New Tanzanian Financial Literacy Guide

After a long break from the world of microfinance, I am back into the swing of things. This time, I am not in Kenya but in the United States assisting Tanzanian organizations in the creation of their own financial literacy guide entitled "A Guide to Financial Literacy and Credit Information Sharing."

It will provide educational material and a training framework for financial counselors to help Tanzanian consumers gain knowledge about...
-microfinance
-credit information sharing
-budgeting
-financial based consumer rights

Stay tuned for it's publication funded by Consumers International and The Tanzania Consumer Advocacy Society.

Please call visit www.tcas-tz.org/demotcas for more information and opportunities.

New Cosumer Report Published by Consumer Unity and Trust Society, Nairobi

The numerous consumer organizations that I collaborated with in Kenya all worked under the motto that informed consumers are empowered citizens.

Unfortunately, the challenge for many organizations working for the welfare of consumers is the difficulty of not only disseminating knowledge and getting consumers to use the knowledge to protect themselves, but the limited compliance to laws and standards among traders and suppliers and enforcement by the government is often minimal.

 To bridge the gap between inadequate consumer knowledge and the lack of development of a consumer protection regime in Kenya, the Consumer Unity and Trust Society, Nairobi will host a workshop to launch and disseminate the “State of Kenyan Consumer Report 2012” on September 6, 2012 in Nairobi at the Safari Club Hotel.

This report is the result of the project “Consumer Rights Empowerment for Social, Economic Justice and Good Governance in Kenya” (CONSREG) that allowed consumers the opportunity to reflect on needed improvements and seek accountability in different sectors across the country.

Consumers in Kisumu, Mobasa, Nyeri and Nairobi were asked to participate in surveys that documented their experiences using water, transport, electricity, telecommunication and healthcare services.

The study and report is critical to facilitating the development of Kenyan consumer protection region and the foundation for the consumer protection policy advocacy for good governance for better service delivery whether in healthcare, water, communication, transport or sanitation.

If you would like to learn more about the report or file a consumer complaint, please contact the Consumer Unity and Trust Society Africa Resource Centre, Nairobi at + 254-20-386 2149-50/232 9112.  

Also, visit their website at www.cuts-international.org/ARC/Nairobi/.

Citi Foundation: Financial Education is a Moral Imperative and Business Smart Practice for Microfinance

Even though each region of the world is invariably different when comparing factors such as politics, culture, and language, there are still similarities among the billions of people around the world. One commonality is access to microfinance. Many governments and development institutions working in every region strive to expand access to "microfinancial services" in an effort to reduce global poverty.

When I worked in Kenya with microfinance borrowers over the last eleven months, I was often asked about how microfinance operates in the United States. When asked if American borrowers were facing similar challenges as Kenyan men and women borrowers, I answered knew the answer was yes.

Kenyan borrowers are not alone in their financial problems.

The stories of individual borrowers around the world (from Morocco to Nicaragua to India) not being able to pay their debt have been documented creating the global trend commonly referred to as the "repayment crisis." Microfinance markets across the world had to cope with losing clients and massive loan write offs.

Americans themselves are not immune to personal financial challenges. Not too long ago attorney generals across the United States came together to bring assistance to families affected by the mortgage crisis. Other families were also financially affected by events the Great Recession. With microfinance expanding in the United States, access to financial education is essential to ensure that borrowers are aware of the risk, investment and responsibility of borrowing. 

According to a recent report entitled Bridging the Gap: The Business Case for Financial Capability funded by the Citi Foundation, it is a moral imperative, but also smart business practice for lenders to think seriously on how to expand the financial capabilities (financial literacy gap) of microfinance clients. The report concludes that only one-fourth of current microfinance borrowers world-wide have or had access to minimal financial education. 

So, could education have prevented the global "repayment crisis"? Definitely not in its entirety, but education initiatives would have provided a greater platform of information for clients. 

Why is the microfinance industry reluctant to pick up this issue? According to the Citi Foundation, it's the price ticket. There is no sufficient research that suggests financial education provides higher returns compared to the cost of providing it.

Access to information and education is a vital consumer right, especially for financial consumers. Unfortunately, this is not the only solution to ensure consumer protection for borrowers. 

Another solution...regulation. Unfortunately, regulation seems to be a "four letter word" for financial markets. 

There needs to be a transformation of the current expectations of education that allows regulation to take a complimentary role in ensuring consumer protection for clients. Change needs to come at the policy level through an increase in legislation and regulation of the microfinance industry to compliment education efforts of civil society organizations and consumers.

 

Until this is implemented, I am the cheerleader for the industry to seriously consider long term education to allow clients to explore and question the usefulness of his or her participation in microfinance.

**To read more about financial literacy, please clink on the report title Bridging the Gap: The Business Case for Financial Capability  written by Anamitra Deb and Mike Kubzansky and funded by the Citi Foundation.

**Also, read a review of the report entitled A Call for Caution in Judging the Merits of Financial Education: A Review of ‘Bridging the Gap’ written by Chris Dunford, Senior Research Fellow at Freedom from Hunger.

April 2012 National Financial Capability Month: Who Knew?

President Barack Obama named April 2012 as the National Financial Capability Month in the United States. Who knew?!?!

The president announced that "[d]uring National Financial Capability Month, we recommit to ensuring everyone has access to the information and tools that empower them to operate safely and smartly in the marketplace." You can read his proclamation by clicking here.

Throughout this blog, I have discussed financial literacy within the microfinance industry, but it is becoming a global issue for ALL consumers, especially with the troubled economies of the world.

Expand your financial capabilities by exploring these free financial resources provided by the US government at

1. www.MyMoney.gov

2. www.ConsumerFinance.gov

or call 1-888-MyMoney.

The SMART Campaign Recognizes the Manual as Client Protection Resource

The manual "My Guide to Microfinance Lending"  (in English or Swahili) is now available on the Client Education Resource Library sponsored by the SMART Campaign at The Center for Financial Inclusion at ACCION International. 

The SMART Campaign is a global effort to increase protection for microfinance clients through collaborating and uniting with lenders around this principle.

The resources created in different regions by different institutions include radio programs, brochures, and  videos. 

It is hoped that microfinance institutions can use these materials to communicate to their clients about their rights and responsibilities. 

To access the new library (including the manual), please click here.

Thank you to the SMART Campaign for recognizing the manual as an excellent resource for client protection!

Microenterprise and Microfinance Opportunities Make Full Circle Around the Globe from the Developing to the Developed: Entrepreneurism and Small Loan Service Delivery in the United States

The Microenterprise. It is a popular anti-poverty strategy common in the field of international development for decades that puts the responsibility of poverty alleviation in the hands of the poor by encouraging such individuals to use their own skill set to create income-generating activities.

Specifically in Kenya, as jobs become less common in the public or private sector, sources of income become less formalized and individuals take up the spirit of entrepreneurism to support themselves and their families.

While conducting research in Kenya, I was often asked what the job opportunities were like in the United States by the very Kenyan informal economy workers whom I was trying to learn from. It seemed that these individuals were just as curious as I was regarding employment trends around the world.

To my surprise, there are continually expanding entrepreneurial policies that have coincided with the democratization of capital within for-profit and non-profit lenders to promote the development of microenterprises in the United States. [1]  

Within the last decade, the microenterprise has been a solution of the American government to tackle the economic uncertainty of the Great Recession. As unemployment statistics remain high (as of April 2012 8.1%), the microenterprise is servicing as one avenue of job creation in the United States. [2]  

For example, Nicole Gates, a Grameen America borrower, is just one individual who decided to turn to her own culinary skills to start a business after being laid off from her full time job. [3] During the recent economic decline, individuals such as Nicole are often left with no choice but to focus on the development of a microenterprise for survival. I also witnessed such a trend in Kenya, where formal sector jobs are not sufficiently providing job opportunities for the population, even those with college degrees.

In the United States, Congress and President Obama seem to recognize the need for supporting microenterprises. In the last year, three major pieces of legislation passed with bi-partisan support. The Jumpstart Our Business Startups (JOBS Act) [4], the Entrepreneur Access to Capital Act [5], and the Access to Capital for Job Creators Act [6] are all meant to make it easier for small business owners and start-ups to flourish.

These pieces of legislation compliment the previous efforts of the Microenterprise for Self-Reliance Act and its later amendment titled the Microenterprise Results and Accountability Act, which made it possible for increased funding from private and non-profit lenders through microfinance programs. [7] 

Entrepreneurs now have access to small amounts of capital, as low as $1,000, through a microfinance industry that has moved full circle around the globe, now returning to where it originated as large American communities are now facing similar economic hardships as their global neighbors in the developing world. [8] 

Microfinance lenders in the United States now include a vast number of organizations and private companies. The most popular include Accion U.S.A [9], Sam’s Club (Walmart owned and operated), Opportunity Fund [10] and most recently Grameen America (created from the success of The Grameen Bank lead by Muhammad Yunus, the Nobel Prize recipient for his innovation in "pro-poor credit delivery") [11].

As the decade long trend to support the development of microenterprise continues, the government of the United States should learn from the use of the microenterprise as a method to expand economic opportunities for the poor in other countries.

For example, during the early 19^th century in England, welfare provisions were replaced by the informal economy that was meant to be an endless opportunity for the poor to support themselves. [12] Also, during the 1980s and 1990s, Hernando De Soto, made the use of microenterprises hugely popular in international development policies throughout Latin America to allow the poor to become the economic heroes in their own lives through entrepreneurism. [13] 
Unfortunately, the past has proven that such pushes for microenterprise based policies often do not provide sufficient long-term economic development or poverty alleviation through the push for self-employment [14] because it breaks down organized labor [15] and collective activities used to challenge social structures of income and racial inequality. [16] 

If the American government wishes to decrease economic insecurities of its citizens, especially the effects of the Great Recession, such historical legacies need to be understood. Only then can the government fully understand the potential of entrepreneurial activities for job creation and learn what resources are needed to make the microenterprise a poverty prevention and poverty alleviating option for citizens of the United States. 

[1] Roy, Ananya. Poverty Capital: Microfinance and the Making of Development. New York: Routledge, 2010.

[2] Department of Labor Statistics “Labor Force Statistics from the Current Population Survey.” Accessed May 29, 2012. http://www.bls.gov/cps/

[3] Bernhard, Kent. “Small Loans, Big Dreams.” Portfolio.com Accessed May 29, 2012. http://upstart.bizjournals.com/companies/startups/2012/04/16/grameen-america-part-of-domestic-microfinance-trend.html?page=all

[4]Read more about this act: http://beta.congress.gov/bill/112th/house-bill/3606

[5] Read more about this act: http://beta.congress.gov/bill/112th/house-bill/2930

[6] Read more about this act: http://beta.congress.gov/bill/112th/senate-bill/1831

[7] Roy, Ananya. Poverty Capital: Microfinance and the Making of Development. New York: Routledge, 2010.

[8] Bernhard, Kent. “Small Loans, Big Dreams.” Portfolio.com Accessed May 29, 2012. http://upstart.bizjournals.com/companies/startups/2012/04/16/grameen-america-part-of-domestic-microfinance-trend.html?page=all

[9] www.accion.org

[10] www.opportunityfund.org

[11] www.grameenamerica.com

[12] Bateman, Milford. Why Doesn't Microfinance Work?: The Destructive Rise of Local Neoliberalism. London: Zed Books, 2010.

[13] De Soto, Hernando. The Other Path: The Invisible Revolution in the Third World. New York: Harper & Row, 1989.

[14] Specifically in Latin America during the 1980s and 1990s, the expansion of the informal economies of developing countries resulted in an increase in poverty and inequality (although other factors are partially to blame).

(Please refer to Bateman, Milford. Why Doesn't Microfinance Work?: The Destructive Rise of Local Neoliberalism. London: Zed Books, 2010.)

[15] Harvey, David. A Brief History of Neoliberalism. Oxford: Oxford University Press, 2005.

[16] Bateman, Milford. Why Doesn't Microfinance Work?: The Destructive Rise of Local Neoliberalism. London: Zed Books, 2010.

Know Your Money: How to provide financial education in Africa

Here is fantastic video produced by Consumers International about their NEWLY designed "Financial Education Counselling: Counsellor's Handbook" used in the financial education programs of Consumer Information Network of Kenya (a partner organization of the manual) and Youth Education Fund actively working in Nairobi.

To access the handbook, please copy and paste the url into your web browser.
www.consumersinternational.org/news-and-media/publications/financial-education-counselling-counsellor%27s-handbook%20.

CONSUMER BASED FINANCIAL RIGHTS.

 

As A Consumer, You Have Rights!

         Some of the rights recognized by the United Nations Guidelines for Consumer Protection are protected by financial legislation and regulation in Kenya.
                                                         

As a Kenyan financial consumer, you have the right to consumer education because…

Consumers in Kenya have the right to the information necessary to gain full benefit from goods and services.[1]

As a Kenyan financial consumer, you have the right to be informed because…

There are often specific requirements for financial institutions to formulate and follow well-defined credit policies and procedures.[2] This allows institutions to provide clear and truthful information in a timely manner to consumers.

Individuals have the right to access and request a free copy of his or her credit report maintained by a Credit Reference Bureau at least once a year.[3]

If an institution reports an individual to a Bureau, it must notify him or her within thirty days of its submission, including the contact information of the Bureau along with an explanation that he or she has the right to a free copy of the information provided to the Bureau and the right to dispute and correct the information held by the Bureau.[4]

As a Kenyan financial consumer, you have the right to redress and to be heard by your lender and financial regulators because…

Regulated financial institutions are forbidden to act in a reckless or fraudulent manner.[5] Thus, institutions must provide clear, truthful and timely information to consumers.

No financial institution shall make false representations or claims about accepting deposits from the public. Only regulated, licensed financial institutions can accept deposits from the public.[6]

If such a financial institution dissolves, clients have the right to seek compensation from the Deposit Protection Fund or the Deposit Guarantee Fund for his or her deposits that would have been paid had he or she demanded payment from the insolvent institution.[7]

Individuals have the right to challenge the information in his or her credit report maintained by a Credit Reference Bureau.[8] 

If an individual challenges the information in his or her credit report, the Bureau is required to investigate the dispute within fifteen days of receiving the written notice. If a Bureau finds an error in the credit report of the customer, it is required to correct the incorrect information. If the Bureau does not complete the investigation within fifteen working days of receiving the dispute, the Bureau must delete the disputed information from the report of the individual.[9]

A Bureau can charge the individual a reasonable fee for conducting an investigation of the disputed information in a credit report.[10]

Individuals also have the right to disagree with the findings of the Bureau upon the completion of its investigation. If the individual disagrees with the findings, he or she can write a statement that  the Bureau must attach to his or her credit report.[11]

As a Kenyan financial consumer, you have the right to safety because…

Financial Institutions and all Credit Reference Bureaus are required to treat client information with confidentiality and protect it against unauthorized disclosure.[12]  

As A Consumer, You Also Have Responsibilities.  

Consumer rights do not exist without consumer obligations.

Consumers have responsibilities while participating in the financial sector that they have to follow in order to enjoy their rights.

Remember as a financial consumer, you have the...

Responsibility to choose for yourself what financial services to use.

Responsibility to be critical in questioning or asking for information.

Responsibility to understand loan agreements.

Responsibility to comply with or honour loan agreements.

Responsibility to evaluate the costs of financial products before making any decisions.

Responsibility to treat your lender with respect as your lender must treat its clients with respect.

---

[1] The Constitution of Kenya, Article 46.

[2] Such requirement(s) can be found in the Banking Act, Section 4 (1 and 5); Microfinance Regulations 2008, Section 35 (3); Sacco Regulations 2010, Section 28 (2).

[3] Such requirement(s) can be found in the Banking Regulations 2008, Section 20 (1-3).

[4] Such requirement(s) can be found in the Banking Regulations 2008, Section 28 (1).

[5] Such requirement(s) can be found in the Banking Act, Section 11 (1A); Microfinance Regulations 2008, Section 32 (1-2); Sacco Regulations 2010, Part VI.

[6] Such requirement(s) can be found in the Banking Act Section 16 (1); Microfinance Regulations 2008, Section 3(1); Sacco Regulations 2010, Section 4 (1).

[7] Such requirement(s) can be found in the Banking Act Section 39 (2); The Microfinance Act 2006, Section 40 (2); The Sacco Societies Act 2008, Section 59 (5).

[8] Such requirement(s) can be found in the Banking Regulations 2008, Section 20 (5).

[9] Such requirement(s) can be found in the Banking Regulations 2008, Section 20 (5-12).

[10] Such requirement(s) can be found in the Banking Regulations 2008, Section 20 (14).

[11] Such requirement(s) can be found in the Banking Regulations 2008, Sections 20 (13).

[12] Such requirement(s) can be found in the Banking Act Section 31 (1); Banking Regulations 2008, Section 15 (1-4); Microfinance Act 2006, Section 34 (2-3); Sacco Regulations 2010, Section 66 (10).