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Protecting microfinance borrowers (Chinês)

Worldwide, the microfinance community is paying more attention to consumer protection. Controversial topics, such as high interest rates and the over-indebtedness of borrowers, have raised public concern for poor consumers in countries far and wide. Yet, relatively little is known about how consumer protection might apply to financial services for the poor. Moral arguments for consumer protection in microfinance focus on the imbalance of power between lenders and borrowers. The note analyzes the issue of consumer protection in microfinance, as a challenge that is here to stay. Few would disagree with the principles supporting consumer protection. However, there is no clear consensus about the scope and intensity of appropriate measures, or the mechanisms for enforcement, especially in developing countries. As a result, developing countries may inappropriately apply mechanisms and approaches from developed countries, without a proper evaluation of their costs and benefits, and often with unintended consequences. In countries where political pressure to implement new protection measures is strong, regulators and policy makers should carefully consider the full impact such measures may have, both immediately and over time. Excessive protection could well lead to results that directly contradict what is intended. Rather than promoting the formalization and integration of microfinance into the mainstream of the financial sector, Microfinance institutions (MFIs) could be forced outside of any legal framework. Such cases would likely result in no protection at all for borrowers.




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