdictions (10 percent) report that maximum maintenance fees for accounts are regulated, and the Credit reporting systems serve the function of reducing same number of responding jurisdictions (10 percent) also informational asymmetries between lenders and borrow- report that maximum overdraft penalties or below-mini- ers. In the context of financial inclusion, credit reporting 26   Global Financial Inclusion and Consumer Protection Survey  |  2017 Report can be a valuable tool for improving lenders’ ability to more favorable terms and conditions for the borrower. responsibly extend credit to underserved consumers. The use of credit reporting data can also help minimize For example, by collecting data from a range of institu- overindebtedness by enabling lenders to match the loan tions and making such data available to lenders, credit product to the needs and repayment capacities of bor- reporting systems can help consumers build their “repu- rowers (ICCR forthcoming). tational collateral.” Credit reporting systems allow lend- Yet a key challenge is ensuring that credit reporting ers to price risks more accurately, which can result in systems have sufficiently broad coverage in terms of the types of lenders that report to it and that use its services, including those that typically lend to underserved con- FIGURE 3.9 Account Cost Regulations % of responding jurisdictions with account cost regulation in place sumer segments (ICCR forthcoming). A credit reporting system that relies heavily on Commercial Banks would, 60% for example, have limited benefit for low-income con- 58% sumers in many jurisdictions. 50% According to results from the Survey, 56 percent of jurisdictions require Commercial Banks to check / report credit bureau information for some or all loans. The same 40% applies to just 36 percent of jurisdictions with Financial Cooperatives and 46 percent of jurisdictions with MCIs 30% (Figure 3.10).13 This trend holds across income categories and is, in fact, most pronounced in lower-middle and low 20% income jurisdictions where 69 percent of jurisdictions require Commercial Banks to check / report credit bureau 10% information for some or all loans, compared to 34 percent 10% 10% for Financial Cooperatives and 59 percent for MCIs. 8% 8% This highlights a key challenge for policymakers: 0% Maximum Maximum Maximum Maximum No law or broadening the coverage of credit reporting systems to account account account account over- regulation enable lenders to make better credit decisions for a opening cost minimum maintenance draft penalties addresses balance fees or minimum account costs wider segment of consumers. requirement balance penalties Note: Percentages are based on 124 responding jurisdictions. 3 jurisdictions (2 percent) report no cost to open or maintain savings account. FIGURE 3.10 Credit Reporting Systems % of responding jurisdictions that require FSPs to check or report to a credit bureau for some or all types of loans, by institutional category 60% 56% 50% 54% 52% 46% 40% 36% 30% 20% 10% 10% 0% Commercial Other Banks Financial ODTIs MCIs NBEIs Banks Cooperatives Note: Percentages are based on 124 responding jurisdictions for Commercial Banks, 69 for Other Banks, 78 for Financial Cooperatives, 65 for ODTIs, 61 for MCIs, and 72 for NBEIs. Selected Approaches to Advance Financial Inclusion    27 FIGURE 3.11 Documentation Requirements for Account Opening at Commercial Banks % of responding jurisdictions that require documentation type to open an account at a Commercial Bank 100% 90% 80% 75% 69% 60% 40% 44% 35% 32% 20% 22% 0% Government Any form Proof of Proof of Proof of Proof of Other issued ID of ID nationality or address income employment documentation legal status in requirements country must be met to open an account Note: Percentages based on 124 jurisdictions. ID = identity document. 3.7  SIMPLIFIED CUSTOMER DUE DILIGENCE ing jurisdictions include tax identification number, marital status, phone number, etc. The Financial Action Task Force (FATF) recommends that Generally speaking, documentation requirements for financial sector authorities require FSPs to perform cus- Other Banks and ODTIs track closely with those of Com- tomer due diligence (CDD) to identify their customers and mercial Banks, though responding jurisdictions report gather information relevant to their customers’ use of relatively fewer requirements for Financial Cooperatives. financial products and services. The objective of CDD In general, the responses suggest that the documen- requirements is to ensure that FSPs identify, verify, and tation requirements in many jurisdictions go beyond monitor their customers and the financial transactions of what is required in the FATF Recommendations (FATF those customers in relation to money laundering and ter- 2012). This is likely one reason why more than 15 percent rorism financing risks that they may pose (FATF 2013). of unbanked adults worldwide cite excessive documen- Results from the Survey confirm the near-universality of tation requirements as a major reason for not owning an documentation requirements for account opening: 116 account (Demirguc-Kunt, et al. 2015). jurisdictions (94 percent) report that legal or regulatory Financial sector authorities are increasingly aware requirements specify which documents individuals must that customer due diligence requirements can have submit to open an account at a Commercial Bank. This adverse impacts on financial inclusion. Indeed, the FATF value drops to 56 jurisdictions (72 percent) for Financial Interpretative Notes to Recommendation 10 on Cus- Cooperatives. tomer Due Diligence indicate that “it could be reason- However, many jurisdictions require customers to pro- able for a country to allow its financial institutions to vide additional information beyond a basic identification apply simplified CDD measures” in circumstances where document to open an account at a Commercial Bank. 93 the risk of money laundering or terrorist financing may responding jurisdictions (75 percent) require proof of be lower (FATF 2012). As the FATF Recommendations address and 85 jurisdictions (69 percent) require proof of note, one example of such an approach would be “finan- nationality or legal status in the jurisdiction. Requirements cial products or services that provide appropriately to provide proof of income or employment are also not defined and limited services to certain types of custom- uncommon: 55 jurisdictions (44 percent) report that ers, so as to increase access for financial inclusion pur- income documents are required to open an account at poses” (FATF 2012). Commercial Bank and 44 jurisdictions (35 percent) report 60 jurisdictions (50 percent) have established simplifi- that employment documents are required (Figure 3.11). cations or exceptions to customer due diligence require- Other forms of documentation requirements not listed in ments for certain types of customers (e.g., low income) the Survey questionnaire but reported by some respond- or account products (e.g., small-value, low-risk transac- 28   Global Financial Inclusion and Consumer Protection Survey  |  2017 Report FIGURE 3.12 Simplifications or Exemptions to Customer Due Diligence Requirements % of responding jurisdictions that have simplifications or exemptions to customer due diligence requirements, by income and regional group 100% 100% 80% 60% 61% 57% 56% 55% 53% 50% 40% 44% 40% 41% 20% 22% 0% High Upper- Lower- Low Europe & East Latin Middle East South Sub-Saharan All Income Middle Middle Income Central Asia & America & & North Asia Africa Income Income Asia Pacific Caribbean Africa Note: The three multi-jurisdiction respondents (BCEAO, BEAC, and ECCB) are not included in income group classifications. High-income jurisdictions are not included in regional classifications. Percentages are based on 120 jurisdictions (all), 36 high income, 37 upper-middle income, 34 lower-middle income, 10 low income, 17 Europe and Central Asia, 11 East Asia and Pacific, 18 Latin America and Caribbean, 9 Middle East and North Africa, 7 South Asia, and 22 Sub-Saharan Africa. BOX 3.2 Pakistan: Simplified Customer Due Diligence According to the 2014 Global Findex, an estimated 21 million adults in Pakistan do not have an account due to lack of adequate documentation (Demirguc-Kunt, et al. 2015). The Digital Financial Service Technical Commit- tee—formed under the National Financial Inclusion Strategy—undertook a review of AML/CFT requirements and issued revised branchless banking regulations in 2016 (State Bank of Pakistan 2016). The regulations include specific provisions on simplified CDD. Such provisions categorize accounts on three tiers: level 0 and level 1, which only individuals can open, and level 2 accounts, which can be opened as joint accounts and by firms. Level 2 accounts require full CDD; however, level 0 and level 1 allow for alternative forms of identification and mitigating measures (e.g., caps on maximum transfer amount and caps on maximum balance). tions). A basic account with simplified documentation Banks can use non-face-to-face customer due diligence requirements and low transaction limits would be one (e.g., by agents and/or via mobile devices). Less than a such example (see Box 3.2). third of responding jurisdictions report that FSPs can The prevalence of this approach varies significantly accept nonstandard identification documents. Other risk- across regions: all responding jurisdictions in the South based approaches to AML/CFT regulations not listed in Asia region report that Commercial Banks have such sim- the Survey questionnaire but reported by responding plifications or exemptions in place, as compared with the jurisdictions include reliance on customer due diligence Middle-East and North Africa region where the same is conducted by another entity.14 reported by only 22 percent of jurisdictions (Figure 3.12). The Survey asked respondents to indicate whether their jurisdiction had established several distinct approaches ADDITIONAL POLICIES TO ADVANCE 3.8  to simplified customer due diligence requirements. FINANCIAL INCLUSION Approximately 40 percent of responding jurisdictions report that Commercial Banks are allowed to undertake The policy toolkit, so to speak, for advancing financial simplified transaction monitoring based on lower assessed inclusion is large and diverse. Details on many such policy risk. Thirty percent of jurisdictions report that Commercial approaches were solicited in the Survey (e.g., simplified Selected Approaches to Advance Financial Inclusion    29 CDD and the use of agents, which were discussed in Again, this policy was particularly common in East Asian detail in previous sections), but given that collecting and Pacific jurisdictions (64 percent) and in high-income detailed information on all such approaches was not fea- jurisdictions (67 percent), such as those in the European sible, a series of broad questions was included to assess Union, where residents are entitled to open a free basic the prevalence of additional high-level policies. The payment account by law. results show significant variation in how financial sector Other policies cited by responding jurisdictions include policymakers choose to advance financial inclusion. priority sector lending, whereby FSPs are subject to lend- Eighty-three jurisdictions (67 percent) reported that ing requirements for certain segments or sectors such as financial sector authorities encourage or mandate that agriculture or SMEs (reported by 38 percent of respond- recipients of government transfers open an account to ing jurisdictions); requirements, exceptions, tax incentives, receive their funds (Table 3.6). This was particularly com- or subsidies to promote opening of branches or outlets in mon in East Asian and Pacific jurisdictions where it was underserved areas (24 percent); and tax-incentive-based reported by 100 percent of respondents. Sixty-seven juris- savings schemes (24 percent). Fourteen responding juris- dictions (54 percent) report that deposit-taking institu- dictions (11 percent) reported not establishing any of the tions offer basic financial products such as a basic account. listed policy approaches (Table 3.6). TABLE 3.6 Additional Policy Approaches to Advance Financial Inclusion % of responding jurisdictions that report policy approach, by income and regional group LATIN MIDDLE UPPER- LOWER- EUROPE & EAST AMERICA EAST & SUB- FINANCIAL INCLUSION HIGH MIDDLE MIDDLE LOW CENTRAL ASIA & & NORTH SOUTH SAHARAN POLICY APPROACHES ALL INCOME INCOME INCOME INCOME ASIA PACIFIC CARIBBEAN AFRICA ASIA AFRICA Encouraging or mandating recipients 67% 56% 76% 76% 55% 71% 100% 61% 78% 71% 65% of government transfers to open an account to receive their funds Deposit-taking institutions are 54% 67% 43% 53% 55% 24% 64% 44% 44% 57% 61% required to offer basic financial products, such as a basic account Priority lending: mandatory lending 38% 26% 41% 56% 27% 18% 64% 44% 56% 71% 39% requirements targeting underserved segments, e.g., SMEs or agricultural sector Requirements, exceptions, tax 24% 10% 22% 50% 9% 0% 55% 17% 56% 57% 35% incentives, or subsidies to promote opening of branches or outlets in underserved areas Tax-incentive savings schemes (e.g., 24% 36% 24% 18% 9% 18% 45% 17% 11% 14% 13% for retirement or education) Number of responding jurisdictions 124 39 37 34 11 17 11 18 9 7 23 Note: The three multi-jurisdiction respondents (BCEAO, BEAC, and ECCB) are not included in income group classifications. High-income jurisdictions are not included in regional classifications. SME = small and medium enterprise. NOTES Similar data was also collected on credit registries though this analysis focuses on credit bureaus. Most jurisdictions have either a 13.  credit registry or credit bureaus, or both. Both credit registries and credit bureaus collect data. However, credit registries are often developed to inform supervision and may not be designed to provide information back to lenders to inform credit decision making. Credit bureaus, however, are generally developed to enable credit decision making and thus provide useful information back to financial service providers and other data providers. An additional common approach is simplifications from customer due diligence processes for products or services deemed to be 14.  low risk. Unfortunately, due to a survey programming error, information on this approach was not reliably collected. 4 FINANCIAL CONSUMER PROTECTION 4.1  LEGAL AND REGULATORY FRAMEWORKS law with explicit references to financial services, while about two-thirds (77 jurisdictions) have general consumer The 2017 Good Practices hold that jurisdictions should protection laws without explicit references to financial ser- have a clear and comprehensive legal framework that vices. In 9 responding jurisdictions (7 percent), general establishes minimum standards specifically to protect consumer protection laws without explicit references to consumers of retail financial products and services (World financial services serve as the only legal framework for Bank Group 2017). This can be accomplished through financial consumer protection. As noted in the 2017 Good laws with a broader scope than financial consumer protec- Practices, a common drawback of relying on general con- tion, for example through explicit references to financial sumer protection laws for financial consumer protection is services within a general consumer protection law (e.g., a that, even in cases where a general consumer protection law on disclosure for all retail products and services) or law includes explicit references to financial services, these through consumer protection provisions in laws covering laws are often not specific, clear, or comprehensive specific financial markets (e.g., a banking law). It can also enough to provide effective protection for financial con- be accomplished through standalone law(s) for consumer sumers and may also not allow for the development of protection in the financial sector (e.g., a law on disclosure detailed regulations by financial regulatory authorities. for financial products and services). The options are not Three jurisdictions (2 percent) report having no legal mutually exclusive. framework for financial consumer protection or general The approach most commonly taken by responding consumer protection (Table 4.1). jurisdictions is to include consumer protection provisions Table 4.1 indicates that many jurisdictions employ sev- within one or more financial sector laws, reported by 94 eral approaches. For example, Angola has both a general responding jurisdictions (76 percent). For example, Mala- consumer protection law with explicit references to finan- wi’s 2010 Financial Services Act includes provisions on dis- cial services and consumer protection provisions within closure and on misleading and deceptive conduct. sector-specific financial sector laws. Overall, 69 percent of Just 26 responding jurisdictions (21 percent)—almost responding jurisdictions reported at least two of the four entirely high-income and upper-middle income—report approaches. having one or more standalone laws for financial con- The approach to financial consumer protection regula- sumer protection. In some cases, these are single, overar- tion follows largely the same pattern: 70 percent of ching laws on financial consumer protection (e.g., New responding jurisdictions report that consumer protection Zealand’s 2013 Financial Market Conduct Act) and in provisions are embedded within regulations pertaining to other cases these are standalone laws focused on a spe- the financial sector, for example, agent banking regula- cific element of financial consumer protection (e.g., tions. About 46 percent of responding jurisdictions report Japan’s 2000 Act on Sales of Financial Instruments). having standalone financial consumer protection regula- Approximately a third of responding jurisdictions (42 tions, for example, a regulation on disclosure for con- jurisdictions) report having a general consumer protection sumer credit products.   31 32   Global Financial Inclusion and Consumer Protection Survey  |  2017 Report TABLE 4.1 Approaches to Financial Consumer Protection Legal Frameworks % of responding jurisdictions that report legal framework approach for financial consumer protection, by income and regional group LATIN MIDDLE UPPER- LOWER- EUROPE & EAST AMERICA EAST & SUB- HIGH MIDDLE MIDDLE LOW CENTRAL ASIA & & NORTH SOUTH SAHARAN LEGAL FRAMEWORK APPROACH ALL INCOME INCOME INCOME INCOME ASIA PACIFIC CARIBBEAN AFRICA ASIA AFRICA Standalone financial consumer 21% 38% 24% 6% 0% 24% 9% 17% 0% 0% 13% protection law Consumer protection provisions 76% 85% 65% 88% 36% 76% 73% 78% 56% 71% 70% within other financial sector laws (e.g., banking law) General consumer protection law 34% 46% 19% 41% 27% 12% 36% 39% 11% 29% 35% with explicit references to financial services General consumer protection law 62% 62% 78% 59% 36% 76% 82% 50% 67% 86% 43% without explicit reference to financial services No legal framework exists for 2% 0% 0% 3% 18% 0% 0% 6% 11% 0% 4% financial consumer protection % of responding jurisdictions with 69% 79% 62% 79% 36% 71% 64% 67% 44% 71% 61% at least two of the four approaches Number of responding jurisdictions 124 39 37 34 11 17 11 18 9 7 23 Note: The three multi-jurisdiction respondents (Central Bank of West African States or BCEAO, Bank of Central African States or BEAC, and Eastern Caribbean Central Bank or ECCB) are not included in income group classifications. High-income jurisdictions are not included in regional classifications. Jurisdictions were able to select more than one response, for example, a general consumer protection law with explicit references to financial services and consumer protection provisions within other financial sector laws. Twenty-eight responding jurisdictions (23 percent) selected an “other” legal framework not listed in the survey questionnaire. 4.2  INSTITUTIONAL ARRANGEMENTS tional arrangements for financial consumer protection into five broad categories:15 Closely linked to the legal and regulatory framework for • Integrated Single Financial Sector Authority Model: financial consumer protection are institutional arrange- financial consumer protection supervision responsibili- ments, that is, which authority or authorities are respon- ties fall under a single financial sector authority that is sible for financial consumer protection regulation and responsible for all aspects of supervision (e.g., pruden- supervision. Principle 2 of the G-20 High Level Principles tial and financial consumer protection) of all financial on Financial Consumer Protection states that there service providers. should be oversight bodies explicitly responsible for financial consumer protection, with the necessary author- • Integrated Sectoral Financial Sector Authority ity to fulfill their mandates. These institutions are most Model: financial consumer protection supervision effective when they have clear and objectively defined responsibilities fall under multiple financial sector responsibilities and appropriate governance, opera- authorities, each responsible for all aspects of supervi- tional independence, accountability for their activities, sion (e.g., prudential and financial consumer protec- adequate powers, resources and capabilities, defined tion) of financial service providers operating within and transparent enforcement frameworks, and clear and specific financial sectors (e.g., banking). consistent regulatory processes. • Dedicated Financial Consumer Protection Authority The 2017 Good Practices note that no single model of Model: financial consumer protection supervision institutional arrangements for financial consumer protec- responsibilities fall under a single authority primarily tion is optimal for all jurisdictions. Various institutional dedicated to financial consumer protection, or market arrangements are structured along several dimensions, conduct more broadly.16 including whether a single authority or multiple sectoral authorities supervise the financial sector; whether pruden- • Shared Financial Sector and General Consumer Pro- tial and financial consumer protection supervision are tection Authority Model: one or more financial sector integrated within a single institution or separated into authorities and one or more general consumer protec- multiple institutions; and whether a general consumer tion authorities share financial consumer protection protection authority plays a role in financial consumer pro- supervision responsibilities. tection. Responding jurisdictions classified their institu- Financial Consumer Protection    33 • General Consumer Protection Authority Model: lators and the Zambia Competition and Consumer Protec- financial consumer supervision responsibilities fall tion Commission all have supervisory mandates for the under one or more authorities responsible for general financial sector with respect to financial consumer protec- consumer protection supervision within the jurisdic- tion. As noted in the 2017 Good Practices, overlap in the tion, including nonfinancial activities. legal mandates of different financial consumer protection authorities can lead to inconsistent and ineffective supervi- Annex B further explains this categorization. sion and should be minimized, or at least coordinated. Significant variation exists across jurisdictions in institu- Finally, 10 responding jurisdictions (8 percent) report a tional arrangements for financial consumer protection (Fig- General Consumer Protection Authority Model. For exam- ure 4.1 and Table 4.2). The most common approach is an ple, in Costa Rica the Ministry of Economy, Industry, and Integrated Sectoral Financial Sector Authority model, Commerce is responsible for consumer protection regula- reported by 55 responding jurisdictions (45 percent). An tion and supervision for all sectors, likewise for the Con- example of this approach is Namibia, where the Central sumer Rights Protection Center in Latvia. Five responding Bank of Namibia is responsible for both financial consumer jurisdictions (four percent) of responding jurisdictions protection and prudential supervision for Commercial report that there is no established institutional arrange- Banks and NBEIs, while the Namibia Financial Institutions ment for financial consumer protection or general con- Supervisory Authority is responsible for both financial con- sumer protection in their jurisdiction. sumer protection and prudential supervision for MCIs and A more in-depth discussion of the benefits, drawbacks, the pension, insurance, and securities subsectors. and other considerations for various institutional arrange- The second most commonly reported institutional ments can be found in the 2017 Good Practices. arrangement is an Integrated Single Financial Sector Given that the Dedicated Financial Consumer Protec- Authority Model, reported by 36 jurisdictions (30 percent). tion Authority Model is still a rarity and may not be appro- In Armenia, for example, the central bank is responsible priate in many jurisdictions, financial sector authorities are for both financial consumer protection and prudential increasingly establishing separate, specialized units dedi- supervision for the entire financial sector. cated to financial consumer protection within institutions Four responding jurisdictions (3 percent) report a Ded- with broader mandates. The 2017 Good Practices notes icated Financial Consumer Protection Authority model. that this approach can help to minimize potential conflicts Australia was the first economy to follow this model (also of interest and allow for specialization of staff. Eighty-six referred to as a “twin peaks” model) with the Australian jurisdictions, i.e., 75 percent of relevant responding juris- Securities and Investments Commission holding responsi- dictions, report having such specialized units dedicated to bility for market conduct for the entire financial sector.17 financial consumer protection within a broader authority. Shortly after the reporting period for the Survey, South Among jurisdictions with specialized units dedicated Africa moved toward this approach with the passage of to financial consumer protection, 49 jurisdictions (61 per- the Financial Sector Regulation Act in mid-2017. cent) have established the unit since 2010; 17 jurisdictions Eleven responding jurisdictions (9 percent) follow the (21 percent) have been established the unit since 2013. Shared Financial Sector and General Consumer Protection These recently established units include the Consumer Model, including Zambia, where the financial sector regu- Protection Unit in the Banking Control Commission of FIGURE 4.1 Institutional Arrangement Models for Financial Consumer Protection % of responding jurisdictions that report institutional arrangement model for financial consumer protection 4% 9% Integrated Single Financial Sector Authority Model 8% 30% Integrated Sectoral Financial Sector Authority Model 3% Dedicated Financial Consumer Protection Authority Model General Consumer Protection Authority Model Shared Financial Sector and Consumer Protection Authority Model 45% None Note: Percentages are based on 121 responding jurisdictions. 34   Global Financial Inclusion and Consumer Protection Survey  |  2017 Report TABLE 4.2 Institutional Arrangement Models for Financial Consumer Protection % of responding jurisdictions that report institutional arrangement model for financial consumer protection, by income and regional group LATIN MIDDLE UPPER- LOWER- EUROPE & EAST AMERICA EAST & SUB- HIGH MIDDLE MIDDLE LOW CENTRAL ASIA & & NORTH SOUTH SAHARAN MODELS ALL INCOME INCOME INCOME INCOME ASIA PACIFIC CARIBBEAN AFRICA ASIA AFRICA Integrated Single Financial Sector 30% 38% 22% 26% 36% 38% 9% 28% 33% 0% 30% Authority Model Integrated Sectoral Financial Sector 45% 27% 53% 62% 27% 50% 64% 39% 67% 71% 52% Authority Model Dedicated Financial Consumer 3% 11% 0% 0% 0% 0% 0% 0% 0% 0% 0% Protection Authority Model General Consumer Protection 8% 11% 8% 9% 0% 6% 18% 11% 0% 14% 0% Authority Model Shared Financial Sector and 9% 14% 11% 3% 9% 6% 0% 17% 0% 0% 9% Consumer Protection Authority Model None 4% 0% 6% 0% 27% 0% 9% 6% 0% 14% 9% Number of responding jurisdictions 121 37 36 34 11 16 11 18 9 7 23 Note: The three multi-jurisdiction respondents (BCEAO, BEAC, and ECCB) are not included in income group classifications. High-income jurisdictions are not included in regional classifications. Lebanon (established in 2014) and the Investor and Con- plaints analysis, thematic reviews, consumer research, sumer Rights Division in Financial Market Supervisory mystery shopping, and drafting or providing inputs into Authority of Azerbaijan (established in 2016). The size of regulation. Nonsupervisory activities include complaints these units varies significantly, with a median of 18 staff. handling (discussed in more detail in Section 4.6) and However, it is clear that these units often start small and financial education (discussed in more detail in Section 5). grow over time: the median number of staff in the units Figure 4.2 details the prevalence of various activities established before 2008 is 25, compared with 14 for units for jurisdictions in which an institution has a mandate for established since 2012. financial consumer protection. The most commonly In institutions that house both prudential and financial undertaken supervisory activity—reported by 88 jurisdic- consumer protection supervision, the financial consumer tions (77 percent)—is drafting or providing inputs into protection team’s hierarchical relationship with the pru- relevant regulation. Eighty-one jurisdictions (71 percent) dential supervision team is also relevant. Of the 82 rele- report undertaking onsite inspections that address finan- vant responding jurisdictions, 43 jurisdictions (52 percent) cial consumer protection; 82 jurisdictions (72 percent) report that the financial consumer protection unit is sepa- report undertaking offsite inspections that address finan- rate from the prudential supervision team and on an equal cial consumer protection. hierarchical level. Twenty-five jurisdictions (30 percent) Seventy-four jurisdictions (65 percent) report collecting report that the separate financial consumer protection data from FSPs on consumer complaints, and 65 jurisdic- team is embedded within the prudential supervision team. tions (57 percent) report undertaking market monitoring Finally, in about seven responding jurisdictions (9 percent), for supervisory purposes. Around 50 percent of jurisdic- the financial consumer protection unit is separate from the tions report undertaking thematic reviews and collecting prudential team, but on a lower hierarchical level. data from FSPs on rates and fees for financial services (see Box 4.1). Just a quarter of responding jurisdictions reports mystery shopping or conducting interviews or focus 4.3  SUPERVISION AND ENFORCEMENT groups with consumers. Figure 4.3 shows that the prevalence of several activities Institutions and teams dedicated to financial consumer has increased somewhat over time. Among the 89 jurisdic- protection undertake a range of activities. Such activities tions that responded to both the 2013 Global Financial can be broadly categorized into supervisory activities and Consumer Protection and Financial Literacy Survey and this nonsupervisory activities. Supervisory activities for finan- Survey, increases were observed in the number of jurisdic- cial consumer protection can include onsite and offsite tions reporting that the institution responsible for financial examinations, collection of data from financial service pro- consumer protection undertakes market monitoring, mys- viders (FSPs; e.g., on complaints or rates and fees), com- tery/incognito shopping, and consumer focus groups. Financial Consumer Protection    35 FIGURE 4.2 Financial Consumer Protection Supervisory Activities # of responding jurisdictions that undertake financial consumer protection supervisory activity Drafting or providing inputs into regulation 88 Off-site inspection of FSPs 82 On-site inspections and investigations of FSPs 81 Collection of data from FSPs on the # of 74 complaints received Market monitoring 65 Thematic reviews 56 Collection of data from FSPs on rates and 55 fees for financial services Mystery/incognito shopping 33 Interviews, focus groups, and research with 32 consumers 0 20 40 60 80 100 Note: Based on 114 responding jurisdictions. BOX 4.1 Côte d’Ivoire: Collecting and Disseminating Product Information Some financial consumer protection supervisors collect and disseminate information on financial products and services to help customers make informed financial decisions. Such information can be disseminated through the authority’s institutional website, ad hoc websites and institutions, or through other channels (e.g., newspapers). In December 2016, financial sector authorities in Côte d’Ivoire established an institution in charge of promoting financial consumer protection (Observatoire de la Qualité des Services Financiers). This institution, as part of its mandate, will operate a detailed and comprehensive comparison website, to allow financial consumers to eas- ily compare financial services products. The decree establishing the institution gives it the authority to request data from FSPs in a standardized format to be determined by the authority. The Ivorian authorities have conducted market research and several rounds of industry consultations to identify the relevant products to be covered and related fees, charges, and services. The goal is to provide clear, com- parable information in a manner that is not overwhelming to consumers. Through this exercise a small range of deposits, credit, and savings products and a limited set of related fees, charges, and services have been iden- tified. Two prototype tools—including desktop and mobile-based applications—were then developed and tested with consumers. The comparison website and tools are expected to be launched in 2018. Ninety-six jurisdictions (84 percent) also report that tion. According to the Survey, approximately 96 responding their financial consumer protection teams undertake com- jurisdictions (82 percent) can issue warnings to FSPs, and plaints handling, although there is an increasing recogni- 97 jurisdictions (83 percent) can impose fines and penal- tion that complaints handling should be separated from ties. About 85 responding jurisdictions (73 percent) can financial consumer protection supervision functions (due to require providers to withdraw misleading advertisements, concerns about resource allocation, specialized capacities, and about 62–69 jurisdictions (53–59 percent) can require and conflicts of interest). Sixty-four jurisdictions (56 per- providers to refund fees and charges, issue public notices cent) report that their financial consumer protection teams of violation, or issue administrative sanctions to senior or institutions undertake financial education activities. management. The enforcement of financial consumer protection laws Enforcement powers for financial consumer protection and regulations is also a critical element of a comprehen- have increased significantly since 2013. For example, of sive and effective approach to financial consumer protec- the 89 jurisdictions that responded in 2013 and 2017, the 36   Global Financial Inclusion and Consumer Protection Survey  |  2017 Report FIGURE 4.3 Financial Consumer Protection Supervisory Activities, Over Time # of responding jurisdictions that undertake financial consumer protection supervisory activity Market monitoring, including providers’ 43 advertisements, sales materials, websites, etc. 53 25 Mystery/incognito shopping 28 2013 24 2017 Interviews, focus groups and research with consumers 25 0 10 20 30 40 50 60 Note: Figure is based on 89 jurisdictions that responded to both 2013 and 2017 surveys. FIGURE 4.4 Financial Consumer Protection Enforcement Powers, Over Time # of responding jurisdictions that have financial consumer protection enforcement power 54 Impose fines and penalties 75 65 Issue warnings to financial institutions 72 Require providers to withdraw 51 misleading advertisements 65 Issue administrative sanctions to senior management 52 Revoke or recommend revoking the 36 offending provider’s license 52 42 Require providers to refund fees and charges 48 2013 2017 34 Issue public notice of violations 47 0 10 20 30 40 50 60 70 80 Note: Figure is based on 89 jurisdictions that responded to both 2013 and 2017 surveys. power to impose fines and penalties has increased from selectively: 12 jurisdictions report having recently taken an 61 percent of jurisdictions to 86 percent (Figure 4.4). enforcement action to issue a public notice of violation For each enforcement action, respondents were also (equal to 19 percent of jurisdictions with that power), eight asked whether they had recently applied that action. The jurisdictions report having recently taken an enforcement enforcement action most commonly reported to have action to revoke or recommend revoking the offending been recently applied was the issuance of warnings providers’ license (equal to 11 percent of jurisdictions with (reported by 38 jurisdictions), followed by the imposition that power), and five jurisdictions report having recently of fines and penalties (reported by 35 jurisdictions). In taken an enforcement action to issue administrative sanc- both cases, slightly more than one-third of jurisdictions tions to senior management (equal to 8 percent of juris- with the enforcement power reported having recently dictions with that power). applied it. Other enforcement powers are used more Financial Consumer Protection    37 4.4  DISCLOSURE AND TRANSPARENCY less common than contractual-stage requirements but prevalent nonetheless. For example, between 61 and 79 Effective disclosure of the pricing, key features, terms and percent of responding jurisdictions require FSPs to dis- conditions, and risks of financial products and services close certain key information at the shopping stage, allows customers to comparison shop and make informed depending on the institutional category (Table 4.3). purchases that are suitable to their needs. The 2017 Good Disclosure requirements can sometimes be too gen- Practices emphasizes the importance of objectivity, con- eral or not cover key product features, pricing, and risks. It ciseness, plain language, standardization, and timing of is therefore useful for such rules to specifically require the disclosure. Disclosure regulations are often among the disclosure of certain key product features, prices, terms first regulatory reforms made in jurisdictions seeking to and conditions, and risks. Certain information is useful improve financial consumer protection. Information col- across all products; for example, information on recourse lected in the Survey provides a broad overview of disclo- rights and requirements: 82 responding jurisdictions (73 sure practice in responding jurisdictions. percent) require Commercial Banks to disclose this infor- Nearly all (117 jurisdictions, 94 percent) of responding mation to consumers at the shopping and/or pre-contrac- jurisdictions have some requirements for Commercial tual stage. For MCIs and Financial Cooperatives, this Banks to provide customers, in paper or electronic form, value falls to 63 percent. specific types of information (e.g. interest rate, fees and Much of the information that is useful to consumers of penalties, etc.) of the relevant financial product. For NBEIs course varies by product, and as the 2017 Good Practices and Financial Cooperatives, the same is true in only about notes, specific regulations may need to be issued to 58 (76 percent) and 59 (81 percent) responding jurisdic- require disclosure of certain items for specific products tions, respectively. (see Box 4.2). For deposit products at the shopping or To be effective, information must be disclosed to con- precontractual stage, 68 responding jurisdictions (65 per- sumers at the right time. The timing of disclosure is critical cent) require Commercial Banks to disclose deposit insur- to facilitate comparison shopping and provide sufficient ance coverage availability, 79 jurisdictions (74 percent) and time to consider the benefits and drawbacks of a given 83 jurisdictions (75 percent) require Commercial Banks to product before purchase. Responding jurisdictions were disclose account opening and account maintenance fees, asked about disclosure requirements covering the advertis- and 72 jurisdictions (67 percent) require disclosure of min- ing, shopping, precontractual, contractual, and postcon- imum balance requirements. These requirements are sig- tractual stages. Responding jurisdictions were mostly likely nificantly less prevalent for other institutional categories, in to report disclosure requirements that cover the contrac- particular for Financial Cooperatives and ODTIs, for which tual stage: 114 responding jurisdictions (95 percent) require only about 63–65 percent of responding jurisdictions Commercial Banks to disclose key information at the con- require disclosure of account opening or maintenance tractual stage. For other institutional categories, required fees, indicating variation in the disclosure requirements disclosure at the contractual stage is required in only about for the same product across different institutional catego- 45 to 56 responding jurisdictions (82 to 92 percent). ries (Table 4.4). Regulators are increasingly aware that once customers For credit products, the most common disclosure arrive at the contractual stage, their decision may have requirements across all institutional categories relate to already been made about which product to purchase. For disclosure of effective interest rate (calculated using a that reason, many jurisdictions require FSPs to disclose standard formula) and fees and penalties. One hundred key information at the advertisement, shopping, or pre- and one responding jurisdictions (86 percent) require contractual stage as well. Such requirements are relatively Commercial Banks to disclose such information at the TABLE 4.3 Disclosure Requirements, by Stage of Customer Relationship % of responding jurisdictions with requirements to provide specific types of information at stage, by institutional category COMMERCIAL OTHER FINANCIAL STAGE BANKS BANKS COOPERATIVES ODTIs MCIs NBEIs At advertisement stage 81% 74% 71% 73% 65% 72% At shopping stage 79% 70% 61% 65% 63% 70% At precontractual stage 90% 87% 76% 80% 75% 89% At contractual stage 95% 92% 82% 88% 87% 93% Upon request 2% 2% 0% 2% 2% 3% Number of responding jurisdictions 118 61 69 56 52 60 Note: Number of jurisdictions varies by question; the given number represents the question with the most number of responses. 38   Global Financial Inclusion and Consumer Protection Survey  |  2017 Report BOX 4.2 Kenya: Disclosure Requirements for Transactions Delivered via Mobile Phones In 2016, the Competition Authority of Kenya (CAK) issued an order to FSPs to fully disclose all applicable charges for transactions delivered via mobile phone prior to completing the transaction. For example, the order requires FSPs to ensure that all SMS receipts for payments contain the principal value and any additional fees debited. In the order, the CAK refers to the 2010 Competition Act, which provides that “A consumer shall be entitled to be informed by a service provider of all charges and fees, by whatever name called or described, intended to be imposed for the provision of a service” (Competition Authority of Kenya 2017). This move by the CAK was a response to the poor price disclosure practices in the Kenyan market and consumers’ low levels of price awareness and sensitivity as found in CGAP-supported and consumer behavioral research. The research pointed out that many providers did not disclose to consumers the cost of their product or transaction before consumers accepted the transaction on their mobile phone and that this lack of timely and easy-to-under- stand disclosure of fees could have a particularly negative impact on low-income consumers’ financial decisions. This ruling was issued under the CAK’s authority established in the Competition Act, which applies to all firms in the Kenyan market, and on the basis of respective memoranda of understanding with both the Central Bank of Kenya and the Communications Authority. As of June 2017, all relevant Kenyan providers, including Safar- icom Kenya, have updated their mobile money transfer services to enable customers to receive information on the cost of each transaction automatically. TABLE 4.4 Disclosure Requirements for Deposit Products % of responding jurisdictions that require disclosure of product feature, fee, or charge at the shopping or precontractual stage, by institutional category PRODUCT FEATURE, COMMERCIAL OTHER FINANCIAL FEE, OR CHARGE BANKS BANKS COOPERATIVES ODTIs Minimum balance requirements 67% 67% 60% 63% Account opening fees 74% 65% 65% 65% Account maintenance fees 75% 62% 64% 63% Account closure fees 74% 65% 65% 59% Deposit insurance coverage availability 65% 58% 51% 53% Number of responding jurisdictions 108 53 55 51 Note: Number of jurisdictions varies by question; the given number represents the question with the most responses. shopping or precontractual phase; the same is true for plain language requirement in their disclosure documents, about 75 to 83 percent of other institutional categories. that is, clear and simple language that any customer can Disclosure requirements for mandatory insurance, compu- readily understand. Seventy-two responding jurisdictions tational methods (e.g., for interest), and specific types of (63 percent) report having some form of local language warnings (e.g., related to late repayment) are also rela- requirement for Commercial Banks so that customers tively prevalent, though notably less common for Finan- have access to disclosure information in their preferred or cial Cooperatives, ODTIs, and in lower-income jurisdictions primary language. Finally, 80 responding jurisdictions (71 (Table 4.5). percent) have requirements that specify the form in which Finally, how FSPs are required to disclose key informa- information is conveyed, whether it be orally and/or tion to potential customers is also critically important. through some form of durable media. In all cases, the Information expressed in overly complex legal or techni- prevalence of such requirements is lower for other institu- cal jargon, buried in lengthy terms and conditions, or tional categories, particularly Financial Cooperatives and communicated in language that the customer is not profi- MCIs (Table 4.6). cient in is of little use. Ninety-five responding jurisdictions Some jurisdictions go a step further and require the (81 percent) require Commercial Banks to adhere to a use of a disclosure document with a standardized format. Financial Consumer Protection    39 TABLE 4.5 Disclosure Requirements for Credit Products % of responding jurisdictions that require disclosure of product feature, fee, or charge at the shopping or precontractual stage, by institutional category PRODUCT FEATURE, COMMERCIAL OTHER FINANCIAL FEE, OR CHARGE BANKS BANKS COOPERATIVES ODTIs MCIs Effective interest rate calculated using 86% 83% 80% 75% 81% a standard formula Fees and penalties 86% 84% 77% 75% 74% Computation method (e.g., average 78% 75% 72% 70% 75% balance or interest) Required insurance 75% 75% 72% 71% 74% Specific warnings (e.g., related late 77% 70% 65% 66% 68% repayment) Number of responding jurisdictions 118 58 62 53 53 Note: Number of jurisdictions varies by question; the given number represents the question with the most responses. TABLE 4.6 Requirements for Manner of Disclosure % of responding jurisdictions with requirement for manner of disclosure, by institutional category REQUIREMENTS FOR COMMERCIAL OTHER FINANCIAL MANNER OF DISCLOSURE BANKS BANKS COOPERATIVES ODTIs MCIs NBEIs Plain language requirement 81% 80% 75% 77% 73% 82% (i.e., clear and simple language) Local language requirement 63% 63% 60% 63% 56% 68% Any form requirements (e.g., durable 71% 64% 63% 56% 56% 65% media or oral communication) Number of responding jurisdictions 117 59 64 56 52 57 Note: Number of jurisdictions varies by question; the given number represents the question with the most responses. Indeed, the 2017 Good Practices recommends that FSPs disclose information is most commonly required at the be required to provide customers with key facts state- contractual stage. It is worth noting that these values may ments (KFSs; also known as key information documents or provide an overly optimistic picture of KFS requirements, summary sheets) for common retail products (e.g., trans- as in many jurisdictions KFS requirements may cover just action accounts and consumer loans) that summarize the one or two types of products. main characteristics of a product to help consumers Disclosure is not only important when a customer is understand the product and compare it with different pro- shopping for and purchasing a financial product or ser- viders offering the same product. vice, but also important during the contractual stage to Overall, 84 responding jurisdictions (68 percent) have help customers understand their product on an ongoing some requirements in place for FSPs to use a KFS, that is, basis. The 2017 Good Practices notes that a financial ser- for at least one product in at least one institutional cate- vice provider generally should be required to provide the gory (Figure 4.5). The prevalence of KFS requirements consumer with periodic written (including in electronic for- drops to 55 percent among low-income jurisdictions and mat) statements of every account the provider operates to 44 percent among jurisdictions in Latin America and for the consumer, free of charge. the Caribbean (see Box 4.3). Approximately 80 responding jurisdictions (65 per- KFS requirements also vary by institutional categories. cent) require Commercial Banks to provide periodic state- The required use of a KFS for at least one product is ments free of charge. In a further 18 jurisdictions (15 reported by 81 responding jurisdictions (65 percent) as it percent), Commercial Banks are required to provide a relates to Commercial Banks, but significantly less so for statement free of charge, but only on request from the other institutional categories. Just 26 responding jurisdic- customer. In 33 responding jurisdictions (27 percent), the tions (36 percent) with NBEIs report some type of key facts customer can either obtain a statement by paying a fee or statement requirement (Figure 4.6). The use of KFSs to the regulations do not specify disclosure requirements 40   Global Financial Inclusion and Consumer Protection Survey  |  2017 Report FIGURE 4.5 Required Use of Key Facts Statements for Disclosure % of responding jurisdictions that require FSPs to provide key fact statements for at least some products during the shopping, precontractual or contractual stage, by income and regional group 100% 94% 80% 77% 74% 68% 60% 65% 59% 57% 55% 55% 56% 40% 44% 20% 0% All High Upper- Lower- Low Europe & East Latin Middle East South Sub-Saharan Income Middle Middle Income Central Asia & America & & North Asia Africa Income Income Asia Pacific Caribbean Africa Note: Percentages are based on 124 jurisdictions (all), 39 high income, 37 upper-middle income, 34 lower-middle income, 11 low income, 17 Europe and Central Asia, 11 East Asia and Pacific, 18 Latin America and Caribbean, 9 Middle East and North Africa, 7 South Asia, and 23 Sub-Saharan Africa. Three jurisdictions report providing standardized disclosure documents only upon request. BOX 4.3 Rwanda: Key Facts Statements In June 2016, the National Bank of Rwanda (BNR) issued a requirement for all financial service providers to provide customers a KFS for consumer credit products, both when a consumer makes an inquiry (a general KFS) and prior to signing the contract (a personalized KFS). The current consumer credit KFS includes basic features such as (i) the total amount of the loan; (ii) the amounts of monthly payments; (iii) the final maturity of the loan; (iv) the total amount of payments to be made; (v) fees, including insurance charges and total monthly fees; (vi) information on complaints; (vii) if the interest rate is calculated on a declining balance of flat rate method; and (viii) warning on late repayment (National Bank of Rwanda 2016). The consumer credit KFS was developed after extensive consultations with the industry, including two public consultation workshops. BNR also undertook consumer testing of the draft consumer credit KFS, with focus groups representative of different demographics in Rwanda. The objective of the testing was to identify the most appropriate design for consumers to easily understand key features of the relevant products and compare information. BNR is now in the process of developing requirements for all financial services providers offering transaction accounts to give consumers standardized KFSs containing the most common fees and charges relating to a transaction account. Financial Consumer Protection    41 FIGURE 4.6 Required Use of Key Facts Statements for Disclosure % of responding jurisdictions that require FSPs to provide key fact statements for at least some products during the shopping, precontractual or contractual stage, by institutional category 70% 60% 65% 50% 54% 51% 51% 40% 42% 36% 30% 20% 10% 0% Commercial Other Banks Financial ODTIs MCIs NBEIs Banks Cooperatives Note: Percentages are based on 124 for commercial banks, 69 for other banks, 78 for financial cooperatives, 65 for ODTIs, 61 for MCIs, and 72 for NBEIs. TABLE 4.7 Requirements for FSPs to Provide Customers with Account Statements % of responding jurisdictions with account statement requirement, by institutional category ACCOUNT STATEMENT COMMERCIAL OTHER FINANCIAL REQUIREMENTS BANKS BANKS COOPERATIVES ODTIs MCIs NBEIs Yes, periodic statements must be 65% 48% 44% 44% 38% 33% provided free of charge No, but a statement can be provided 15% 16% 12% 13% 13% 17% free of charge upon request No, but customer can purchase 5% 7% 5% 6% 3% 4% this additional service Regulations do not specify 22% 29% 39% 33% 40% 35% Number of responding jurisdictions 123 69 77 64 60 72 Note: Values do not sum to 100 percent because some jurisdictions’ requirements for product statements vary by products. For example, in Poland periodic statements must be provided free of charge for current accounts but can be made available upon request for a credit account. regarding statements. Statements provided free of charge About 74 responding jurisdictions (89 percent) require on a periodic basis are significantly less common for other Commercial Banks to include in their account statements institutional categories, required in just 33–48 percent of detailed transactional information for the reporting jurisdictions (Table 4.7). period. However, only about half of these jurisdictions Of course, a statement is only as useful as the informa- require Commercial Banks to present information about tion contained within it and the clarity with which that procedures to dispute the accuracy of the transactions information is presented. The 2017 Good Practices rec- recorded in the statement. For deposit products in partic- ommends that statements list all types of transactions, ular, about 78–83 percent of jurisdictions require that values, and dates concerning the account during the time product statements from Commercial Banks cover the period of the statement and highlight any impending risk amount of interest earned, fees imposed, and the account for the consumer or changes in account rules or product balance. For credit products from Commercial Banks, terms and conditions. The statement should also inform about 79–90 percent of relevant responding jurisdictions the customer of contact information for internal and exter- report that the following elements must be covered: (i) all nal dispute resolution mechanisms. transactions concerning the account for the period cov- 42   Global Financial Inclusion and Consumer Protection Survey  |  2017 Report FIGURE 4.7 Required Content for Credit Product Statements % of relevant responding jurisdictions that require content for credit product statements, for Commercial Banks 100% 89% 90% 88% 86% 88% 80% 83% 79% 60% 40% 20% 0% All transactions Effective interest Interest Fees charged Minimum Due date Outstanding concerning the rate calculated charged for during the amount due balance account for the using a standard the period period period covered by formula the statement Note: Percentages are based on 82 responding jurisdictions. Number of jurisdictions varies by question; the given number represents the question with the most responses. ered by the statement, (ii) effective interest rate calculated Product suitability is a topic that has been receiving using a standard formula, (iii) interest charged for the increasing attention. The 2017 Good Practices notes that period, (iv) fees charged during the period, (v) minimum FSPs should be required to take reasonable steps to amount due, (vi) due date, and (vii) outstanding balance ensure that any product or service recommended to the (Figure 4.7). consumer is suitable for the consumer, accounting for the A final disclosure issue relates to changes in the terms information disclosed by the consumer and other relevant and conditions of a product. According to the 2017 Good information about the consumer of which it is aware. Practices, FSPs should be required to notify their custom- Implementing product suitability requirements can be ers prior to changes in key product features, prices, or complicated by the difficulties in defining, incentivizing, terms and conditions outlined in the original contract, monitoring, and enforcing such requirements in practice. including changes to interest rates and noninterest Various efforts to promote responsible lending provide a charges. For Commercial Banks, 105 responding jurisdic- case in point. Many regulators have pursued efforts that tions (91 percent) require FSPs to notify their customers of seek to balance affordability and overindebtedness con- any changes in the terms and conditions of their products. cerns with the financing needs of customers. In fact, 110 For Financial Cooperatives, the same is true in 51 respond- responding jurisdictions (90 percent) report having some ing jurisdictions (80 percent). provisions in existing law or regulations that restrict exces- sive borrowing by individuals. The majority of these juris- dictions require the lending institution to assess borrower’s FAIR TREATMENT AND BUSINESS 4.5  ability to repay, but do not set specific limits or ratios. Oth- CONDUCT ers take a more direct approach: 32 percent of jurisdic- tions (including Colombia and Sri Lanka) report having The fair treatment of consumers is a key element of finan- explicit limits such as debt-to-income ratios established in cial consumer protection. Principle 3 of the G-20 High regulation (Figure 4.8). Level Principles on Financial Consumer Protection states Regulators in many jurisdictions have also made efforts that “all financial consumers should be treated equitably, to prohibit or restrict FSPs from carrying out certain prac- honestly and fairly at all stages of their relationship with tices deemed to be harmful to consumers. In 90 respond- financial service providers.” Many jurisdictions have ing jurisdictions (75 percent), FSPs are prohibited from established requirements on the conduct of FSPs to meet using, in a customer agreement, any term or condition this objective. that is unfair, excessively unbalanced, or abusive. Such a Financial Consumer Protection    43 FIGURE 4.8 Restrictions on Excessive Borrowing % of responding jurisdictions reporting approach to restrict excessive borrowing by individuals 10% Regulation establishes explicit limits 10% (e.g. debt-to-income ratio) to restrict 32% excessive borrowing by individuals Regulation requires FSPs to assess borrower ability to repay, but no explicit limits are set Regulation has other types of provisions to restrict excessive borrowing by individuals Regulation does not address excessive 48% borrowing by individuals Note: Percentages are based on 124 responding jurisdictions. FIGURE 4.9 Restrictions or Prohibitions on Unfair Business Practices % of responding jurisdictions that restrict or prohibit business practice, by income and regional group 100% 89% 88% 80% 82% 79% 80% 78% 75% 75% 74% 71% 72% 67% 67% 60% 62% 61% 56% 47% 40% 44% 43% 33% 29% 20% 25% 0% All High Upper- Lower- Low Europe & East Latin Middle East South Sub-Saharan Income Middle Middle Income Central Asia & America & & North Asia Africa Income Income Asia Pacific Caribbean Africa Use of any term or condition in a consumer agreement that is unfair, excessively unbalanced, or abusive Use of any term or condition in a consumer agreement that restricts the liability of the financial service provider Note: The three multi-jurisdiction respondents (BCEAO, BEAC, and ECCB) are not included in income group classifications. High-income jurisdictions are not included in regional classifications. Percentages are based on 124 jurisdictions (all), 37 high income, 36 upper-middle income, 34 lower-middle income, 9 low income, 17 Europe and Central Asia, 10 East Asia and Pacific, 18 Latin America and Caribbean, 9 Middle East and North Africa, 7 South Asia, and 21 Sub-Saharan Africa jurisdictions. Number of jurisdictions varies by question; the given number represents the question with the most responses. prohibition is roughly twice as common in high-income tion also varies widely across income groups and regions. jurisdictions (89 percent) as in low-income jurisdictions (56 In about 78 responding jurisdictions (67 percent), percent) and is particularly rare in South Asian jurisdictions FSPs are prohibited from using any term or condition (29 percent) (Figure 4.9). Eighty-four responding jurisdic- that restricts the liability of the financial service provider, tions (69 percent) prohibit FSPs from using, in a customer and in 76 responding jurisdictions (65 percent) FSPs are agreement, any term or condition that excludes or restricts prohibited from discriminating against certain popula- the right of the consumer. The prevalence of this restric- tion segments. 44   Global Financial Inclusion and Consumer Protection Survey  |  2017 Report In many jurisdictions, a common practice is for FSPs to (56 percent) have provisions in existing law or regulations “tie” or bundle products, selling two or more products that require FSPs to allow customers a cooling-off period together in a package. Such a practice can have negative for some products. This includes Bulgaria, where the Law effects on customer mobility, transparency, and market on Distance Provision of Financial Services entitles con- competition, and may increase costs for the consumer. sumers who have purchased a financial product via a non- Bundling or tying products in a manner that unduly face-to-face channel to withdraw from the contract within restricts the choice of consumers is restricted in 70 14 days “without indemnity or penalty and without giving responding jurisdictions across all regions (61 percent), any reason.” though such a prohibition exists in just a third or fewer Approximately 65 jurisdictions (55 percent) restrict or jurisdictions in the Middle East and North Africa and prohibit FSPs from penalizing customers for early repay- Sub-Saharan Africa regions. ment of loans, in line with the 2017 Good Practices, Each of the aforementioned prohibitions against unfair which states that FSPs should only be allowed to charge practices are more likely to be found in the legal and reg- a reasonable prepayment penalty if foreseen in the con- ulatory framework of higher-income jurisdictions. For sumer agreement, which should also contain its method example, just 44 percent of low-income jurisdictions have of calculation. laws or regulations that explicitly prohibit or restrict dis- Approximately 49 jurisdictions (42 percent) have legal criminatory practices. or regulatory provisions that limit fees and charges for Practices that limit customer mobility are another con- account closure, and 48 jurisdictions (42 percent) also cern for regulators in many jurisdictions. The 2017 Good have provisions that prohibit extra burdening procedures Practices recommends that FSPs be prohibited from for account closure. unduly limiting a customer’s ability to cancel or transfer Finally, the 2017 Good Practices recommends that products or services to another provider when given rea- financial service providers, their agents, and any third sonable notice by the customer (see Box 4.4). One such parties should be prohibited from employing abusive approach is a requirement that FSPs provide their cus- debt collection practices. Such practices include the use tomers with a reasonable cooling-off period in which they of false statements, practices akin to harassment, or pro- can withdraw from the product or service without incur- vision of false or unauthorized credit information to third ring penalties after signing the customer agreement. This parties. Provisions that require minimum standards for is particularly useful for financial products with a long- debt collection practices are reported by 71 responding term commitment, those that are commonly sold using jurisdictions (58 percent)—such provisions are particu- high-pressure sales practices, and those sold remotely larly common among the Middle East and North Africa (e.g., via telephone). Sixty-seven responding jurisdictions jurisdictions. BOX 4.4 European Union: Customer Mobility Following a series of studies that found that a significant share of the European Union (EU) population lacks access to payment accounts and that large disparities exist in fees and in barriers to switching accounts, the EU issued a Directive on Payment Accounts in 2014 that addressed these issues (European Union 2014). The Direc- tive requires member states to ensure that payment service providers provide a switching service for consumers who wish to switch their payment account to another provider within the same member state. The Directive establishes parameters for such switching services, including with respect to timeliness, cost, and disclosure. For example, the Directive provides that any fees charged to the consumer by the transferring or receiving payment service provider in relation to the consumer’s switching request must be “reasonable and in line with the actual costs of that payment service provider.” Financial Consumer Protection    45 COMPLAINTS HANDLING, DISPUTE 4.6  tems. Seventy-eight responding jurisdictions (66 percent) RESOLUTION, AND RECOURSE report having requirements covering the FSP’s timeliness of response. Seventy-one responding jurisdictions (60 When an issue arises in the relationship between a cus- percent) report requirements for FSPs to have a desig- tomer and a financial service provider, it is important that nated, independent unit in charge of handling customer the customer have a clear, accessible avenue through complaints, in line with the 2017 Good Practices, which which to raise the issue with the provider. If the complaint note that such an arrangement can help ensure fair and is not resolved to the customer’s satisfaction, an out- unbiased handling of the complaints. The 2017 Good of-court alternative dispute resolution (ADR) mechanism Practices also recommends that FSPs make available vari- can provide further options for recourse. These two levels ous channels (e.g., telephone, email, web, etc.) for sub- of recourse comprise the dispute resolution system for mitting consumer complaints; 68 responding jurisdictions financial consumers. Principle 9 of the G-20 High-Level (58 percent) require FSPs to have accessibility standards Principles on Financial Consumer Protection states that for making a complaint. jurisdictions should ensure that consumers have access to Fifty-nine responding jurisdictions (50 percent) have adequate complaints-handling and redress mechanisms standards in place for reporting complaint data to a regu- that are accessible, affordable, independent, fair, account- latory authority. able, timely and efficient. Financial consumers who cannot resolve disputes to Ninety-two responding jurisdictions (78 percent) report their satisfaction with their FSPs can, in some jurisdictions, having rules in place for complaints handling and resolu- appeal to an out-of-court alternative dispute resolution tion by FSPs. Significant variation is observed: just 40 per- entity (e.g., a financial ombudsman) to seek recourse with cent of low-income jurisdictions have such standards in a third party. In the absence of such an ADR entity, cus- place, while 89 percent of high-income jurisdictions report tomers who cannot resolve complaints to their satisfaction the same. Jurisdictions in East Asia and the Pacific and in with the relevant FSP must either turn to the court system South Asia are also relatively less likely to report having (which can be costly and inefficient) or give up. such standards in place. Eighty responding jurisdictions (65 percent) report The most commonly reported rule is a broad require- having an ADR entity in place for financial consumers. ment for FSPs to implement procedures and processes for The prevalence varies significantly, from high-income resolving customer complaints—reported by 87 respond- jurisdictions where 79 percent of jurisdictions have an ing jurisdictions (74 percent) (Figure 4.10). ADR entity in place, to low-income jurisdictions where Many jurisdictions have also established minimum just 45 percent of jurisdictions report the same. Region- standards relevant to the timeliness, organizational struc- ally, ADR entities are most common in South Asia ture, and accessibility of internal complaints-handling sys- (reported by 71 percent of jurisdictions) and least com- FIGURE 4.10 Requirements for Internal Dispute Resolution % of responding jurisdictions with type of requirement for internal dispute resolution Requirements for FSPs to implement procedures and 74% processes for resolving customer complaints Timeliness of response by FSP 66% Record keeping of complaints 64% Requirements for FSPs to have a designated, independent unit in charge of handling customer 60% complaints Accessibility (i.e. consumer can file complaint 58% via multiple channels) Providing customers the detaills of a relevant 51% altnernative dispute resolution mechanisms Reporting complaints data to a gov’t agency 50% 0% 10% 20% 30% 40% 50% 60% 70% 80% Note: Percentages are based on 118 responding jurisdictions. 46   Global Financial Inclusion and Consumer Protection Survey  |  2017 Report mon in the Middle East and North Africa (33 percent). In of the within-jurisdiction variation for jurisdictions with 60 responding jurisdictions (51 percent), FSPs are multiple ADR entities. required to provide customers with the details of the rel- Two broad functional types of ADR entities are those evant ADR entity (Figure 4.11). that provide binding decisions (e.g., an ombudsman or Some jurisdictions have more than one ADR entity that an adjudicator) and those that provide mediation ser- covers the financial sector. In such cases, responding juris- vices. Some may do both. Of jurisdictions with an ADR dictions were asked to provide information with respect to entity, 22 jurisdictions (29 percent) report that the ADR the ADR entity that covers the banking sector and, if more entity provides only mediation services, 30 jurisdictions than one ADR entity does so, to respond with respect to (40 percent) report that the ADR entity provides only the ADR entity that receives the largest number of com- binding decisions, and 23 jurisdictions (31 percent) plaints. As a result, this analysis focuses on ADR entities report that the ADR entity provides both mediation ser- reported by each jurisdiction and may not capture some vices and binding decisions, as appropriate (Figure 4.12). FIGURE 4.11 Alternative Dispute Resolution Entities % of responding jurisdictions with an out-of-court alternative dispute entity covering the financial sector, by income and regional group 100% 80% 79% 71% 67% 60% 65% 63% 64% 59% 61% 57% 40% 45% 33% 20% 0% All High Upper- Lower- Low Europe & East Latin Middle East South Sub-Saharan Income Middle Middle Income Central Asia & America & & North Asia Africa Income Income Asia Pacific Caribbean Africa Note: The three multi-jurisdiction respondents (BCEAO, BEAC, and ECCB) are not included in income group classifications. High-income jurisdictions are not included in regional classifications. Percentages are based on 123 (all), 39 high income, 36 upper-middle income, 34 lower-middle income, 11 low income, 16 Europe and Central Asia, 11 East Asia and Pacific, 18 Latin America and Caribbean, 9 Middle East and North Africa, 7 South Asia, and 23 Sub-Saharan Africa jurisdictions. FIGURE 4.12 Services Provided by Alternative Dispute Resolution Entities % of relevant responding jurisdictions with service provided by alternative dispute resolution entity 31% Provides binding decisions only 40% Provides mediation services only Provides both mediation services and binding decisions, as appropriate 29% Note: Percentages are based on 75 responding jurisdictions. Financial Consumer Protection    47 FIGURE 4.13 Models of Alternative Dispute Resolution Entities ADR Entity 80 jurisdictions (65 percent of responding jurisdictions) Statutory Industry-based 46 jurisdictions 28 jurisdictions (62 percent*) (38 percent*) Financial sector Multiple sectors Voluntary Mandatory specific 8 jurisdictions 15 jurisdictions 13 jurisdictions 38 jurisdictions (11 percent*) (20 percent*) (18 percent*) (51 percent*) Within financial Independent from sector regulator financial sector regulator 22 jurisdictions 24 jurisdictions (30 percent*) (32 percent*) *denotes that the value is expressed as a percentage of 74 jurisdictions with an ADR entity that provided complete information on the ADR entity. ADR entities that provide binding decisions are more funded by direct contribution of the ADR entity members common in high-income jurisdictions, Latin America and (e.g., FSPs) and eight jurisdictions (11 percent) are funded the Caribbean Sub-Saharan Africa, and South Asia, while by a financial industry association. Ten ADR entities (14 ADR entities that provide mediation services are more percent) are funded by a combination of these sources. common in Europe and Central Asia and in East Asia and In addition to the mediation and/or resolution of a Pacific. dispute between a financial consumer and an FSP, ADR There are a range of institutional models for ADR enti- entities can undertake several useful functions to moni- ties (Figure 4.13). Of jurisdictions with an ADR entity, 46 tor trends and provide a feedback loop to industry and jurisdictions (62 percent) have a statutory ADR entity (i.e., financial sector authorities. Of responding jurisdictions established by law), while 28 jurisdictions (38 percent) with an ADR entity, 70 jurisdictions (95 percent) report have industry-based ADR entities. that the entity maintains a database of registered com- Within the category of industry-based ADR entities, plaints. Somewhat fewer but still the vast majority—86 15 responding jurisdictions report that participation in percent—report analyzing the complaints data to iden- the ADR entity is voluntary, while 13 jurisdictions report tify trends. Approximately 75 percent of responding that it is mandatory. Within the category of statutory ADR jurisdictions with an ADR entity report that the entity entities, the vast majority included in the Survey focus reports complaints statistics to the regulator and com- specifically on the financial sector, while in eight respond- municates trends to financial sector regulators, and 77 ing jurisdictions it covers multiple sectors. And among percent report that the entity regularly publishes com- statutory ADR entities that focus on the financial sector, plaints statistics (Figure 4.14). approximately half are housed with the financial sector Data collected from ADR entities on the prevalence of regulator and half are independent from the financial sec- complaints around certain issues and products provides tor regulator. some insight into the common friction points between Closely linked to an ADR’s institutional model is its financial consumers and financial service providers. ADR funding source. Thirty-seven jurisdictions (51 percent) entities were asked to rank a set of issues and products report that their ADR entity is funded solely with govern- based on those that are the focus of the largest number ment funding, while 17 jurisdictions (24 percent) are of complaints. Figure 4.15 and Figure 4.16 show the 48   Global Financial Inclusion and Consumer Protection Survey  |  2017 Report FIGURE 4.14 Functions of ADR Entities with Respect to Complaints Data % of relevant responding jurisdictions that report function of ADR entity with respect to complaints data 100% 95% 80% 86% 77% 75% 75% 60% 40% 20% 0% Maintain a database Analyze the Communicate trends to Regularly publish Report complaints of registered/ complaints data to the financial sector complaints statistics to the recorded complaints identify trends regulator statistics regulator Note: Percentages are based on 74–76 responding jurisdictions. Number of jurisdictions varies by question. FIGURE 4.15 Issues Commonly Addressed by ADR Entity % of relevant responding jurisdictions ranking issue as first, second, or third most commonly addressed by ADR entity 60% 50% 53% 51% 45% 40% 37% 30% 20% 16% 10% 0% Excessive Unclear Mistaken/ ATM Fraud interest or fees interest or fees unauthorized transactions transactions Note: Based on 51 responding jurisdictions. Respondents ranked a pre-determined set of issues according to the frequency with which the issue is addressed by the ADR entity in response to complaints. Financial Consumer Protection    49 FIGURE 4.16 Financial Products Commonly Addressed by ADR Entity % of relevant responding jurisdictions ranking financial product as first, second, or third most commonly addressed by ADR entity 80% 75% 60% 54% 40% 45% 29% 27% 20% 0% Consumer Credit card Mortgage/ Debit card Deposit loan housing loan account Note: Based on 56 responding jurisdictions. Respondents ranked a pre-determined set of financial products according to the frequency with which the product is addressed by the ADR entity in response to complaints. issues as a percentage of ADR entities for which the issue automated teller machine (ATM) transactions, and (v) is a “top-three” complaint topic. The most common top- fraud. On the product side, the most frequently com- ics of complaint among the 51 jurisdictions that provided plained-about products are (i) consumer loans, (ii) credit data are (i) excessive interest or fees, (ii) unclear interest cards, (ii) mortgage/housing loans, (iv) debit cards, and or fees, (iii) mistaken or unauthorized transactions, (iv) (v) deposit accounts. NOTES Conceivably many more combinations of parameters could yield many more models. For the purposes of the Survey, however, 15.  five broad models were used. In some cases, such as the Financial Conduct Authority in the United Kingdom, the institution may also have prudential responsi- 16.  bilities over one or more subsectors, though these tend not to cover deposit-taking institutions. The Australian Prudential Regulation Authority is responsible for prudential supervision of authorized deposit-taking institutions 17.  and insurers, while the Reserve Bank of Australia has the responsibility for financial stability, monetary policy, and payment systems. 5 FINANCIAL CAPABILITY Financial capability plays a complementary role in meet- tions have adopted definitions developed by international ing financial inclusion and consumer protection objec- organizations or forums (e.g., the World Bank Group or tives. Financially capable consumers have the knowledge, the Organisation for Economic Co-operation and Devel- skills, attitudes, and confidence to make informed deci- opment’s International Network on Financial Education), sions and act in their own best financial interest. However, while others have developed their own definitions. The demand-side surveys from various jurisdictions show that adoption of an official definition for any of these terms is many consumers have low or limited financial capabili- least common among jurisdictions in the South Asia ties—a particularly concerning finding given the ever-in- region, where none of the respondents report official defi- creasing diversity and complexity of financial products nitions of any of the three terms. and services. Financial sector authorities and other stake- The institutional arrangements for leading and/or holders are therefore prioritizing financial education and coordinating financial education policies and programs other interventions to increase the financial capabilities of also vary by jurisdiction. Thirty-eight responding jurisdic- consumers. tions (31 percent) have a single agency responsible for As noted in Section 2.1, many jurisdictions have estab- leading or coordinating financial education policy or pro- lished or are developing a national strategy for financial grams, while 31 responding jurisdictions (26 percent) have capability (or financial literacy or financial education) with multiple agencies responsible for the task. In Malawi, a coordinated, sequenced set of actions to improve efforts for example, the Consumer Protection and Financial Liter- in this space: 35 percent of jurisdictions report having acy division within the Reserve Bank of Malawi has the either a national financial capability, literacy, or education mandate to lead and/or coordinate financial education strategy in place, and 22 percent report such a strategy to policy and programs, whereas in Estonia, the Ministry of be in development. Finance, the Financial Supervision Authority, and the Min- Financial capability stakeholders—including financial istry of Education share these responsibilities. Thirty-eight sector authorities, education authorities, nongovernmen- responding jurisdictions (31 percent) report that no institu- tal organizations, the private sector, etc.--often use differ- tion has such a mandate (Figure 5.1). ent terminology and definitions when referring to and Given the cross-sectoral nature of financial education pursuing efforts relevant to financial capability. Having an and the wide range of stakeholders involved, many juris- established national definition or definitions is therefore dictions have established a dedicated, multi-stakeholder often useful. Fifty responding jurisdictions (42 percent) entity to promote and coordinate the provision of financial have an official definition for either “financial education,” education. Forty-nine responding jurisdictions (40 per- “financial literacy,” or “financial capability.” Thirty-six juris- cent) report having established such an entity. Not surpris- dictions (31 percent) have a definition for financial educa- ingly, jurisdictions with a national financial capability tion, 30 jurisdictions (25 percent) have a definition for strategy (or similar) are significantly more likely to have financial literacy, and 22 jurisdictions (19 percent) have a established a dedicated, multi-stakeholder entity. Among definition for financial capability. In many cases, jurisdic- the jurisdictions with such an entity, 12 percent report that   51 52   Global Financial Inclusion and Consumer Protection Survey  |  2017 Report FIGURE 5.1 Institutional Arrangements for Leading and/or Coordinating Financial Education % of responding jurisdictions reporting institutional arrangement A single agency is responsible 31% 31% Multiple agencies are responsible Other No agency is responsible 12% 26% Note: Percentages are based on 121 responding jurisdictions. FIGURE 5.2 Coordination Structure to Promote and Coordinate Financial Education % of responding jurisdictions reporting coordination structure approach Dedicated, multi-stakeholder structure for financial capability 46% 40% Financial capability addressed under the mandate of a broader multi-stakeholder structure (e.g. for financial inclusion) None 13% Note: Percentages are based on 121 responding jurisdictions. it comprises only government authorities, while 76 per- tions (43 percent) having conducted a dedicated survey cent have a structure that includes government authori- on financial capability and 29 jurisdictions (24 percent) ties, industry, and nongovernmental organizations. having included a module on financial capability as part of Sixteen responding jurisdictions (13 percent) report a broader questionnaire. Demand-side data collection that this work is addressed under a broader multi-stake- varies significantly across regions: 63 percent of respond- holder structure (Figure 5.2), for example, the National ing jurisdictions in the Middle East and North Africa region Financial Inclusion Steering Committee in Jamaica, which conducted a dedicated financial capability survey in the has a Consumer Protection and Financial Capability Work- past five years, while only 14 percent of jurisdictions in the ing Group. South Asia region reported taking the same measure. As noted in the 2017 Good Practices, a robust national Fifty responding jurisdictions (42 percent) reported monitoring and evaluation system is needed to success- having nationally mapped financial education activities in fully implement financial education policies and programs. the past five years. Thirty-six responding jurisdictions (30 Such a system can have several elements, including (i) percent) report that the government regularly collects nationally representative surveys of individuals and/or data from providers of financial education on the reach of households, (ii) national mapping of relevant financial their programs (e.g., number of beneficiaries; Figure 5.3). education activities, and (iii) collection of data directly Within this group, the majority collect data from a defined from providers of financial education (e.g., on the number or limited set of financial education providers. of beneficiaries of their program(s)). Eighty responding Beyond monitoring and evaluation, relevant authorities jurisdictions (67 percent) report having undertaken a also use a range of approaches to improve the quality, con- nationally representative survey of individuals and/or sistency, and reach of financial education. Such approaches households covering financial capability, with 51 jurisdic- include (i) issuing guidelines to providers of financial edu- Financial Capability   53 FIGURE 5.3 Elements of Monitoring and capability gaming programs were circulated among Evaluation Systems for Financial Education recipients of the Más Familias en Acción conditional cash % of responding jurisdictions undertaking M&E activity transfer program through the LISTA initiative.18 The offline 80% application featured simulators for learning to use auto- mated teller machines (ATMs) and mobile banking, in addition to practical information for managing personal 67% and family finances delivered in a fun format. The pro- 60% gram delegated community leaders to allot time slots for recipients to use the game-based training application from the comfort of their homes and at their own pace. 40% The initiative also allowed recipients to customize their 42% learning by focusing on topics relevant to them. Public schools are another channel through which 30% many jurisdictions have chosen to deliver financial educa- 20% tion. Sixty-one out of 120 responding jurisdictions (51 per- cent) report that financial education has been integrated into public school curriculum to some extent. Sixteen jurisdictions (13 percent) report that financial education 0% Nationally National mapping Collection of has been included as a distinct curriculum topic or sub- representative of relevant data directly ject, while 45 jurisdictions (38 percent) report that financial surveys of financial from providers individuals and/or education of financial education has been included as a curriculum subtopic households activities education integrated into one or more topics or subjects. In terms of education levels, 56 jurisdictions (67 percent) report that Note: Percentages for the first indicator are based on 120 responding financial education has been included as a topic at the jurisdictions and for the second and third indicator are based primary school level, 65 jurisdictions (78 percent) at the on 119 responding jurisdictions. junior secondary level, 64 jurisdictions (77 percent) at the senior secondary level, and 24 jurisdictions (29 percent) cation programs, (ii) integrating financial education into report financial education being included as a curriculum government-provided social assistance programs, (iii) inte- topic at the university level. grating financial education into school curriculums, (iv) An additional 14 jurisdictions (12 percent) report that developing web-based tools and resources to improve the the implementation of a financial education component in public’s financial capability, and (v) establishing explicit public school curriculum is planned to begin within 1–2 requirements for financial service providers to provide years, while seven jurisdictions (6 percent) report that the financial education to their customers. development of such a curriculum is planned to begin Given the diversity of financial education programs in with 1–2 years. most jurisdictions, some have issued written guidelines to Many relevant authorities also seek to leverage mass providers of financial education on content and/or media platforms to reach wide audiences with messages, approaches for such programs. Thirty-five responding tools, and resources relevant to financial capability. Sixty jurisdictions (29 percent) report issuing such guidelines responding jurisdictions (51 percent) report maintaining a (Figure 5.4), with 20 jurisdictions (17 percent) targeting a website with the objective of improving the public’s finan- defined set of providers of financial education (e.g., cial capabilities (Figure 5.4). Twenty-four jurisdictions (20 schools) and 15 jurisdictions (13 percent) targeting all pro- percent) report maintaining a website to disclose informa- viders of financial education. tion on the pricing and terms of financial products and In thirty-five responding jurisdictions (30 percent), services—for example Peru’s RETASAS website19—while financial education has been integrated into at least one 53 jurisdictions (45 percent) report maintaining a website government-provided social assistance program (Figure with educational content, tools, and resources for broader 5.4). The World Bank Group Toolkit on Integrating Finan- financial education purposes—for example the Mon- cial Capability into Government Cash Transfer Programs eySmart website run by the Australian Securities and provides reference material with suggested key Investments Commission.20 approaches and pretested instruments to help design, Approximately 27 responding jurisdictions (23 per- implement, and integrate financial education into gov- cent) explicitly require financial service providers (e.g., via ernment cash transfer programs (World Bank Group regulation) to provide financial education to their custom- Forthcoming). For example, in Colombia, shared tablet ers—an approach that is particularly common in East Asia computers and smart phones with interactive financial and Pacific jurisdictions, including Indonesia (Figure 5.4). 54   Global Financial Inclusion and Consumer Protection Survey  |  2017 Report FIGURE 5.4 Approaches to Improve the Quality, Consistency, and Reach of Financial Education % of responding jurisdictions reporting approach 60% 50% 51% 51% 40% 30% 29% 30% 20% 23% 10% 0% Issuances of Integration of Integrating Development of Explicit guidelines financial education financial education web-based tools requirements for to providers of into government- into school and resources financials service financial education provided social curriculums as a providers to programs assistance distinct topic provide financial program or sub-topic education to customers Note: Percentages are based on 119 responding jurisdictions for the first indicator, 120 jurisdictions for the third indicator and 118 responding jurisdictions for the remaining indicators. NOTES 18. http://blogs.accion.org/fin-tech/app-promotes-personal-finance-colombia/. 19. http://www.sbs.gob.pe/app/retasas/paginas/retasasInicio.aspx?p=C. 20. https://www.moneysmart.gov.au/. 6 REFERENCES Ardic, Oya Pinar, Joyce A. Ibrahim, and Nataliya Mylenko. 2011. “Consumer Protection Laws and Regulations in Deposit and Loan Services: A Cross-Country Analysis with a New Data Set.” World Bank Policy Research Working Paper No. 5536. Basel Committee on Banking Supervision (BCBS). 2012. Core Principles for Effective Banking Supervision. Basel. Basel Committee on Banking Supervision (BCBS). 2015. Range of Practice in the Regulation and Supervision of Institutions Relevant to Financial Inclusion. Basel. Basel Committee on Banking Supervision (BCBS). 2016. Guidance on the Application of the Core Principles for Effective Banking Supervision to the Regulation and Supervision of Institutions Relevant to Financial Inclusion. Basel. 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ANNEXES ANNEX A LIST OF RESPONDING JURISDICTIONS JURISDICTION COORDINATING RESPONDENT INCOME LEVEL REGION 1 Afghanistan Da Afghanistan Bank Low income South Asia 2 Albania Bank of Albania Upper-middle income Europe & Central Asia 3 Angola Banco Nacional de Angola Upper-middle income Sub-Saharan Africa 4 Argentina Banco Central de la República Argentina Upper-middle income Latin America & Caribbean 5 Armenia The Central Bank of Armenia Lower-middle income Europe & Central Asia 6 Australia Australian Securities and Investments Commission High income + 7 Austria Oesterreichische Nationalbank/Financial Market High income + Authority 8 Azerbaijan Financial Market Supervisory Authority of the Upper-middle income Europe & Central Asia Republic of Azerbaijan 9 Bahamas, the The Central Bank of the Bahamas High income + 10 Bahrain Central Bank of Bahrain High income + 11 Bangladesh Bangladesh Bank Lower-middle income South Asia 12 Belgium Financial Services and Markets Authority High income + 13 Bhutan Royal Monetary Authority Lower-middle income South Asia 14 Bolivia Supervisory Authority of the Financial System Lower-middle income Latin America & Caribbean 15 Bosnia and Herzegovina Central Bank of Bosnia and Herzegovina Upper-middle income Europe & Central Asia 16 Botswana Bank of Botswana Upper-middle income Sub-Saharan Africa 17 Brazil Central Bank of Brazil Upper-middle income Latin America & Caribbean 18 Bulgaria Bulgarian National Bank Upper-middle income Europe & Central Asia 19 Burundi Banque de la République du Burundi Low income Sub-Saharan Africa 20 Cambodia The National Bank of Cambodia Lower-middle income East Asia & Pacific 21 Canada Financial Consumer Agency of Canada High income + 22 Caribbean Small States Eastern Caribbean Central Bank (ECCB) * Latin America & Caribbean 23 Cayman Islands Cayman Islands Monetary Authority High income + 24 Chile Superintendencia de Bancos e Instituciones Financieras High income + 25 China The People’s Bank of China Upper-middle income East Asia & Pacific 26 Colombia Superintendencia Financiera de Colombia Upper-middle income Latin America & Caribbean 58 Annex A: List of Responding Jurisdictions   59 ANNEX A, List of Responding Jurisdictions, continued JURISDICTION COORDINATING RESPONDENT INCOME LEVEL REGION 27 Central African Banque des États de l’Afrique Centrale (BEAC) * Sub-Saharan Africa Economic and Monetary Community (CEMAC) 28 Costa Rica Superintendencia General de Entidades Financieras Upper-middle income Latin America & Caribbean 29 Croatia Croatian National Bank High income + 30 Denmark Danmarks Nationalbank High income + 31 Djibouti Central Bank of Djibouti Lower-middle income Middle East & North Africa 32 Dominican Republic Central Bank of Dominican Republic Upper-middle income Latin America & Caribbean 33 Ecuador Superintendencia de Bancos del Ecuador Upper-middle income Latin America & Caribbean 34 Egypt, Arab Rep. Central Bank of Egypt Lower-middle income Middle East & North Africa 35 El Salvador Banco Central de Reserva de El Salvador Lower-middle income Latin America & Caribbean 36 Estonia Financial Supervision and Resolution Authority High income + 37 Fiji Reserve Bank of Fiji Upper-middle income East Asia & Pacific 38 Finland Financial Supervisory Authority High income + 39 France Bank of France High income + 40 Gambia, The Central Bank of The Gambia Low income Sub-Saharan Africa 41 Georgia National Bank of Georgia Upper-middle income Europe & Central Asia 42 Germany Deutsche Bundesbank High income + 43 Greece Bank of Greece High income + 44 Guatemala Superintendencia de Bancos de Guatemala Lower-middle income Latin America & Caribbean 45 Guyana Bank of Guyana Upper-middle income Latin America & Caribbean 46 Haiti Banque de la République d’Haïti Low income Latin America & Caribbean 47 Honduras Comisión Nacional de Bancos y Seguros de Honduras Lower-middle income Latin America & Caribbean 48 Hong Kong SAR, China Hong Kong Monetary Authority High income + 49 Hungary Central Bank of Hungary High income + 50 India Reserve Bank of India Lower-middle income South Asia 51 Indonesia Indonesia Financial Services Authority/Otoritas Lower-middle income East Asia & Pacific Jasa Keuangan 52 Iran, Islamic Rep. Central Bank of the Islamic Republic of Iran Upper-middle income Middle East & North Africa 53 Iraq Central Bank of Iraq Upper-middle income Middle East & North Africa 54 Israel Bank of Israel High income + 55 Italy Banca d’Italia High income + 56 Jamaica Bank of Jamaica, Consumer Affairs Commission of Upper-middle income Latin America & Caribbean Jamaica 57 Japan Financial Services Agency, Government of Japan High income + 58 Jordan Central Bank of Jordan Upper-middle income Middle East & North Africa 59 Kazakhstan National Bank of Kazakhstan Upper-middle income Europe & Central Asia 60 Kenya Central Bank of Kenya Lower-middle income Sub-Saharan Africa 61 Korea, Rep. Financial Supervisory Service High income + 62 Kuwait Central Bank of Kuwait High income + 63 Kyrgyz Republic National Bank of Kyrgyz Republic Lower-middle income Europe & Central Asia 64 Latvia Bank of Latvia High income + 65 Lebanon Banque du Liban Upper-middle income Middle East & North Africa 66 Lesotho Central Bank of Lesotho Lower-middle income Sub-Saharan Africa 67 Liberia Central Bank of Liberia Low income Sub-Saharan Africa 60   Global Financial Inclusion and Consumer Protection Survey  |  2017 Report ANNEX A, List of Responding Jurisdictions, continued JURISDICTION COORDINATING RESPONDENT INCOME LEVEL REGION 68 Lithuania Bank of Lithuania High income + 69 Luxembourg Commission de Surveillance du Secteur Financier High income + 70 Macedonia, FYR National Bank of the Republic of Macedonia Upper-middle income Europe & Central Asia 71 Madagascar Commission de Supervision Bancaire et Financaire Low income Sub-Saharan Africa 72 Malawi Reserve Bank of Malawi Low income Sub-Saharan Africa 73 Malaysia Bank Negara Malaysia Upper-middle income East Asia & Pacific 74 Maldives Maldives Monetary Authority Upper-middle income South Asia 75 Malta Central Bank of Malta High income + 76 Mauritania Banque Centrale de Mauritanie Lower-middle income Sub-Saharan Africa 77 Mauritius Bank of Mauritius Upper-middle income Sub-Saharan Africa 78 Mexico National Banking and Securities Commission Upper-middle income Latin America & Caribbean 79 Moldova National Bank of Moldova Lower-middle income Europe & Central Asia 80 Montenegro Central Bank of Montenegro Upper-middle income Europe & Central Asia 81 Morocco Banque Centrale du Maroc/Bank Al-Maghreb Lower-middle income Middle East & North Africa 82 Myanmar Central Bank of Myanmar Lower-middle income East Asia & Pacific 83 Namibia Bank of Namibia Upper-middle income Sub-Saharan Africa 84 Netherlands De Nederlandsche Bank High income + 85 New Zealand Reserve Bank of New Zealand High income + 86 Nigeria Central Bank of Nigeria Lower-middle income Sub-Saharan Africa 87 Norway Finanstilsynet—Financial Supervisory Authority High income + of Norway 88 Oman Central Bank of Oman Middle East & North Africa 89 Pakistan State Bank of Pakistan Lower-middle income South Asia 90 Panama Superintendency of Banks Upper-middle income Latin America & Caribbean 91 Paraguay Banco Central del Paraguay—Superintendencia Upper-middle income Latin America & Caribbean de Bancos 92 Peru Superintendence of Banking, Insurance and Upper-middle income Latin America & Caribbean Private Pension Funds 93 Philippines Bangko Sentral ng Pilipinas Lower-middle income East Asia & Pacific 94 Poland Narodowy Bank Polski High income + 95 Portugal Banco de Portugal High income + 96 Russian Federation Bank of Russia Upper-middle income Europe & Central Asia 97 Rwanda National Bank of Rwanda Low income Sub-Saharan Africa 98 Samoa Central Bank of Samoa Lower-middle income East Asia & Pacific 99 San Marino Central Bank of the Republic of San Marino High income + 100 Saudi Arabia Saudi Arabian Monetary Agency High income + 101 Serbia National Bank of Serbia Upper-middle income Europe & Central Asia 102 Seychelles Central Bank of Seychelles High income + 103 Slovak Republic National Bank of Slovakia High income + 104 Somalia Central Bank of Somalia Sub-Saharan Africa Low income 105 South Africa National Treasury Upper-middle income Sub-Saharan Africa 106 Spain Banco de España High income + 107 Sri Lanka Central Bank of Sri Lanka Lower-middle income South Asia 108 Sudan Central Bank of Sudan Lower-middle income Sub-Saharan Africa Annex A: List of Responding Jurisdictions   61 ANNEX A, List of Responding Jurisdictions, continued JURISDICTION COORDINATING RESPONDENT INCOME LEVEL REGION 109 Swaziland Central Bank of Swaziland Lower-middle income Sub-Saharan Africa 110 Sweden Finansinspektionen High income + 111 Tajikistan National Bank of Tajikistan Lower-middle income Europe & Central Asia 112 Thailand Bank of Thailand Upper-middle income East Asia & Pacific 113 Tonga National Reserve Bank of Tonga Lower-middle income East Asia & Pacific 114 Tunisia Central Bank of Tunisia Lower-middle income Middle East & North Africa 115 Turkey Undersecretariat of Treasury Upper-middle income Europe & Central Asia 116 Uganda Bank of Uganda Low income Sub-Saharan Africa 1 17 Ukraine National Bank of Ukraine, State Commission for Lower-middle income Europe & Central Asia Regulation of Financial Services Markets of Ukraine 118 United Kingdom Financial Conduct Authority High income + 19 Uruguay 1 Superintendencia de Servicios Financieros— High income + Banco Central del Uruguay 120 Vietnam State Bank of Vietnam Lower-middle income East Asia & Pacific 21 West African Economic Banque Centrale des Etats de l’Afrique de l’Ouest 1 * Sub-Saharan Africa and Monetary Union (BCEAO) (WAEMU) 122 West Bank and Gaza Palestine Monetary Authority Lower-middle income Middle East & North Africa 123 Zambia Bank of Zambia Lower-middle income Sub-Saharan Africa 124 Zimbabwe Reserve Bank of Zimbabwe Low income Sub-Saharan Africa Note: * multi-economy jurisdictions were not categorized by income level as the economies within these jurisdictions correspond to a range of income categories. + High income jurisdictions were not included in regional classifications in the analysis. ANNEX B INSTITUTIONAL ARRANGEMENT MODELS FOR FINANCIAL CONSUMER PROTECTION PRUDENTIAL AND FINANCIALV FINANCIAL SECTOR IS CONSUMER PROTECTION ROLE OF GENERAL CONSUMER SUPERVISED BY SUPERVISION ARE INSTITUTIONALLY PROTECTION AUTHORITY SINGLE OR INTEGRATED INSTITUTIONAL A SINGLE MULTIPLE MULTIPLE OR ARRANGEMENT MODEL AUTHORITY AUTHORITIES AUTHORITIES INTEGRATED SEPARATED SEPARATED NONE SHARED LEAD Integrated Single Financial Sector Authority Model X X X Integrated Sectoral Financial Sector Authority Model X X X Dedicated Financial Consumer Protection X X X Authority Model Shared Financial Sector and Consumer Protection X X X Authority Model General Consumer X X X Protection Authority Model 62 ANNEX C DATA BY REGION AND INCOME GROUP TABLE C.1 Strategies to Promote Financial Inclusion % of responding jurisdictions with national strategy in place or under development, by income and regional group LATIN MIDDLE UPPER- LOWER- EUROPE & EAST AMERICA EAST & SUB- HIGH MIDDLE MIDDLE LOW CENTRAL ASIA & & NORTH SOUTH SAHARAN NATIONAL STRATEGY ALL INCOME INCOME INCOME INCOME ASIA PACIFIC CARIBBEAN AFRICA ASIA AFRICA National financial In place 27% 8% 38% 29% 55% 12% 64% 44% 11% 14% 52% inclusion strategy Under development 23% 8% 22% 44% 27% 12% 36% 28% 67% 57% 22% General financial In place 27% 13% 35% 38% 27% 35% 45% 11% 33% 29% 48% sector strategy Under development 9% 5% 11% 12% 0% 6% 27% 17% 0% 14% 4% with a financial inclusion component National In place 26% 10% 38% 32% 27% 24% 64% 17% 33% 14% 43% development Under development 6% 8% 3% 9% 0% 0% 9% 0% 0% 14% 9% strategy with a financial inclusion component Microfinance In place 20% 10% 14% 35% 36% 0% 45% 17% 44% 0% 39% strategy Under development 6% 10% 3% 9% 0% 6% 9% 6% 0% 14% 0% Financial capability / In place 35% 49% 35% 26% 18% 47% 27% 11% 22% 14% 39% literacy / education Under development 22% 15% 27% 24% 27% 24% 36% 22% 22% 43% 17% strategy Number of responding jurisdictions 124 39 37 34 11 17 11 18 9 7 23 Note: The three multi-jurisdiction respondents (BCEAO, BEAC, and ECCB) are not included in income group classifications. High-income jurisdictions are not included in regional classifications.   63 64   Global Financial Inclusion and Consumer Protection Survey  |  2017 Report TABLE C.2 Requirements for Safeguarding of Customer E-Money Funds % of relevant responding jurisdictions reporting requirement, by income and regional group LATIN MIDDLE UPPER- LOWER- EUROPE & EAST AMERICA EAST & SUB- HIGH MIDDLE MIDDLE LOW CENTRAL ASIA & & NORTH SOUTH SAHARAN REQUIREMENTS ALL INCOME INCOME INCOME INCOME ASIA PACIFIC CARIBBEAN AFRICA ASIA AFRICA 100% of the customers’ funds must 86% 79% 80% 95% 100% 78% 89% 100% 67% 100% 93% be kept in accounts at a prudentially regulated financial institutions A fraction of customer e-money 6% 8% 5% 5% 0% 22% 0% 0% 0% 0% 0% funds must be kept in an account at a prudentially regulated financial institution No requirement that customer 7% 13% 10% 0% 0% 0% 11% 0% 33% 0% 0% e-money funds must be separated from the funds of the e-money issuer Number of responding jurisdictions 71 24 20 19 7 9 9 8 3 3 15 Nonbank E-Money Issuers 86% 79% 89% 84% 100% 89% 89% 100% 50% 100% 86% prohibited from using customer funds for purposes other than redeeming e-money and executing fund transfers Number of responding jurisdictions 69 24 19 19 7 9 9 8 2 3 14 Note: NBEI = nonbank e-money issuer. The three multi-jurisdiction respondents (BCEAO, BEAC, and ECCB) are not included in income group classifications. High-in- come jurisdictions are not included in regional classifications. TABLE C.3 Interest Payments and Profit Sharing on Customer E-Money Accounts % of relevant responding jurisdictions reporting approach to interest payments and profit sharing, by income and regional group LATIN MIDDLE UPPER- LOWER- EUROPE & EAST AMERICA EAST & SUB- INTEREST AND PROFIT SHARING ON HIGH MIDDLE MIDDLE LOW CENTRAL ASIA & & NORTH SOUTH SAHARAN CUSTOMER E-MONEY ACCOUNTS ALL INCOME INCOME INCOME INCOME ASIA PACIFIC CARIBBEAN AFRICA ASIA AFRICA NBEIs can pay interest on customer 13% 13% 17% 0% 33% 0% 14% 14% 0% 0% 25% e-money accounts NBEIs can share profits with their 8% 17% 0% 0% 17% 0% 0% 0% 0% 0% 8% e-money customers NBEIs are not allowed to pay 85% 83% 83% 100% 67% 100% 86% 86% 100% 100% 75% interest on customer e-money accounts or share profits with e-money customers Number of responding jurisdictions 62 23 18 14 6 9 7 7 1 3 12 Note: Denominator represents jurisdictions with NBEIs that responded to this question. The three multi-jurisdiction respondents (BCEAO, BEAC, and ECCB) are not included in income group classifications. High-income jurisdictions are not included in regional classifications. TABLE C.4 Permitted Use of Retail Agents as Third-Party Delivery Channels % of responding jurisdictions permitting use of retail agents for institutional category, by income and regional group LATIN MIDDLE UPPER- LOWER- EUROPE & EAST AMERICA EAST & SUB- HIGH MIDDLE MIDDLE LOW CENTRAL ASIA & & NORTH SOUTH SAHARAN PERMITTED USE OF RETAIL AGENTS ALL INCOME INCOME INCOME INCOME ASIA PACIFIC CARIBBEAN AFRICA ASIA AFRICA Commercial Banks 81% 81% 83% 82% 80% 82% 91% 82% 25% 86% 95% Other Banks 70% 73% 76% 65% 60% 100% 67% 71% 33% 50% 71% Financial Cooperatives 65% 88% 47% 65% 57% 43% 50% 54% 0% 67% 56% ODTIs 61% 80% 63% 55% 63% 25% 50% 71% 0% 50% 61% MCIs 47% 67% 33% 57% 33% 36% 33% 43% 50% 67% 43% NBEIs 91% 92% 94% 89% 83% 88% 100% 86% 100% 67% 92% Note: The number of responding jurisdictions varies by cell. The three multi-jurisdiction respondents (BCEAO, BEAC, and ECCB) are not included in income group classifications. High-income jurisdictions are not included in regional classifications. Annex C: Data by Region and Income Group  65 TABLE C.5 Definitions of Microfinance, Microcredit, and Microsavings % of responding jurisdictions with term defined in law or regulation, by income and regional group LATIN MIDDLE UPPER- LOWER- EUROPE & EAST AMERICA EAST & SUB- HIGH MIDDLE MIDDLE LOW CENTRAL ASIA & & NORTH SOUTH SAHARAN DEFINED “TERM” IN LAW OR REGULATION ALL INCOME INCOME INCOME INCOME ASIA PACIFIC CARIBBEAN AFRICA ASIA AFRICA Microfinance 36% 8% 22% 65% 82% 19% 55% 22% 56% 71% 78% Microcredit 41% 16% 54% 50% 45% 41% 36% 72% 67% 43% 48% Microsavings 13% 0% 14% 15% 36% 0% 27% 11% 22% 14% 35% Number of responding jurisdictions 123 38 37 34 11 17 11 18 9 7 23 Note: Number of jurisdictions varies by question; the given number represents the question with the most responses. The three multi-jurisdiction respondents (BCEAO, BEAC, and ECCB) are not included in income group classifications. High-income jurisdictions are not included in regional classifications. TABLE C.6 Interest Rate Caps and Pricing Limits on Loans for Commercial Banks % of responding jurisdictions reporting interest rate cap or pricing limit approach for Commercial Banks, by income and regional group LATIN MIDDLE UPPER- LOWER- EUROPE & EAST AMERICA EAST & SUB- APPROACH TO INTEREST RATE CAPS HIGH MIDDLE MIDDLE LOW CENTRAL ASIA & & NORTH SOUTH SAHARAN AND PRICING LIMITS ON LOANS ALL INCOME INCOME INCOME INCOME ASIA PACIFIC CARIBBEAN AFRICA ASIA AFRICA No interest rate caps or pricing 49% 34% 49% 55% 82% 63% 45% 50% 22% 57% 71% limits of any kind Some interest rate caps or pricing 23% 34% 23% 21% 0% 19% 36% 28% 22% 14% 0% limits apply to certain products or consumer segments All lending is subject to interest 28% 31% 29% 24% 18% 19% 18% 22% 56% 29% 29% rate caps or pricing limits Number of responding jurisdictions 117 35 35 33 11 16 11 18 9 7 21 Note: The three multi-jurisdiction respondents (BCEAO, BEAC, and ECCB) are not included in income group classifications. High-income jurisdictions are not included in regional classifications. TABLE C.7 Account Cost Regulations % of responding jurisdictions reporting regulated aspect of account costs, by income and regional group LATIN MIDDLE UPPER- LOWER- EUROPE & EAST AMERICA EAST & SUB- REGULATED ASPECTS OF HIGH MIDDLE MIDDLE LOW CENTRAL ASIA & & NORTH SOUTH SAHARAN ACCOUNT COSTS ALL INCOME INCOME INCOME INCOME ASIA PACIFIC CARIBBEAN AFRICA ASIA AFRICA The maximum cost for customers of 8% 10% 5% 9% 0% 0% 0% 6% 33% 0% 9% opening a savings or current account A ceiling on the minimum balance 8% 5% 8% 15% 0% 0% 18% 17% 22% 0% 4% that a provider can impose for a savings or transaction account The maximum maintenance fees 10% 13% 3% 18% 0% 0% 0% 11% 22% 14% 13% for savings or current accounts (e.g., monthly or yearly account ownership fees) The maximum overdraft penalty 10% 15% 11% 9% 0% 0% 9% 11% 44% 0% 0% or below-minimum balance penalty that providers can charge No cost for customers opening a 2% 5% 3% 0% 0% 0% 0% 6% 0% 0% 0% savings or current account No law or regulation addresses 58% 46% 51% 68% 100% 53% 64% 61% 33% 71% 83% costs of customer accounts Other 31% 41% 46% 12% 9% 41% 27% 28% 33% 29% 9% Number of responding jurisdictions 124 39 37 34 11 17 11 18 9 7 23 Note: The three multi-jurisdiction respondents (BCEAO, BEAC, and ECCB) are not included in income group classifications. High-income jurisdictions are not included in regional classifications. 66   Global Financial Inclusion and Consumer Protection Survey  |  2017 Report TABLE C.8 Simplifications or Exemptions to Customer Due Diligence Requirements % of responding jurisdictions reporting simplification or exemption to customer due diligence requirement, by income and regional group LATIN MIDDLE UPPER- LOWER- EUROPE & EAST AMERICA EAST & SUB- HIGH MIDDLE MIDDLE LOW CENTRAL ASIA & & NORTH SOUTH SAHARAN CDD SIMPLIFICATIONS OR EXEMPTIONS ALL INCOME INCOME INCOME INCOME ASIA PACIFIC CARIBBEAN AFRICA ASIA AFRICA Acceptance of nonstandard 17% 24% 14% 18% 10% 6% 36% 6% 0% 14% 23% identification documents Non-face-to-face customer due 30% 28% 39% 29% 10% 47% 30% 44% 11% 43% 9% diligence (by agents and/or via mobile devices) Allowing simplified transaction 40% 32% 46% 48% 33% 47% 45% 50% 22% 80% 36% monitoring based on lower assessed risk Number of responding jurisdictions 122 39 36 34 10 17 10 18 9 7 22 Note: Ten jurisdictions report other simplifications or exemptions to anti-money laundering/combating the financing of terrorism (AML/CFT) regulations not listed in the survey questionnaire. Number of jurisdictions varies by question; the given number represents the question with the most responses. Note: The three multi-jurisdiction respondents (BCEAO, BEAC, and ECCB) are not included in income group classifications. High-income jurisdictions are not included in regional classifications. TABLE C.9 Financial Consumer Protection Supervisory Activities % of responding jurisdictions that report undertaking financial consumer protection supervisory activity, by income and regional group LATIN MIDDLE UPPER- LOWER- EUROPE & EAST AMERICA EAST & SUB- HIGH MIDDLE MIDDLE LOW CENTRAL ASIA & & NORTH SOUTH SAHARAN SUPERVISORY ACTIVITIES ALL INCOME INCOME INCOME INCOME ASIA PACIFIC CARIBBEAN AFRICA ASIA AFRICA Drafting or providing inputs 77% 78% 83% 70% 67% 76% 78% 81% 67% 67% 80% into regulation Collection of data from FSPs on 65% 62% 69% 70% 50% 47% 56% 75% 78% 67% 75% the # of complaints received Collection of data from FSPs on 48% 46% 60% 33% 50% 35% 33% 56% 56% 50% 60% rates and fees for financial services Market monitoring 57% 65% 63% 45% 50% 71% 44% 50% 44% 50% 50% Mystery/incognito shopping 29% 35% 17% 36% 33% 35% 33% 13% 22% 50% 20% Interviews, focus groups, and 28% 22% 34% 33% 17% 35% 44% 31% 33% 17% 25% research with consumers On-site inspections and 71% 81% 69% 61% 67% 82% 67% 63% 44% 50% 70% investigations of FSPs Off-site inspection of FSPs 72% 84% 60% 70% 83% 59% 89% 56% 56% 67% 75% Thematic reviews 49% 65% 54% 33% 33% 59% 56% 25% 44% 50% 30% Number of responding jurisdictions 114 37 35 33 6 17 9 16 9 6 20 Note: FSP = financial service provider. The three multi-jurisdiction respondents (BCEAO, BEAC, and ECCB) are not included in income group classifications. High-income jurisdictions are not included in regional classifications. Annex C: Data by Region and Income Group  67 TABLE C.10 Financial Consumer Protection Enforcement Powers % of responding jurisdictions that report financial consumer protection enforcement power, by income and regional group LATIN MIDDLE UPPER- LOWER- EUROPE & EAST AMERICA EAST & SUB- HIGH MIDDLE MIDDLE LOW CENTRAL ASIA & & NORTH SOUTH SAHARAN ENFORCEMENT POWERS ALL INCOME INCOME INCOME INCOME ASIA PACIFIC CARIBBEAN AFRICA ASIA AFRICA Issue warnings to institutions 82% 92% 77% 76% 71% 94% 80% 56% 88% 67% 76% Require providers to refund fees 55% 54% 54% 58% 57% 53% 60% 56% 25% 50% 67% and charges Require providers to withdraw 73% 82% 66% 73% 57% 71% 80% 56% 75% 67% 67% misleading advertisements Impose fines and penalties 83% 85% 83% 79% 86% 88% 80% 75% 75% 67% 90% Issue public notice of violation 53% 77% 34% 45% 57% 18% 50% 50% 13% 67% 52% Revoke or recommend revoking 59% 72% 46% 58% 57% 53% 70% 31% 25% 50% 71% the offending provider’s license to operate Issue administrative sanctions to 56% 67% 51% 48% 57% 71% 60% 50% 25% 33% 43% senior management Number of responding jurisdictions 117 39 35 33 7 17 10 16 8 6 21 Note: The three multi-jurisdiction respondents (BCEAO, BEAC, and ECCB) are not included in income group classifications. High-income jurisdictions are not included in regional classifications. TABLE C.11 Suitability Requirements and Provisions to Restrict Excessive Borrowing % of responding jurisdictions reporting provisions to ensure product suitability or restrict excessive borrowing, by income and regional group LATIN MIDDLE SUITABILITY REQUIREMENTS UPPER- LOWER- EUROPE & EAST AMERICA EAST & SUB- AND PROVISIONS TO RESTRICT HIGH MIDDLE MIDDLE LOW CENTRAL ASIA & & NORTH SOUTH SAHARAN EXCESSIVE BORROWING ALL INCOME INCOME INCOME INCOME ASIA PACIFIC CARIBBEAN AFRICA ASIA AFRICA Have specific Yes, explicit 32% 31% 23% 41% 18% 20% 27% 28% 67% 43% 30% provisions that limits are set by restrict excessive regulation borrowing by Yes, regulations 48% 49% 46% 56% 45% 67% 55% 39% 33% 43% 48% individuals require lending institutions to assess borrower ability to repay, but no specific limits set Yes, other 10% 13% 14% 0% 18% 13% 0% 11% 0% 14% 9% Number of responding jurisdictions 122 39 35 34 11 15 11 18 9 7 23 Note: FSP = financial service provider. The three multi-jurisdiction respondents (BCEAO, BEAC, and ECCB) are not included in income group classifications. High-income jurisdictions are not included in regional classifications. 68   Global Financial Inclusion and Consumer Protection Survey  |  2017 Report TABLE C.12 Restrictions or Prohibitions on Unfair Business Practices % of responding jurisdictions that report restriction or prohibition on unfair business practices, by income and regional group LATIN MIDDLE UPPER- LOWER- EUROPE & EAST AMERICA EAST & SUB- HIGH MIDDLE MIDDLE LOW CENTRAL ASIA & & NORTH SOUTH SAHARAN RESTRICTED OR PROHIBITED PRACTICES ALL INCOME INCOME INCOME INCOME ASIA PACIFIC CARIBBEAN AFRICA ASIA AFRICA Use of any term or condition in a 75% 89% 75% 71% 56% 88% 80% 78% 44% 29% 62% consumer agreement that is unfair, excessively unbalanced, or abusive Use of any term or condition in a 67% 79% 74% 61% 25% 82% 67% 72% 33% 43% 47% consumer agreement that restricts the liability of the financial service provider Use of any term or condition in a 69% 82% 72% 68% 33% 88% 70% 72% 44% 29% 52% consumer agreement that excludes or restricts the right of the consumer Discriminating against certain 65% 81% 61% 63% 44% 75% 40% 83% 25% 57% 43% segments such as women, indigenous populations, or based on faith, political affiliation, the manner a consumer dresses, etc. Bundling and tying services and 61% 86% 57% 50% 25% 59% 44% 71% 33% 43% 32% products in a manner that unduly restricts the choice of consumers Number of responding jurisdictions 121 39 36 34 9 17 10 18 9 7 21 Note: Number of jurisdictions varies by question; the given number represents the question with the most responses. The three multi-jurisdiction respondents (BCEAO, BEAC, and ECCB) are not included in income group classifications. High-income jurisdictions are not included in regional classifications. TABLE C.13 Prevention of Unfair Business Practices % of responding jurisdictions that report provisions to prevent unfair business practices, by income and regional group LATIN MIDDLE UPPER- LOWER- EUROPE & EAST AMERICA EAST & SUB- PROVISIONS TO PREVENT HIGH MIDDLE MIDDLE LOW CENTRAL ASIA & & NORTH SOUTH SAHARAN UNFAIR BUSINESS PRACTICES ALL INCOME INCOME INCOME INCOME ASIA PACIFIC CARIBBEAN AFRICA ASIA AFRICA Have provisions Provisions that 42% 68% 37% 24% 0% 25% 20% 47% 33% 29% 20% in existing law limit fees and or regulations charges for that prohibit or account closure restrict terms Provisions that 42% 65% 43% 25% 13% 27% 20% 56% 33% 43% 11% and practices prohibit extra that limit custo- burdening proce- mer mobility dures for account between FSPs closure Provisions that 56% 77% 56% 42% 38% 75% 40% 39% 44% 29% 40% allow customers a cooling-off period for certain products, during which they can withdraw from the product or service without incurring penalties Provisions that 55% 76% 61% 39% 13% 88% 40% 50% 44% 29% 15% limit early repay- ment penalties Number of responding jurisdictions 119 39 36 33 8 16 10 18 9 7 20 Annex C: Data by Region and Income Group  69 TABLE C.13, continued LATIN MIDDLE UPPER- LOWER- EUROPE & EAST AMERICA EAST & SUB- PROVISIONS TO PREVENT HIGH MIDDLE MIDDLE LOW CENTRAL ASIA & & NORTH SOUTH SAHARAN UNFAIR BUSINESS PRACTICES ALL INCOME INCOME INCOME INCOME ASIA PACIFIC CARIBBEAN AFRICA ASIA AFRICA Requirements for financial institutions 65% 82% 54% 56% 55% 35% 55% 67% 78% 71% 52% to have certain minimum levels of professional competence/training for relevant personnel dealing with customers Provisions that require minimum 58% 64% 53% 56% 55% 44% 45% 61% 89% 43% 52% standards for debt collection practices Number of responding jurisdictions 124 39 36 34 11 16 11 18 9 7 23 Note: FSP = financial service provider. The three multi-jurisdiction respondents (BCEAO, BEAC, and ECCB) are not included in income group classifications. High-income jurisdictions are not included in regional classifications. TABLE C.14 Internal Dispute Resolution % of responding jurisdictions that report type of requirement for internal dispute resolution, by income and regional group LATIN MIDDLE UPPER- LOWER- EUROPE & EAST AMERICA EAST & SUB- HIGH MIDDLE MIDDLE LOW CENTRAL ASIA & & NORTH SOUTH SAHARAN REQUIREMENTS ALL INCOME INCOME INCOME INCOME ASIA PACIFIC CARIBBEAN AFRICA ASIA AFRICA Law sets standards for complaints 78% 89% 81% 72% 40% 79% 55% 78% 89% 57% 73% resolution and handling by FSPs The relevant Requirements for 74% 86% 75% 72% 30% 71% 55% 72% 89% 57% 64% law or regulation FSPs to imple- sets standards in ment procedures the following and processes areas for com- for resolving plaint resolution customer and handling [of complaints jurisdictions with Requirements for 60% 65% 67% 59% 30% 57% 45% 78% 78% 57% 41% such standard] FSPs to have a designated, inde- pendent unit in charge of han- dling customer complaints Timeliness of 66% 81% 75% 53% 40% 71% 55% 67% 67% 43% 50% response by FSP Accessibility (i.e., 58% 73% 64% 47% 30% 57% 55% 56% 56% 57% 36% consumer can file complaint via multiple channels) Record keeping 64% 76% 67% 59% 40% 71% 45% 67% 56% 57% 55% of complaints Reporting com- 50% 68% 56% 41% 10% 36% 45% 61% 44% 43% 27% plaints data to a gov’t agency Providing custo- 51% 76% 47% 38% 30% 57% 36% 39% 22% 57% 32% mers the details of a relevant alter- native dispute resolution mechanism Number of responding jurisdictions 118 37 36 32 10 14 11 18 9 7 22 Note: FSP = financial service provider. The three multi-jurisdiction respondents (BCEAO, BEAC, and ECCB) are not included in income group classifications. High-income jurisdictions are not included in regional classifications. 70   Global Financial Inclusion and Consumer Protection Survey  |  2017 Report TABLE C.15 Alternate Dispute Resolution % of responding jurisdictions that report characteristic of ADR entity, by income and regional group LATIN MIDDLE UPPER- LOWER- EUROPE & EAST AMERICA EAST & SUB- ALTERNATE DISPUTE RESOLUTION HIGH MIDDLE MIDDLE LOW CENTRAL ASIA & & NORTH SOUTH SAHARAN ENTITY CHARACTERISTICS ALL INCOME INCOME INCOME INCOME ASIA PACIFIC CARIBBEAN AFRICA ASIA AFRICA Has an out-of-court alternative 65% 79% 67% 59% 45% 63% 64% 61% 33% 71% 57% dispute resolution entity Number of responding jurisdictions 123 39 36 34 11 16 11 18 9 7 23 Type of alterna- Provides binding 40% 38% 29% 56% 50% 25% 14% 36% 67% 40% 67% tive dispute decisions only resolution entities Provides media- 29% 24% 42% 17% 50% 63% 29% 27% 33% 20% 25% [of jurisdictions tion services only with an ADR Provides both 31% 38% 29% 28% 0% 13% 57% 36% 0% 40% 8% entity] mediation ser- vices and binding decisions, as appropriate Number of responding jurisdictions 75 29 24 18 4 8 7 11 3 5 12 Key characteris- Statutory scheme 62% 59% 65% 67% 50% 75% 71% 70% 67% 60% 50% tics of alternate Industry-based, 20% 17% 26% 17% 25% 25% 14% 20% 0% 40% 25% dispute reso- voluntary scheme lution entities Industry-based, 18% 24% 9% 17% 25% 0% 14% 10% 33% 0% 25% [of jurisdictions mandatory with an ADR scheme entity] Number of responding jurisdictions 74 29 23 18 4 8 7 10 3 5 12 Key characteris- Covers only 83% 88% 87% 75% 50% 100% 60% 86% 100% 100% 50% tics of statutory financial services ADR entities Covers multiple 17% 12% 13% 25% 50% 0% 40% 14% 0% 0% 50% [of jurisdictions sectors with a statutory Within the 48% 35% 53% 58% 50% 17% 40% 86% 100% 67% 50% ADR entity] financial sector regulator Independent from 52% 65% 47% 42% 50% 83% 60% 14% 0% 33% 50% the financial sector regulator Number of responding jurisdictions 46 17 15 12 2 6 5 7 2 3 6 Funding models From a budget 13% 0% 13% 29% 25% 13% 14% 18% 33% 20% 27% for ADR entities allocated by the [of jurisdictions central govern- with an ADR ment ONLY entity] From an annual 39% 33% 42% 41% 50% 38% 29% 55% 33% 60% 36% budget allocated by a government authority (e.g., cen- tral bank) ONLY By a financial 11% 19% 4% 6% 25% 13% 0% 0% 0% 20% 9% industry associa- tion ONLY By direct contribu- 24% 30% 29% 12% 0% 38% 29% 9% 33% 0% 18% tion of members to the ADR entity ONLY Some combination 14% 19% 13% 12% 0% 0% 29% 18% 0% 0% 9% of the above Number of responding jurisdictions 72 27 24 17 4 8 7 11 3 5 11 ADR entity requires consumers to 79% 90% 68% 89% 40% 67% 86% 55% 100% 80% 77% first submit their complaint to the relevant FSP Number of responding jurisdictions 124 39 37 34 11 17 11 18 9 7 23 Note: ADR = alternate dispute resolution; FSP = financial service provider. The three multi-jurisdiction respondents (BCEAO, BEAC, and ECCB) are not included in income group classifications. High-income jurisdictions are not included in regional classifications. Annex C: Data by Region and Income Group  71 TABLE C.16 National Strategies and Definitions for Financial Capability % of responding jurisdictions that report having a strategy or definition in place for financial capability (or similar), by income and regional group LATIN MIDDLE FINANCIAL CAPABILITY STRATEGY UPPER- LOWER- EUROPE & EAST AMERICA EAST & SUB- AND DEFINITIONS FOR FINANCIAL HIGH MIDDLE MIDDLE LOW CENTRAL ASIA & & NORTH SOUTH SAHARAN EDUCATION, LITERACY OR, EDUCATION ALL INCOME INCOME INCOME INCOME ASIA PACIFIC CARIBBEAN AFRICA ASIA AFRICA National strategy in place 35% 49% 35% 26% 18% 47% 27% 11% 22% 14% 39% National strategy under development 22% 15% 27% 24% 27% 24% 36% 22% 22% 43% 17% Number of responding jurisdictions 124 39 37 34 11 17 11 18 9 7 23 Has an official definition for 42% 51% 39% 38% 36% 38% 55% 39% 33% 0% 41% “financial education,” “financial literacy,” or “financial capability” Number of responding jurisdictions 120 37 36 34 11 16 11 18 9 7 22 Note: The three multi-jurisdiction respondents (BCEAO, BEAC, and ECCB) are not included in income group classifications. High-income jurisdictions are not included in regional classifications. TABLE C.17 Efforts to Promote / Implement Financial Education Policy % of responding jurisdictions reporting financial education initiative, by income and regional group LATIN MIDDLE UPPER- LOWER- EUROPE & EAST AMERICA EAST & SUB- HIGH MIDDLE MIDDLE LOW CENTRAL ASIA & & NORTH SOUTH SAHARAN FINANCIAL EDUCATION INITIATIVES ALL INCOME INCOME INCOME INCOME ASIA PACIFIC CARIBBEAN AFRICA ASIA AFRICA Government has undertaken a 42% 49% 39% 39% 45% 35% 55% 33% 50% 0% 45% national mapping of financial educa- tion activities in the past 5 years Government Yes, from a defin- 22% 22% 14% 33% 18% 24% 36% 17% 38% 0% 18% regularly collects ed or limited set data directly of providers of from providers financial of financial education education Yes, from all 8% 14% 11% 3% 0% 12% 18% 6% 0% 0% 0% pro grams on the known providers reach of their of financial programs education A nationally Yes, a dedicated 43% 59% 39% 35% 27% 41% 45% 22% 63% 14% 32% representative survey on financial individual or capability household sur- Yes, as part of a 24% 11% 36% 26% 27% 35% 36% 33% 13% 14% 32% vey of financial broader survey capability has (e.g. related to been conducted financial inclusion) in jurisdiction within past 5 years Government Yes, directed at a 17% 24% 8% 15% 27% 12% 9% 17% 25% 0% 14% has issued guide- defined or limited lines to providers set of providers of of financial financial education education on (e.g. schools) content and/or Yes, directly at 13% 24% 8% 9% 0% 0% 9% 17% 13% 0% 5% approaches to all providers of the provision of financial education financial education Government Yes, directed at a 9% 5% 11% 12% 9% 6% 27% 11% 13% 0% 9% explicitly defined or limited requires FSPs set of FSPs (e.g. to provide cooperatives) financial Yes, directed at 14% 8% 11% 18% 27% 6% 18% 17% 13% 17% 23% education all financial institutions 72   Global Financial Inclusion and Consumer Protection Survey  |  2017 Report TABLE C.17, continued LATIN MIDDLE UPPER- LOWER- EUROPE & EAST AMERICA EAST & SUB- HIGH MIDDLE MIDDLE LOW CENTRAL ASIA & & NORTH SOUTH SAHARAN FINANCIAL EDUCATION INITIATIVES ALL INCOME INCOME INCOME INCOME ASIA PACIFIC CARIBBEAN AFRICA ASIA AFRICA Financial education is a component 30% 27% 26% 36% 27% 19% 36% 50% 13% 17% 32% of a government-provided social assistance program Financial Yes, as a distinct 13% 16% 14% 15% 0% 18% 18% 6% 38% 0% 5% education is topic or subject included as a Yes, as a subtopic 38% 49% 44% 26% 18% 35% 45% 22% 25% 14% 41% topic or subject integrated into one in public school or multiple other curriculum topics or subjects No, but planned 12% 5% 17% 15% 9% 29% 0% 22% 0% 29% 5% implementation within 1–2 years No, but planned 6% 3% 0% 15% 9% 0% 9% 6% 13% 0% 14% development of curriculum within 1-2 years No 30% 24% 25% 26% 64% 12% 27% 44% 25% 57% 36% Government Yes, to disclose 20% 25% 22% 18% 0% 18% 9% 28% 25% 17% 14% maintains a information on the website with pricing and terms the objective of financial pro- of improving ducts and services financial Yes, with 45% 58% 53% 36% 9% 47% 55% 44% 25% 33% 27% capability of educational the public context, tools, and resources for financial education purposes Number of responding jurisdictions 120 37 36 34 11 17 11 18 8 7 22 Note: Number of jurisdictions varies by question; the given number represents the question with the most responses. FSP = financial service provider. The three multi-jurisdiction respondents (BCEAO, BEAC, and ECCB) are not included in income group classifications. High-income jurisdictions are not included in regional classifications. Global Financial Inclusion and Consumer Protection Survey 2017 Report Global Financial Inclusion and Consumer Protection Survey 2017 Report