Monday, April 30, 2012

4 problems with (and 5 answers to) financial consumer protection in Kenya

Michael Okumu from CI member organisation YEN,Kenya, advises consumers to educate themselves about a bank’s products and services before they sign up.

Ignorance is truly a fatal disease that increases consumers’ vulnerability. Uneducated consumers buy products and services that do not meet their expectations and then quietly, or never, complain.

On 15 March, the world celebrated World Consumer Rights Day, a day dedicated to highlighting the importance of consumers exercising their rights and responsibilities.
In Kenya, consumer protection is still non-existent with very few mechanisms of redress and a pervasive lack of knowledge of one’s rights as a consumer. This can be compounded by gaps in service delivery by dishonest service providers.
And banks are no exception. Often, consumers don’t get the best deal from a bank and do not respond effectively when this happens.
Here are some of the biggest problems for financial consumers in Africa:
  1. Accessibility
Accessibility is a real problem in Africa as consumers often have to travel long distances from rural areas to get a specific service. The introduction of deposit-taking shops has eased the problem slightly but they do not address all the issues relating to accessibility.
  1. Lack of ATMs
ATMs are not available everywhere, denying people access to their money and causing consumers to have to pay additional fees for drawing money from ATMs other than those their bank provides. Banks need to be more innovative to provide affordable services for all, everywhere.
  1. Hidden fees
Hidden fees are another problem. Taking out loans or enjoying certain services requires close scrutiny by consumers because, in the long run, the high interest rates add up and many consumers are unaware of this at the onset.
  1. Low interest
Low interest on savings is another problem still. Some consumers will question whether it is worth saving in a bank if the interest rates are so minimal. Mobile phone services provide an alternative to saving money in a bank as there are no ledger fees, account opening fees, balance statement fees, etc, but there is also no interest.

Consumers need to empower themselves by seeking information and education on their rights and responsibilities. Consumers International is helping consumer groups in East Africa educate consumers about financial services and products with its financial education counselling handbook.

Here are some tips on how to protect yourself:
  1. Court your bank
When choosing a bank, consumers need to have a ‘courtship’ period. Gathering background information about a bank is very important because it gives you an idea about the bank’s character in terms of stability, reputation, social responsibility and potential. All of these are key for consumers not only to make good choices but to protect themselves from any eventualities.
  1. Evaluate offers closely
Consumers need to keenly evaluate exciting offers and take them up only if they suit them. Consulting with friends or financial advisors would be an added advantage in ensuring that you pick the best financial product or service.
  1. Avoid banks you aren’t sure about
It is also prudent to avoid adversely-named banks that could have evaded taxes or banks with a high turnover of staff as this could signal board wrangles, theft or mistreated staff.
  1. Avoid downsizing banks
Also avoid banks that could be reducing their networks. They often do not warn their customers that they are doing this.
  1. Ask about the complaints desk
A good bank should have a receptive complaints desk with an elaborate mechanism of redress that is accessible and responsive.

Consumers in Kenya should exercise their rights, keeping in mind that the new constitution provides protection as we wait for the Consumer Protection Bill to be passed which will further harness consumer rights and responsibilities.
And remember—if your bank only looks good in the advertising, then look for an alternative rather than ending up in a relationship that doesn’t work.

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