Empower Consumers of Financial Products and Services through Improved Financial Literacy/Capability and Effective Consumer Protection Systems.

Hosted by G20 Russia, World Bank, OECD13-14 June 2013, Moscow

Financial Education and Consumer Protection Strategies: Complementary Foundations for Effective and Responsible Financial Inclusion

The Brazilian Case

Marusa Vasconcelos Freire Deputy Head, Financial Education Department

1. General overview (context)

2. Integrated approach to empower financial consumers

2.1. National Partnership for Financial Inclusion

2.2. National System for Consumer Protection

2.3. Financial Education National Strategy (ENEF)

2.4. Financial Education Department (Depef)

Agenda

• Brazil is among the largest countries in terms of territory, population and GDP

• Brazil has vast natural resources, including recently discovered large offshore oil fields, a diverse industrial base, a dynamic and sophisticated private sector, and a well-structured public sector

• Brazil is a vigorous democracy, with free multiparty elections and a stable political system

• Brazil has good relations with all its neighbors and has increased its ties with all regions of the world

Sources: IBGE / BCB / IMF

Brazil DemographicsGeneral Overview

• 7th largest GDP: US$ 2,253 billion (2012)

• Continental country: 5th largest area 8,515,767 km2

• 5th largest population: 195 million people (2011)

• Sources: IBGE / UN

Sources: IBGE / UN

DemographicsGeneral Overview

Dependency RatioPopulation Pyramid (2011)

Note: The dependency ratio is the ratio of the sum of the population aged 0-14 and that aged 65+ to the population aged 15-64

• Brazil’s dependency ratio is still declining, while other countries already face an upward trend

• Brazil’s population is highly concentrated within the Economically Active Population range

1950

1960

1970

1980

1990

2000

2010

2020

2030

2040

2050

25

50

75

100

Brazil ChinaIndia Russia

millions of people

men women

0-4

10-14

20-24

30-34

40-44

50-54

60-64

70-74

80+

-10 -5 0 5 10

5Sources: BCB / IBGE

Financial Inclusion - AcessibilityGeographic Coverage Increased

2000 2010

0 (20%)

>0 to 2 (22%)

>2 to 5 (40%)

>5 to 10 (16%)

>10 (2%)

# of points per 10,000 adults (% of municipalities)

0 (0%)

>0 to 2 (0%)

>2 to 5 (6%)

>5 to 10 (29%)

>10 (65%)

# of points per 10,000 adults (% of municipalities)

82% of municipalities had less than 5 points of attendance per 10,000 adults in 2000.

In 2010, 94% were above this level.

Bank branches, bank advanced outposts (PAA), credit cooperatives (headquarters and outposts) and correspondents

General Overview

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• It seems that financial inclusion moves in a faster pace than functional literacy:- 1 in each 5 adult Brazilians is functional illiterate (PNAD 2009);- ¾ of Brazilians do not understand a bank contract (INAF);

• Effective and responsible financial inclusion needs to address appropriate actions to change this reality and to help to avoid serious indebtedness problems

– Financial stability – Quality of life of families

=> Promote the financial system efficiency and the financial inclusion of the population (Strategic Goal of BCB - 2010)

Promover a melhoria da qualidade da prestação de serviços financeiros em prol do equilíbrio na relação cidadão-instituição financeira

Relevance of Financial Education and Consumer Protection Strategies for Effective and Responsible Financial Inclusion

General Overview

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1. Improve the regulatory framework for microcredit and IMFs

2. Promote the diversification and improvement of financial services

3. Define a legal and regulatory framework for mobile payment

4. strengthen the network of distribution channels

5. Contribute to promoting financial literacy

6. Scale up efforts to ensure that financial service users are aware of their rights and dispute resolution procedures

7. Improve the methodology used to measure financial inclusion and incorporate quality indicators

8. Conduct surveys on Brazilian people’s behavior and perception in relation to the use of financial services

National Partnership for Financial InclusionIntegrated Approach

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• Law 8078, of 1990 (Consumer Protection Code)

- Competence is concurrent among the Federal, State and Municipal governments regarding consumer rights, and there is, therefore, no hierarchical relation between them– National Secretariat for Consumer Protection (SENACON) of the Ministry of

Justice (coordinate policy and actions)– Other public bodies of Federal, State, Federal District and Municipal governments– Consumer defense civil entities

• 2006 – Supreme Court Decision (ADIN 2.591-1)

- Financial institutions are subjected to the Consumer Defense Code

• Decree 7.963, of 2013 (National Plan for Consumption and Citizenship)

- Integration and coordination of policies, programs and actions.- Committee of Consumption and Regulation

National System for Consumer ProtectionIntegrated Approach

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• Decree 7.397, of 2010 - To empower consumers, policies on financial education, financial

inclusion, and consumer protection (such policies are synergistic and complementary to each other)

• National Committee for Financial Education - CONEF – Deputy-Governor of the Central Bank– President of the Securities and Exchange Commission of Brazil (CVM)– Superintendent-Director of Brazil’s National Superintendence for Pension Funds (PREVIC)– Superintendent of Brazil’s Superintendence of Private Insurance (SUSEP)– Executive-secretary of the Ministry of Education (MEC)– Executive-secretary of the Ministry of Finance (MF)– Executive-secretary of the Ministry of Social Security (MPAS)– Executive-secretary of the Ministry of Justice (MJ)– Four representatives of civil society: ANBIMA, BM&FBOVESPA, FEBRABAN, and CNSEG

• CONEF’s Executive Secretariat => Banco Central do Brasil

National Strategy for Financial Education - ENEFIntegrated Approach

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• To promote and foster a culture of financial education in the country.

• To broaden the understanding of citizens in order to make informed choices regarding the management of their resources.

• To contribute to the efficiency and soundness of financial, capital, insurance, and pension funds markets.

ENEF’s ObjectivesIntegrated Approach

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• ENEF is a permanent and nationwide policy

• Attendance to ENEF’s actions shall be free of charge for target audiences

• Public interest must prevail in all actions

• Programs, projects, and actions employ the information-formation-orientation approach

• ENEF’s management is centralized, actions are decentralized

• ENEF’s plans and actions shall be periodically and permanently evaluated and revised

• Partnerships with public and private institutions are fostered

ENEF’s PrinciplesIntegrated Approach

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• ENEF has a centralized coordination and decentralized execution.

- Brazil’s large territorial extension and cultural diversity, with custom and linguistic differences across the Country, require establishing partnerships both nationwide and with local collaborators, who are familiar with the peculiarities of each community.

- Such structure also conciliates the need for integrating government and non-government entities, preserving the autonomy of financial system regulators, as well as that of other participants, to develop their own educational programmes.

- Rather than a top-down public policy, ENEF’s governance is closer to a network configuration.

ENEF’s GovernanceIntegrated Approach

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Driven by the growing importance of financial education, financial inclusion, and consumer relations in the national agenda, in 2012, BCB created a new Department to handle these issues based on integrated approach:

- To promote financial education and financial inclusion- To evaluate the impact and efficacy of BCB’ regulation & actions with focus

on the citizen.- To act as Executive-Secretariat for CONEF

• Challenge - Strategies to enable “scalability” of ENEF to reach millions of people

• How to face this challenge? - Using an integrated approach to empower financial consumers

(strategic partnerships and special projects)

Promover a melhoria da qualidade da prestação de serviços financeiros em prol do equilíbrio na relação cidadão-instituição financeira

Department of Financial Education (BCB)Integrated Approach

Thank you!

marusa.freire@bcb.gov.br

Marusa Vasconcelos Freire

Deputy Head, Financial Education Department

Promover a melhoria da qualidade da prestação de serviços financeiros em prol do equilíbrio na relação cidadão-instituição financeira