The Role of PVOs in Consumer Protection:

A Proposal to SEEP Membership

Consumer Protection Working Group 23 October 2003

Introduction

Expansion, growth and competition have led to abusive practices.

Need for consumers to be protected.

This can best be done by the service providers themselves.

Background of SEEP Engagement on Consumer Protection

Discussions began at October 2001 SEEP annual meeting.

Task Force created to address spectrum of consumer protection issues.

Work started with product orientation.

Task Force transformed into Working Group.

Proposal to SEEP Membership:

That SEEP members take a proactive stance for

consumer orientation and protection.

Consumers are Vulnerable

Competition can lead to overindebted consumers, poor service, and aggressive collection.

Laws to protect consumers are often non-existent or un-enforced.

Transparency measures have not focused on helping the consumer.

Two Examples of Abuses

In Bolivia and South Africa, microfinance customers were victims of overly aggressive collection practices, predatory lending, unilateral changes to contracts, false promises and other abuses.

Government had to intervene on an emergency basis, microfinance industry image was tarnished, and operating flexibility of MFIs was reduced.

Benefits to Consumers of a Proactive Approach

Fair and equal treatment.

Make more informed decisions about financial services.

Understand what is manageable level of debt.

Manage consumer expectations.

Benefits to Institutionsa Proactive Approach

Improve public relations and advertising.

Increase market share.

Obtain greater client loyalty and higher retention rates.

Avoid burdensome and costly government regulation.

Role of International PVOs

Take a pro-consumer stand.

Assist local microfinance associations and networks become credible industry representatives.

Share best practices and provide tools.

Support creation of consumer protection frameworks.

Lead by example.

SEEP’s Leading Role

Help members adapt consumer protection approaches to the range of institutional types and maturity.

Help members apply consumer protection approaches to the range of services offered.

Catalyze and support member initiatives in consumer protection.

SEEP’s Leading Role (con)

Develop tools that members and affiliates can use to ensure consumer protection.

Provide lateral learning opportunities among members.

Serve as a model for other microenterprise networks by adopting a policy or code.

Proposal to SEEP Membership

1. Adopt ethical statement for consumer orientation and protection.

2. Encourage development of policy or code by each member.

3. Endorse CPWG to assist members in developing policy or code and documenting experiences.

4. Review experiences adopting policies or codes after two years.

Task for SEEP Members

At your tables, identify a notetaker and a spokesperson. You will have 25 minutes to discuss the following questions:

1. What issues, if any, have you or your partners faced related to consumer protection? Do you expect that this will be an issue in the next three years?

2. What are the pros and cons of the SEEP membership adopting an ethical statement in support of consumer orientation and protection?

3. What is your recommendation regarding each of the four components of the proposal to the SEEP membership regarding consumer protection?

Next Steps

Based on a review of the responses from the tables at this business meeting, the CPWG will:

Share with membership the consensus on the questions raised, including the four elements of the proposal by 30 November.

Initiate an interactive forum beginning in early 2004 to follow up with actions indicated.