- Weak financial consumer protection and low levels of financial literacy can result in disastrous consequences for both the financial sector and society.
- The G20 has asked the international community to develop principles for financial consumer protection by October 2011. The Bank is part of this initiative.
- Representatives from Armenia, Azerbaijan, Kenya, Russia, South Africa, and Zambia participated in a Bank-sponsored knowledge exchange on consumer protection and financial literacy.
Watch the Dialogue!
March 3, 2011—In Andhra Pradesh, India, microfinance credit is easily available but the lack of consumer education has left many borrowers in despair. In Malawi, three times as many people keep their savings in coffee tins as in a bank, leaving them at risk and undermining economic growth.
For the World Bank the picture is clear: weak financial consumer protection and low levels of financial literacy in developing countries can result in disastrous consequences for both the financial sector and society.
“Some 2.5 billion people in developing countries have no access to financial services. It is a problem that we at the Bank need to address. As access increases, it is important that financial services benefit consumers and not harm them. The interests of consumers have to be protected to support financial stability and achieve equitable growth worldwide,” said World Bank Managing Director, Mahmoud Mohiedlin at the Global Dialogue on Consumer Protection and Financial Literacy on February 24.
During the dialogue thinkers, policymakers and economic actors from Armenia, Azerbaijan, Kenya, Russia, South Africa, and Zambia exchanged knowledge about consumer protection and financial literacy.
The event was co-sponsored by the World Bank Institute (WBI) and the Financial and Private Sector Development Network (FPD) and is part of WBI’s Global Development Debates Platform – a series of dialogues on emerging development topics and priorities.
“We believe that in today's world south-south conversations have proved to be extremely useful, and the Bank can play a key role in facilitating them,” said WBI Director, Akihiko Nishio.
According to Consolate Rusagara, the director for Financial Systems in FPD, the dialogue was a successful example of peer-to-peer learning.
Some 2.5 billion people in developing countries have no access to financial services. It is a problem that we at the Bank need to address.World Bank Managing Director, Mahmoud Mohiedlin
“We also conduct household surveys on financial literacy, and help countries prioritize and develop concrete action plans and implementation programs,” said Rusagara.
See below for examples of successes and challenges from participants of the dialogue.
In Zambia the Central Bank requires that financial institutions publish interest rates in the newspapers but most people do not understand what the figures mean. Similarly, legislation requires that financial institutions display consumer complaints but consumers do not know about these procedures and do not take advantage of them.
Provide your feedback.
Learn more about the Global Dialogue series.