68067 focus note Incorporating Consumer Research into Consumer Protection Policy Making Financial Consumer T his Focus Note describes CGAP’s experience to date gathering qualitative and quantitative information directly from low-income consumers Protection Policy for Low- Income Consumers to inform financial consumer protection policy— which financial services they use, how they choose In many developing countries, regulation to protect among them, problems they experience, and financial consumers from unfair products and perceptions of their rights and responsibilities. The practices is limited or nonexistent. Even when low- use of consumer experiences to inform financial income consumers have access to formal financial consumer protection can improve policy making by services provided by institutions such as banks or better accounting for the situation of consumers, registered microfinance institutions (MFIs), the including those with lower levels of income, ability to understand any rights or protection they education, and familiarity with formal financial may have and to seek clarification or redress when products. (See Box 1.) In particular, low-income difficulties arise may be limited by their gaps in consumers often use different financial products knowledge, literacy, and confidence. Similarly, to and providers than the mainstream market, have the extent that client protection standards exist limited formal financial experience, and may be at the level of the provider, whether through socially marginalized—making them less likely to provider or industry codes of conduct, compliance advocate on their own behalf or to seek recourse. tends to be far from complete, sanctions for Furthermore, many regulators and supervisors noncompliance weak, and lower income and may have only limited experience with low-income less experienced consumers less likely to receive consumers or semiformal and informal providers, effective protections and recourse. and the approaches and best practices for financial consumer protection taken from more developed countries may not work without significant Box 1. High-Level Findings from modification. This situation calls for direct consumer Consumer Research for Consumer research with these consumer segments, to inform Protection Policy Making policy makers to better incorporate the needs and • Consumer research may better lend itself to experiences of low-income and inexperienced certain specific consumer protection issues, including disclosure and pricing transparency, financial consumers into consumer protection financial capability and decision making, and policy. recourse and dispute resolution. No. 74 • “Intangibles� matter. Factors such as quality of November 2011 This paper describes three different consumer experience or service have a greater influence on consumer decisions relative to product research methodologies CGAP has field tested— features or pricing than expected. This may Daryl Collins, consumer group discussions, in-depth individual Nicola Jentzsch, lead consumers to choose a product of “worse� and Rafael Mazer interviews, and quantitative surveys—and the relative financial value compared to similar lessons learned to date on using consumer tools to products due to other personal preferences. • Consumer research offers the greatest consumer inform consumer protection policy making. Insights protection insights when it uses real-life provided here are derived from field missions to documents or simulates actual events consumers Nicaragua, South Africa, the Philippines, Tanzania, would face in the marketplace to pull out actual consumer experiences. In general we have and Mexico; comprehensive consumer protection found that consumers find it much easier to talk diagnostics in Kenya and Senegal; and selected about specific incidences than general consumer evidence from a broader survey on agent banking protection principles, rights, and obligations. in Brazil. (See Table 1 for a summary.) 2 Table 1. Summary of CGAP Consumer Research to Date Country Research Tools Used Kenya • National survey of 1,500 financial consumers of savings, loans, insurance, mobile payment, and pyramid schemes • 14 focus groups with consumers from varying socioeconomic backgrounds Mexico • 6 consumer group discussions with low-income consumers to identify consumer protection areas for future focus The Philippines • 12 consumer group discussions in 3 regions to test draft loan disclosure formats for comprehension and utility with low-income financial consumers Senegal • National survey of 500 financial consumers, focusing on microfinance clients • 11 consumer group discussions nationally with microfinance clients South Africa • 8 consumer group discussions • 8 in-depth individual interviews with consumers Tanzania • 8 consumer group discussions and 2 focus group discussions • 4 in-depth individual interviews with consumers Financial consumer protection has become a higher Using Consumer Research priority policy issue in many markets in recent years, to Inform Consumer due in part to the global financial crisis, reported over- Protection Policies indebtedness within some microfinance markets, and new products and financial service providers that are There is a growing body of consumer experience often reaching populations with little or no previous research and application of market research tools to formal financial experience. This has led many financial services, including work in the past decade by regulators to recognize that basic consumer protection government financial consumer protection agencies, rules ought to be applied—and enforced—for a such as the U.K.’s Financial Services Authority and the broader range of financial institutions,1 with subsequent South African National Credit Regulator. Also, several policy efforts to develop more comprehensive organizations have adapted traditional market research consumer protection standards for financial services, tools for use in developing countries and specifically tailored in part to the specific challenges the poor among low-income financial consumers and within the face. This includes both improving the effectiveness microfinance sector. Organizations such as MicroSave, of consumer protection regulation for low-income and Microfinance Opportunities, USAID, and Freedom from inexperienced users and extending the coverage of Hunger have developed tailored consumer research basic protections, such as market conduct regulations, tools to help design new products, improve quality of to registered but unsupervised providers as well as service, and raise financial capability. prudentially supervised ones. Examples of expanded 2 financial consumer protection for more types of However, the use of these consumer research financial institutions—and as a result more types of methodologies to inform policy makers is still financial consumers—can be seen in the development relatively new and limited. To contribute to this of important legislation, such as South Africa’s National relatively limited field of knowledge, this Focus Credit Act of 2007, and oversight bodies, such as the Note discusses three common consumer research National Committee for the Defense and Protection of methodologies CGAP and its partners have Financial Service Consumers in Mexico.3 adapted and tested in the field: 1 A worldwide overview of existing consumer protection laws and regulations is provided in cGAP (2010). 2 At this stage in the development of consumer protection regulations in most developing countries not much can be done about informal providers except to make clear the comparative benefits and drawbacks of formal and semi-formal providers. for example, while in some cases consumers may find informal providers more accessible, trustworthy, flexible, or transparent in their pricing, they may also find recourse options when things go wrong with informal providers to be far more limited—or nonexistent—compared to formal providers. 3 see also, among others, recent consumer protection regulations adopted in Ghana, the Philippines, and uganda. 3 1. Consumer group discussions4—An interactive Box 2. What Insights about Consumer discussion with small groups of individuals, Protection and Financial Capability Can facilitated by a moderator Come from Listening to Low-Income 2. Individual in-depth interviews—One-on-one Consumers? discussions for deeper probing of specific topics In Mexico, low-income consumers found greater and experiences price transparency at pawn shops than at MFIs 3. Quantitative consumer surveys—Broad review of and trusted department stores to hold their savings more than they did banks, noting “they consumer experience on issues such as complaints don’t give us anything, but at least they don’t by provider or product type take anything away,� in reference to the various fees and hidden charges levied on their savings These and other consumer research tools can shed accounts by banks. In one particularly egregious example, a consumer reported that “dormancy� light on priorities for consumer protection rules and other charges had depleted the value of her and enforcement by indicating what is working and savings account from 15,000 to 9,000 Mexican what is not working in the marketplace. They can pesos over three years. also help regulators—often in collaboration with In Kenya, participants in consumer group industry associations, civil society, and donors—to discussions could recite by memory the customer monitor new developments and “hot spots,� such as complaint number for M-PESA, and 95 percent of pyramid schemes or predatory lending in their early those surveyed rated their satisfaction level as 7 or higher out of 10, with 10 being the highest level stages, and test different approaches to protect of satisfaction. By contrast, consumers in the same lower income and less experienced consumers survey reported that they even have had to resort before setting policies. (See Box 2.) They offer the to hiring lawyers to resolve complaints with chance to gather general insights from consumers financial institutions because they were not sure of the proper recourse channels to use when handling on their experiences in the marketplace, their complaints with these types of institutions. reported preferences and perceptions, as well as their opinions on how to improve existing consumer protection and market conduct frameworks to better damaging for the poor, whose lower income and address their concerns. 5 asset levels make them, in some cases, more sensitive to the income effects of negative financial outcomes, CGAP experience to date suggests that these such as over-indebtedness, unsuitable products, consumer research tools can be particularly useful or abusive practices by providers. Using consumer for addressing several consumer protection issues research tools to gather consumers’ opinions on what that are of high priority for low-income consumers matters to them when making decisions on financial and less developed markets. products can help policy makers understand the ways certain biases inherent in consumers can impact the Decision making and financial capability effectiveness of different policy interventions to improve financial literacy or steer consumers toward Recent research in behavioral sciences has what the policy maker considers more “suitable� or demonstrated that financial consumers, whether rich “appropriate� products. One example of how certain or poor, exhibit a range of cognitive biases that can behavioral biases can be used to steer consumers result in their making financial decisions that are not toward certain decisions is the recent use of “opt- what would be expected, or that do not maximize their out� instead of “opt-in� for savings and retirement personal benefit. These biases can be particularly 6 products to increase participation. 4 the term “consumer group discussions� describes a method that is less rigorous in terms of sampling, screening, and conduct than focus group discussions. one of the key distinctions between these two forms of group discussions is that focus groups filter potential participants to obtain a sample that can be considered “representative� of the demographic(s) being targeted by the consumer research. cGAP has used both consumer group discussions (Mexico, the Philippines, senegal, south Africa, and tanzania) and focus group discussions (Kenya and tanzania) in its consumer protection research. 5 consumer research can provide information on participants’ reported preferences and perceptions. However, understanding consumer behavior and decision making in different contexts requires the use of other techniques, such as in-depth field experiments, which are more comprehensive, and also more costly and time-consuming. 6 see, e.g., Dawnay and shah (2005); Barr, Mullainathan, and shafir (2008); Krishnan (2008). 4 Disclosure and pricing transparency Box 3. Using Consumer Feedback to Improve Disclosure and Pricing This includes testing consumers’ abilities to Transparency in the Philippines read, interpret, and act on financial information As part of its efforts to improve consumer disclosed by providers, often through actual understanding of costs and key terms of credit disclosure documents. This analysis can identify products, the central bank of the Philippines, in ways in which existing disclosure forms or pricing collaboration with CGAP, conducted a series of information could be improved both in content and focus groups with 123 financial consumers from several different financial provider types and layout to make consumers more aware of all costs geographic regions of the Philippines to test and features associated with different financial proposed new disclosure formats. The objective products, and more effectively compare similar was to test consumer comprehension of key terms, understanding of cost, and ability to compare products’ price and key features. (See Box 3.) similar products across providers. Consumer research in markets including the United States, United Kingdom, and European Community These focus groups revealed several behavior to improve disclosure and pricing transparency has patterns and preferences of consumers, leading to important feedback on the draft disclosure formats proved particularly useful for evaluating disclosure tested and the Truth in Lending Act. These insights of terms on credit products (and with a growing included the following: importance in savings products as well). Pricing is, in some cases, intentionally obfuscated by • Consumers prefer not to have costs separated between “finance� and “nonfinance� charges, providers to hide the total cost of the product to but instead summed together as total charges. the consumer. • They prefer to have only the effective interest rate displayed (having both nominal and Dispute resolution and effective interest rates present on disclosure forms confused most consumers). recourse channels • They prefer to have internal and external recourse channels available on the front page of Listening to consumers can also reveal the extent to the loan disclosure form. which they understand their rights, responsibilities, Based on this consumer feedback on how they use and available recourse mechanisms in the financial product information to make financial decisions, the sector, and whether these mechanisms actually central bank modified its suggested loan disclosure function to resolve disputes between consumers form for small business, retail, and consumer credit, as well as certain provisions in the Truth in Lending and providers. This is important both for internal Act, including the requirement to use effective dispute resolution mechanisms and third-party interest rate and declining balance calculations on mechanisms, such as an ombudsman or government payment schedules. agency. Even in countries such as Mexico, where there is an existing financial consumer protection agency, low-income consumers’ knowledge and use of these agencies can be limited.7 Consumer with providers daily and feel the consequences research can help identify the best way to inform of provider practices directly. Direct consumer consumers of the recourse channels available, and research can help bring consumers’ good and bad thereby increase their use of these channels. experiences to the attention of the regulator and, in the process, identify consumer concerns that “Hot spotting� may warrant further, more detailed examination, as well as new or emerging consumer protection Consumers, when properly engaged, are the issues—such as pyramid schemes and other ultimate industry watchdog, as they interact potentially wide-scale, but hard to track, fraud. 7 During cGAP-led consumer group discussions with low- to middle-income consumers in Mexico city, only 1 of 48 participants had used the existing financial consumer protection resources provided free of charge by the government’s financial consumer protection agency, and very few respondents were aware of the agency itself. 5 Once identified, regulators can then develop more Implementation considerations systematic investigations to determine the severity for consumer research of and best approaches to address these issues before they reach a scale that is damaging to The following are several key observations and the market overall. Hot spotting consumer issues recommendations for implementation of consumer can also help regulators and supervisors allocate research tools that have emerged from CGAP’s limited consumer protection resources to focus on consumer research with low-income consumers in the most important problems in the marketplace. several different markets globally. Elements of Consumer Research Using group interaction to identify emerging consumer protection topics. This is one of the Review of three consumer research tools strengths of the group discussion approach, as the open discussion nature of this tool can bring out As mentioned, CGAP has experimented with the new insights and issues for further examination. application of three different tools for consumer Probing further for more detailed information research: consumer group discussions, in-depth can be particularly important for sensitive topics, consumer interviews, and quantitative surveys, such as disputes with the financial institution or which can be used alone or complementarily to collection practices for late payments. In the case gather valuable insights from low-income financial of abusive collection practices, in Tanzania one consumers. These tools can be more or less relevant, discussion revealed that several participants had depending on the specific consumer protection been locked in a room for the late payment of one needs or interests in a country, as well as the group member, a practice that merits follow-up information sought (see Table 2). It is also important investigation. By contrast, in Mexico, the diversity to consider how these consumer research tools of consumer perceptions on whether lenders had can be used to complement each other to better “harassed� them in their collection of delinquent understand the consumer protection environment. payments, and their definitions of what constituted These tools can be used in different sequences, harassment, helped put into context the extreme depending on the needs of the researcher or policy accounts of abusive practices by a few more vocal maker. In some cases, a particular issue may be participants in the consumer group discussions as identified in consumer group discussions, with survey possible outliers or accounts colored by personality questions then developed to measure with what dynamics of that individual consumer. frequency this issue is occurring across a market, or among certain individuals or financial providers. Using real-life documents for consumer research. For example, a quantitative survey can identify a An effective tool for consumer research is the use commonly occurring practice in the marketplace— of sample exhibits to help focus participants on such as 10 percent of consumer credit product specific consumer protection issues. Such documents users registered formal complaints—that can then include loan contracts, brochures, advertisements, be explored further with individual interviews to or correspondence from financial institutions. These determine some of the potential causes of this exhibits can elicit insights by consumers on approaches problem. (See Box 4.) By combining this general they might use for financial decision making and their market information with details on some sample perceptions of specific products and marketing tools incidences, policy makers can gain a clearer picture (measuring real-life consumer behaviors will require of what is happening, why, and how often, which can the use of in-depth field experiments). Additionally, lead to better informed policy solutions to address by using an actual document, the facilitator can ask these consumer protection issues. specific questions, such as “what elements of this 6 Table 2. Brief Overview of Three Consumer Research Tools Consumer What It Does Example from Research Tool The Method What It Does Not Do CGAP Research Consumer Group Convene targeted Provides a relatively Does not offer a Consumer group Discussions groups of 6–8 quick and low- broad, quantifiable discussions con- consumers for a resource sample sample of experi- ducted in Mexico guided discussion of many consumer ences. Does not as part of an initial of consumer protec- opinions. Allows allow for deep prob- market survey by tion and financial for participants to ing of individual the national financial experiences, includ- confirm and refute experiences as is consumer protection ing both consumer each other’s opin- possible with in- agency to identify experience and ions. Can cover a depth interviews. consumer protection feedback. This tool broad range of top- issues for prioritizing can be used for ics quickly. Useful and further research. broad discussions for “hot-spotting� on consumer protec- issues and as a first tion, as well as for approach to under- focused research on standing a market. a specific consumer protection topic. In-Depth Consumer Isolate the experi- Allows for more Difficult to assess Individual interviews Interviews ences of a single detail and custom- the validity of indi- of consumers in consumer through ization of questions vidual experiences South Africa to in a one-on-one inter- than group discus- as representative part better under- view to gather a sions and follow-on samples due to the stand how they high level of details questions to cor- time and resources handled legal dis- and map out the rectly outline the it takes to conduct putes with creditors. chain of events on full sequencing of each in-depth inter- This issue was first their experiences events or financial view. identified during with financial prod- decisions made consumer group dis- ucts. Is also a useful (of particular use cussions, leading to format for probing for issues related the need for follow- personal opinions on to recourse and up in-depth inter- issues such as con- dispute resolution). views to gain clarity sumer understand- Also useful for deal- on this topic. ing of their rights ing with sensitive and responsibilities. topics or issues that some consumers may not wish to discuss in a group setting, such as per- sonal financial infor- mation. Quantitative Gather many con- Offers a point-in- Gather detailed National survey in Surveys sumers’ views on time assessment of qualitative and Kenya to compare consumer protection many consumers’ quantitative informa- consumer experi- topics through fixed experiences—useful tion on individual ences across a broad response variables. for trend-spotting experiences and range of financial Can be done either and measuring perceptions. products. through an omnibus change over time. or tailored survey Also helpful to (see Box 5). describe the breadth or level of incidence of a problem. loan would most impact your decision to accept or local financial institutions into consumer group reject this loan?� Specific questions are often easier discussions. These loan agreements were used in to answer than nonspecific questions, such as “what all four countries to assess how well consumers are the factors you use to choose a loan?� understand key concepts such as interest rates and total cost of credit. This exercise offered insights on In Mexico, the Philippines, South Africa, and Tanzania, how consumers make decisions in cases where they CGAP incorporated sample loan agreements from do not fully understand key financial terms that have 7 decision making, and alternative approaches that Box 4. A Quick Look at National Surveys may convey information in a way that is more useful CGAP has use both tailored and omnibus surveys to financial consumers with limited experience or to measure consumer experience. In Kenya a financial literacy. tailored survey was designed and executed specifically to assess consumer protection across the entire retail financial sector, with a focus on Having adequate capacity and resources for lower income consumers. In Brazil researchers conducting consumer research. Before beginning tagged their survey questions on consumer any consumer research that seeks to inform future experience with agent banking onto an already existing government omnibus survey (a survey that consumer protection policies, it is important to is continuously executed every month, quarter, or consider both the capacity of the local authority year with basic demographic data collected about to implement, or at the least supervise, first-hand respondents, such as age, income, and education). consumer research, as well as its applicability to Omnibus surveys tend to be cheaper than a survey identify or resolve the most important consumer that is created and fielded for a specific need, and protection issues in the market. This is particularly they have a quick turnaround time, although since true for many developing countries. Recent CGAP the survey includes other topics, space is usually research on consumer protection supervision has limited to ask a lot of questions, and it is not always known how long the overall questionnaire identified capacity to monitor markets and resource is nor where your own questions fall within the constraints (financial and personnel) as two of questionnaire. the primary challenges for effective consumer A growing number of countries are emphasizing protection supervision in the developing world.8 financial inclusion indicators, measured through national-level surveys, as a way to track progress Effective consumer research for consumer protection in expanding access to financial services. Such policy making requires either internal staff capacity national-level surveys may offer an opportunity to measure carefully selected consumer protection (and preferably a special unit or team) within issues on a large scale at a low additional cost the relevant authority, or the hiring of outside by tagging onto these financial inclusion surveys firms/independent researchers that specialize in consumer protection questions. administering such consumer research.9 In either case, the responsible party must be able to handle important implications for policies around pricing challenging aspects of the research, such as ensuring transparency and/or financial capability. reliable answers to sensitive questions, ensuring surveys or interviews are administered consistently, For example, in Mexico most participants did not and ensuring data are analyzed and evaluated in a fully understand “total annual cost,� or the difference consistent manner. between the loan amount and the total amount received by the user. To compensate for their A related capacity consideration is the often lack of understanding of key financial terms used substantial costs of consumer research—particularly in the loan contract, consumers used the weekly relevant for resource-constrained financial consumer repayment schedule as the main tool for deciding protection authorities in low-income countries. whether they would accept the loan, focusing on In all of CGAP’s field work cited in this paper we their capacity to pay instead of whether the loan was experimented with the use of market research a good value. These insights have led the Mexican firms and/or independent contractors to organize financial consumer protection authority to pursue a group discussions and help with development more focused investigation into the impact current of materials. These firms and contractors proved disclosure formats have on consumers’ financial valuable for their organizational capabilities, market 8 findings from Davel and Dias (forthcoming). 9 Most commonly this consumer research is outsourced to market research firms or other such experts, although certain countries with low- income consumers, such as Peru and Kenya, have effectively conducted consumer research using their own staff and resources. 8 Box 5. Using Consumer Surveys to Better Understand the Market in Kenya As part of a 2010 consumer protection diagnostic conducted in Kenya by CGAP/FSD Kenya for the Kenyan Ministry of Finance, a survey of 1,548 financial consumers was used to complement desk research and focus group discussions. This survey led to several insights into financial consumer protection issues within the market that are informing development of broad new financial consumer protection policies by the Kenyan Ministry of Finance. Some of the policy insights gathered from the survey include the following: • Having a better understanding of the overall severity of consumer protection issues, to determine if further actions or follow-up should be taken. The Kenyan survey illuminated several key consumer protection issues occurring in the marketplace, foremost of which was that many consumers (ranging from 7 percent to 11 percent, depending on product type) reported losing money through savings devices. Going a step further, the survey also reported that of those who had lost money, 33 percent blamed the charges and penalties for “eating away� their money, although many also claim to have lost money when the institution closed down (21 percent), when money was misappropriated (12 percent), or when there were errors in records (27 percent). Misappropriation of money was more prevalent with informal instruments such as accumulating savings and credit associations (56 percent) and rotating savings and credit associations (51 percent) than formal financial institutions, while nearly 12 percent of bank users felt charges, interest rates, and penalties were not clearly explained compared to much lower percentages in other financial devices. • Hot spotting issues that consumers might not feel comfortable discussing openly in the presence of others. Pyramid schemes are a consumer protection risk that can do widespread and significant harm to low-income consumers. The Kenya survey found that 44 percent of respondents had been approached to invest in a pyramid scheme, with 8 percent of these respondents having taken up these offers, with average loss reported of Kshs 34,000 ($425.) Of even greater concern, of these victims of pyramid schemes, 22 percent did not complain because they did not know who to complain to, and 40 percent did not complain because they did not think it would do any good. • Measuring changes in consumer experience over time. By comparing consumer protection information from surveys conducted at different points in time, it is possible to measure how different consumer protection issues can change over time. An FSD Kenya survey of M-PESA users in 2008, one year after the product’s launch, found that 75 percent of users did not know how to access customer service. By contrast, the 2010 CGAP/ FSD Kenya survey of M-PESA users (using a different user sample) found that “participants were ubiquitously clear how to resolve problems (‘you call customer care’) as well as conveying a clear sense of how long it will take for the problem to be resolved (72 hours).� research backgrounds, and knowledge of the local policy making. CGAP’s experience with three basic financial markets, leading to useful insights for future consumer research tools points to a need for greater consumer protection policy reforms. However, in accounting of consumer experience in all consumer our experience, even a preliminary “trend-spotting� protection diagnostics. These tools, of course, round of consumer research can reach costs need to be complemented with analysis of existing exceeding $10,000, and for more detailed consumer consumer protection policy, laws and regulation, research the costs often range between $25,000 and and consultation with government, industry, and $50,000. In countries where regulators have limited consumer advocates. However, we believe that resources that are mostly allocated toward prudential listening to low-income consumers directly is supervision and other systemic issues, these costs essential to gain a complete perspective of what is can represent significant challenges to conducting occurring currently in the marketplace, and where the consumer research. greatest resources and effort should be invested to improve outcomes for low-income, less experienced, Conclusion and more vulnerable users of financial services. By listening to the consumers themselves, these priority Many different approaches can be used to conduct issues can be better identified, vetted, and analyzed consumer research to inform consumer protection by policy makers for follow-up action. 9 Bibliography Balancing Rights and Responsibilities, Trainer’s Guide.� Davis, Calif.: Freedom from Hunger. http://www.freedomfromhunger.org/press/ CGAP and World Bank. 2010. Financial Access consumerprotection.php 2010: The State of Financial Inclusion through the Crisis. Washington, D.C.: CGAP and World Bank. Global Financial Education Program. 2003–2005. www.cgap.org/p/site/c/template.rc/1.26.14235/ Financial Education Curriculum. http://www. globalfinancialed.org/curriculum.html Barr, Michael, Sendhil Mullainathan, and Eldar Shafir. 2008. “Behaviorally Informed Financial Krishnan, Sudha. 2008. “Psychology and Economics: Services Regulation.� Washington, D.C.: New What It Means for Microfinance.� Framing Note America Foundation, October. No. 3. New York: Financial Access Initiative, April. Brand, Monica. 2003. “Market Intelligence: Making Microfinance Opportunities. 2005. “Listening to Market Research Work for Microfinance.� InSight Clients: How to Better Serve Your Customers.� Series, No. 7. Boston: ACCION International, Washington, D.C.: Microfinance Opportunities. October. http://www.microfinanceopportunities.org/docs/ Listening_to_Clients_How_to_Better_Serve_Your_ Davel, Gabriel, and Denise Dias. Forthcoming. Customers.pdf “The Art of the Possible: Implementing Consumer Protection Rules in Lower-Access Countries.� MicroSave. “Market Research for Microfinance Washington, D.C.: CGAP. Toolkit.� http://www.microsave.org/toolkit/market- research-for-microfinance-toolkit Dawnay, Emma, and Hetan Shah. 2005. “Behavioural Economics: Seven Principles for Policy-Makers.� SEEP Network and United States Agency for London: The New Economics Foundation, July. International Development. 2004. “Learning from Clients: Assessment Tools for Microfinance Flaming, et al. 2011. “Consumer Protection Practitioners.� Washington, D.C.: SEEP and USAID. Diagnostic Study, Kenya.� Nairobi, Kenya: Financial Sector Deepening (FSD) Kenya, and CGAP. United States Agency for International Development. 2000. “Marketing in Microfinance Freedom from Hunger and Microfinance Institutions.� Washington, D.C.: USAID. http://pdf. Opportunities. 2010. “Consumer Protection: usaid.gov/pdf_docs/PNACQ694.pdf 10 Note: The following field guides were developed for use in specific markets, and so will need to be adapted as appropriate to match different local country contexts before being used to conduct consumer research. Annex 1 Recruitment Questionnaire for Focus Group Discussions (Tanzania) Screening Questionnaire Resp.Name: _________________________________ Physical Address: _________________________ Mobile No: __________________________________ Estate: ___________________________________ Recruiter Name: _____________________________ Date: ____________________________________ Dar es Salaam: _______________________________ Kisarawe: _________________________________ Good morning/Afternoon/Evening, my name is …. From [Insert Name], a market research company. We are currently talking to people about services that they use. S1. Would you be willing to answer some questions for us? Yes 1 Continue No 2 Thank and close the Interview S2. We are looking for people who work in certain industries. Do you or any one from your family or close friend work in the following areas? YES Market Research Company 1 TERMINATE An advertising, PR or communications company 2 TERMINATE Media (TV/Radio/Print) 3 TERMINATE Banks 4 TERMINATE MFI 5 TERMINATE Teaching 6 TERMINATE None of the above 7 CONTINUE S3. Have you ever participated in any research either by filling forms or attending a group discussion in the last six months? Yes 1 TERMINATE No 2 CONTINUE S4. Which of the following financial institutions do you have dealings with? (Read Out) Banks 1 Check Quota SACCOs 2 Check Quota MFIs 3 Check Quota ASCAS 4 Check Quota VICOBA 5 Check Quota Bayport 6 Check Quota Others (Specify) 11 S5a. Do you have a bank account? Yes 1 For Dar CONTINUE for Kisarawe check quota No 2 For Dar TERMINATE for Kisarawe check quota Dar – Respondent must have a bank account Kisarawe – Respondents must be members of an MFI, Sacco, bank account/ organizations that lend loans on interest S5b. Have you ever taken a loan from any Financial Institution e.g., Bank, SACCO, etc. over the past 2 years? Yes 1 No 2 INTERVIEWER; AT LEAST ¾ MUST HAVE EVER TAKEN A LOAN S6. What is your age by last birthday? Age in complete years _____________ Under 18 1 TERMINATE 18-24 2 CHECK QUOTA 25- 34 3 CHECK QUOTA 35-44 4 CHECK QUOTA 45-50 5 TERMINATE 50+ 6 TERMINATE S7. Gender: Male - Check Quota Female - Check Quota 50% split S8. What is your source of livelihood? _________________________ If it is business specify type of business Employed – Full time 1 Employed – Part time 2 Self Employed 3 Unemployed 5 Other (Specify) 6 12 S9. What is your average monthly income? ___________________________________ FOR DAR –RECRUIT UP TO 300,000/= FOR KISARAWE RECRUIT UP TO 200,000/= Monthly Income in Tsh SEC Instructions Up 200,000 D C2 Continue 200001–300000 300001 – 450000 C1 450001 – 600000 600001 – 750000 750001 – 900000 Over 900,000 AB Terminate Education E1. What is the highest level of education attained? No education 1 CONTINUE Some primary school 2 CONTINUE Primary school complete 3 CONTINUE Secondary school 4 CONTINUE High school 5 CONTINUE College after high school 6 CONTINUE University 7 CONTINUE ASK ALL LOOKING OUT FOR ARTICULATE AND CONFIDENT RESPONDENTS/KUFAHAMU UELEWA NA KUJIAMINI KWA MHOJIWA 1. At a gathering, I usually will mix with a number of people, including strangers 1 mix with a few people I know 2 2. When I am with a group of people, I usually am happy to start a conversation 1 will wait for other people to talk to me first, I won’t initiate a conversation 2 3. When talking to strangers in a group discussion I find it easy to hold a conversation 1 I don’t know what to say to the person 2 4. I find meeting new people interesting and stimulating 1 makes me tense, and it usually takes me a long time to warm-up 2 13 5. When in a group, I usually express my honest opinion even if others don’t agree 1 tend to follow general consensus even if I don’t totally agree with them 2 LIVING STANDARD MEASURES L1. Which of the following things do you have in your house hold? Item or service title STEP 1 – Score Circle all that apply Do you have a color TV? 18 Did you access the Internet during the past 4 weeks? 49 Do you have a satellite dish/DSTV/cable TV subscription? 34 Do you have a built in kitchen sink in your household? 31 Do you have a microwave oven? 32 Did you read a newspaper in the last 7 days? 17 Do you have a video recorder? 18 Do you have a mobile / cell phone with a working line? 16 Do you have an electric iron? 17 Do you have a personal computer for your own personal use at home? 34 Do you have a fixed telephone line at home or an outstanding application for one? 14 Have you watched TV in the last 7 days? 17 Do you have access to e-mail? 41 Do you have a washing machine? 32 Do you have a refrigerator? 20 Do you have a Hi-Fi or music center? 55 Do you have a free standing deep freezer? 19 Do you have a video camera/camcorder? 35 Do you have an account with a commercial bank? 15 Do you live in a brick house/ cluster house/ condominium/flat? 11 Do you have one or more cars in your household? 12 Have you bought adult clothing in the past six months? 10 Add this every time (constant) 32 Step 2 : Add all circled scores including the constant INTERVIEWER: READ THE INFORMED CONSENT TO THE RESPONDENT Appointment Details I would like to invite you to participate in a research survey on ........................ (Date) at ............................ (Venue) at ............................ (Time). This will take on average two hours of your time. 14 Annex 2. Key Consumer Protection Topics and Questions for Consumer Group Discussions Consumer group discussions function best when the participants, themselves, are steering the conversation, with limited guidance and input by the moderator. For this reason the following list of topics and questions is intended not as a comprehensive checklist of items that must be covered, but rather as a menu of topics from which moderators can choose to steer the discussion depending on the nature of the group or the spe- cific consumer protection issues to be explored. General Attitudes 1. Let’s start by talking about financial services. What types of financial services do you use (banks, MFIs, cooperatives, raffles, credit cards from retail stores, pawn shops, etc.)? How do you use these products? (Ask also about transfers, payments, and other services, such as insurance, pensions, etc.) 2. Describe experiences with the different types of financial services: What type of product is it? Why do you use it (e.g., “when you need to save or obtain credit…where do you go?)? What have been your ex- periences with the different products? 3. Has anyone opened a bank account within the past two years? What type of account did you open? 4. How did you choose your current bank? 5. What positive experiences have you had with that bank? 6. What negative experiences have you had with that bank? 7. What commissions does that bank charge? 8. What could be changed to improve your experience with these products? Financial Decision Making We have talked about your experiences with financial services. Now we are going to ask you about sources for financial information. 1. Which aspects do you consider when selecting a financial product? Is there any aspect in particular that you consider when you open an account? (Investigate further if they are concerned with the charges, commissions, or other aspects.) 2. How do these aspects differ according to the different types of products? 3. How do you obtain this information (from a promoter, friend, the bank itself, etc.)? When do you receive this information (before or after you receive the credit)? 4. How easy was it to obtain this product information? 5. Did you have any problems in obtaining the necessary information? 6. Did you compare prices before using the financial product? 7. Did the executor explain the aspects/terms of the product? Did you ask additional questions to resolve any doubts you had? 8. Whom do you consult to make your decision to use a financial service? 9. What are some of the reasons for taking loans/credit (or other financial services as relevant)? Loans from Different Sources 1. Do any of you have a loan? What motivated you to take on this loan? 2. Where did you take this loan? How do you decide which financial institutions to use when you need a loan? (Probe if they compare interest rates, repayment schedules, loan conditions, security, etc.) Do you maintain more than one loan at a time? With different institutions? 3. How was the experience with [FINANCIAL INSTITUTION]? 4. What documentations were required for the loans you have taken? 5. What were the terms of the loan? (Investigate details about quotas, early/late payment penalties, inter- est, service charges, security or mandatory savings, etc.) 15 6. Have you had any difficulty qualifying for a loan, or any other difficulties getting a loan? 7. How many institutions did you have to visit before you received your loan? 8. Did the institution ask you for a guarantee or a guarantor? (Investigate the details of the guarantee or guarantor.) 9. Is the processing of the loan presented in a written form or through an executor of the institution? 10. Did you compare the terms with that of other institutions? 11. At any moment did you regret taking out the loan? Were there any surprises with respect to the terms of the loan? What happened? What did you do in this instance? 12. Have there been times when you could not make your payments on the required date? What happened? 13. Did you receive help from another person or institution? 14. How did you resolve the problem? Or was the problem not resolved to your satisfaction? 15. Do the bank’s charges seem acceptable or just to you? 16. If you were to become dissatisfied with the service at the bank where would you present a complaint? Review of a Potential Loan Contract (At beginning of this exercise, copies of the sample contract are handed out to all participants. They are then asked to spend a few minutes reviewing the document.) 1. Do any of you recognize this document? (This is for those with experience with consumer credit.) 2. You have now had the opportunity to review the contract. When you receive something like this, do you read it all or only some parts? What do you focus on? 3. Do you always read the contract before signing? Do you always read it yourself, or do you show it to an- other person? (Investigate if they are helped by an intermediary.) 4. On what parts or information in the contract do you focus to make your decision? Do you look for infor- mation outside of the contract or agreement that could help you in your decision? 5. Which are the most difficult parts of the document to understand? 6. Do you think that the information presented here is sufficient to make a decision on this product? If not, what other information should the lender include? 7. Do you think that the loan is just? Why? 8. Do you understand what total annual cost means? What about the interest rate? 9. How can this document be improved to make it more understandable? 10. Is there other information that is usually presented apart from what you find in the contract (verbally or written)? 11. Do you use this information to compare the costs of products? 12. Any other comments or suggestions? Complaints and Rights of Consumers 1. Next we are going to ask you about your rights as consumers. In your opinion, what rights do you have as consumers? How did you learn of these rights? 2. Have you had experiences with financial services where you did not feel respected or where you felt mis- treated? What kinds of experiences? Did you submit a complaint (official or not) when these events occurred? 3. Apart from the specific facts already discussed, in general, do you see any problems or faults with consumer service of financial institutions? What types of problems? And with which types of providers or products? 4. When problems occur, what do you do to resolve them? 5. Describe the different steps that you take/would take to resolve these problems. To whom do you look? What resources, channels, or services would you use to try and resolve these problems? 6. Are you familiar with any organizations that can help you resolve problems with banks and other financial service providers? 7. Have you used the resources of these organizations previously? How was your experience with [NAME OF INSTITUTION]? 16 Annex 3. Consolidated Individual Interview Guide (South Africa and Tanzania) Explain what you are doing. Being sure to include the following: • where you are from • why you are doing this • what you are going to do with the information How do you make decisions when you get financial products? For example, have you opened a bank account in the past two years? Did you shop around when you opened the account? What made you decide to open the account at the bank you did? If you were looking at charges or fees, what type of fee did you look at? (By this we mean whether they looked at charges for depositing, or withdrawing, etc.—in South Africa, most said that they compared the withdrawal fee) How did you get this information? Did you actually go to the bank? Did the bank give you the information easily? Let’s talk now about loans—both informal loans and loans from banks. Let’s talk first about the informal loans, from a moneylender or a savings club. Have you had experience taking these types of loans? How many different people do you need to ask before you get a loan? What is the most you can borrow from a moneylender or a savings club? What will the terms of the loan be, i.e., what is the interest, how long do you get to pay it back? If you take it and pay it back within a few days, do you still pay the same amount of interest? (This is essentially asking about declining balance.) 17 What about a bank loan? Has anyone ever applied for a bank loan? How many places will you go? What is the most important thing that you are looking for when you look for a bank loan: interest rate, how long you have to pay it back, how much you can borrow? You’ve had a chance to look at the loan document; when you see something like this do you read the whole thing? What are the most important parts that you look at? What do you think—is this a fair loan or not? Why do you think so or not? (If respondents get stuck and simply can’t get anywhere on this, ask them to pick out pieces of information to see if they can spot them. If they can do that, then ask about how much interest is charged relative to the amount borrowed.) Do you know what this interest rate means? Let’s talk now about credit—both at little stores in your neighborhood and big stores. What happens when you take credit at a little shop or engage in credit in your neighborhood? Do you know how much interest is charged? Do most places give you credit? What about a big furniture shop or retail store—how many of you have credit at a store like this? If you decide to buy a big piece of furniture on credit, what is the process? Let’s talk about what happens when a bank loan or credit at a big store goes bad. Have you ever had a loan from a bank or credit at a big store and stopped paying? What happened? Did you get assistance from somewhere or somebody? No. 74 November 2011 Please share this Focus Note with your colleagues or request extra copies of this paper or others in this series. CGAP welcomes your comments on this paper. All CGAP publications are available on the CGAP Web site at www.cgap.org. CGAP 1818 H Street, NW MSN P3-300 Washington, DC 20433 USA Tel: 202-473-9594 Fax: 202-522-3744 Email: cgap@worldbank.org © CGAP, 2011 The authors of this Focus Note are Daryl Collins, senior associate Kahn, Rashid Chuachua, Linda Helgesson, Ron Chua, Chito of Bankable Frontiers; Nicola Jentzsch, independent consultant Gregorio, Asuncion Mendoza, and Evelyn Espina during the field for CGAP; and Rafael Mazer, financial analyst, CGAP. The authors research that formed the basis of this research. would like to acknowledge the valuable contributions of Daniel The suggested citation for this Focus Note is as follows: Collins, Daryl, Nicola Jentzsch, and Rafael Mazer. 2011. “Incorporating Consumer Research into Consumer Protection Policy Making.� Focus Note 74. Washington, D.C.: CGAP, November.