Last month, the World Bank released Pakistan’s first ever Consumer Protection and Financial Literacy (CPFL) Diagnostic Review along with convening a workshop where 200 financial sector professionals discussed the recommendations, a first such deliberation on consumer protection and financial literacy in the country.
The assessment compares Pakistan’s performance standards, covering four segments of the financial sector - banking, microfinance, insurance, and securities markets. This approach brought out cross-cutting findings and a comprehensive set of recommendations. The overall objective of the review is to foster a responsible financial system that offers (a) transparency, (b) appropriate choices, (c) redress mechanisms, and (d) privacy of consumer information.
Financial exclusion in Pakistan is high – 56% of the population currently uses no formal or informal financial products – but decreasing. The past decade has seen rapid growth in household lending in Pakistan, leading to many taking on risks and obligations they do not fully understand. This growth underscores the need for CPFL to prevent unfair practices, and improve transparency and efficiency by reaching potential customers to increase their understanding of financial services.
Overall, the report identifies certain gaps and overlaps in the legal, institutional, and regulatory framework for consumer protection in Pakistan and finds that there is a need for some consolidation and much more coordination amongst a fragmented range of consumer protection institutions, including regulators, industry associations and ombudsman offices. Key stakeholders agree that a consolidated approach to regulating market conduct is necessary. One critical area is the microfinance sector which serves close to 3 million active borrowers and 6 million savers. Many of these clients have limited access to consumer protection institutions or information, leaving them vulnerable to consumer rights malpractices. In this sector, microfinance banks (MFBs) are regulated by the State Bank of Pakistan, but other non-deposit taking microfinance institutions (MFIs) are unregulated. In a number of geographical areas, both MFBs and MFIs are serving the same clientele, but there is a difference in market conduct regulations on consumer protection. For example, a microfinance bank is mandated by the prudential regulations of the State Bank of Pakistan to disclose annualized lending and deposit rates in the contract signed with their clients, and to also have an officer read out these terms to their clients. In contrast, a non-deposit taking institution is not subject to these regulations and has the discretion of quoting, say, rupee amounts that might not be representative or comparable.
The key finding on transparency and disclosure is that although financial regulators have strengthened disclosure requirements, there is a lack of standardized, comparable pricing information on financial products. As a result, consumers do not always have simplified, adequate, and comparable information about the prices, terms and conditions, and inherent risks of financial products and services. Regulators, market participants, and other stakeholders agreed with the recommendation on introducing a standard Key Facts Statement sheet, but also stressed the need for some demand-driven research on what information would be most beneficial to Pakistani consumers and what would be most effective way of communicating this information.
Private Sector Development
Learning from a Social Accountability Pilot in the Mining Sector
The Aynak copper mine in the Mohammad Agha district in Logar province is being developed as one of “resource corridors.” These corridors will connect communities with the benefits of mineral resources and infrastructure which will provide over 10,000 estimated jobs and economic growth in Afghanistan.
In facilitating community participation to make the most of the potential growth opportunity, the World Bank supported the Ministry of Mines and Petroleum (MoMP) pilot a small social accountability project in Aynak, to bridge trust between MoMP and affected communities by making a grievance redress mechanism (GRM) work. GRM is a feedback mechanism based on two-way communication, in which the government takes action or shares information based on community feedback.
The Aynak mine development directly affected 62 families in two villages who had to be relocated. The MoMP prepared a resettlement action plan (RAP), which laid out compensation for these affected families and outlined the GRM, including setting up of the district-level grievance handling committee to address resettlement related complaints. Initially, there was no representation in the committee from two communities, and they were not clear on their roles.
The social accountability pilot supported community mobilization, training on entitlements and GRM, and election of Community Development Council (CDC), following the procedure set by the National Solidary Project (NSP) implemented by the Ministry of Rural Rehabilitation and Development. These activities were facilitated by a civil society organization (CSO), the International Rescue Committee (IRC), which had a long-established presence in Mohammad Agha district and was also a NSP facilitating partner in the district.
More than 1.5 billion people today reside in countries affected by violence and conflict, most - if not all - of which also suffer from inadequate and poor access to basic services. By 2030, it is estimated that about 40 percent of the world’s poor will be living in such environments, where each consecutive year of organized violence will continue to slow down poverty reduction by nearly one percentage point.
A large portion of this group presently resides in conflict-affected parts of South Asia, a region that is home to 24 percent of the world’s population and about half the world’s poor.
Despite such challenging circumstances, research shows that in many settings, development aid is indeed working - albeit with frustrating inconsistency.
The 2011 World Development Report recognizes the strong link between security and development outcomes in fragile and conflict-affected contexts. However, what the evidence is yet to show us is how exactly do you get the job done right?
Let’s say we are both girls born on farms in remote villages at the foothills of mountains, but you were born at the foothills of the Himalayas and I, somewhere at the foothills of the Swiss Alps. You are the first of five children and I have only one younger sister. What do you suppose our lives growing up would be like?
I have access to a road that leads me to school every day and to hospitals when I need it. I have electricity so that I can do my homework in the evenings and my mother can cook using a clean stove. We have heat. I even have telecommunication services for when I want to talk to my uncle who lives in Nova Friburgo, Brazil. And my bathroom is indoors because it separates us from our waste.
- ending poverty
- South Asia
- Urban Development
- Social Development
- Private Sector Development
- Migration and Remittances
- Information and Communication Technologies
- Global Economy
- Climate Change
- Agriculture and Rural Development
- South Asia
- Sri Lanka
“If you cannot do great things, do small things in a great way.” - Napoleon Hill
Eight Commonwealth Asian Nations joined hands to discuss the contemporary needs of young entrepreneurs in the region at the Commonwealth Asia Alliances of Young Entrepreneurs (CAAYE) Summit held in Colombo, Sri Lanka from the 9th - 11th of November, in parallel to the Commonwealth Heads of Governments Meetings (CHOGM). The theme of the summit was highlighted as “Profit with a Purpose” which argued around its key objectives in promoting an ecosystem that supports the development of young entrepreneurs who contribute to economic, social and environmental sustainability across CAAYE countries. CAAYE 2013 was hosted by the Federation Chamber of Commerce and Industry Sri Lanka (FCCISL) in partnership with the Commonwealth Secretariat.
South Asia concurrently holds the greatest opportunities and the risks of been responsible for the world’s largest youth populations in transition, therefore facing reality and addressing those contemporary needs should be key to those respective stakeholders such as governments, for a more stable and prosperous economy. Common challenges faced by young entrepreneurs in Asia are “fundamentals” concerns, which could easily been eliminated if there is right focus and continuous review by the relevant authorities in these countries. Those concerns that caught my eye included the need for updated knowledge and curriculum development at all level, need to not jail but celebrate failure, revamping of “extensive” government and organizational procedures allowing to reduce the lead time.
NGOs, lending agencies, and the public sector are hard at work in meeting the global sanitation target. But what about the private sector, and what about the families that do not want to wait for the next NGO to knock on their door with a better toilet? Over the past couple of years, the Water and Sanitation Program’s (WSP) Sanitation Marketing strategy in Bangladesh has tried to address these concerns by stimulating the supply and demand of hygienic sanitation facilities through the mobilization of local entrepreneurs. The objective of Sanitation Marketing is for families to have the desire and the agency to move up the sanitation ladder on their own.
In 2009, the pilot program began in five villages in the Jamalpur district, and has now been scaled-up to around 230 villages across Bangladesh with support from the Dutch WASH Alliance, International Development Enterprises, and the Max Foundation. WSP also strategizes and implements the project with Hope for the Poorest (HFP), a local Bangladeshi NGO, and the Association of Social Advancement (ASA), a microfinance institution.
Mohammed Jalal is one of the many sanitation entrepreneurs supported by Sanitation Marketing in the Hobiganj district where WSP has began scaling up the initiative since 2011. Through microfinance loans from ASA and small-business training sessions from WSP, Mr. Jalal was able to open two stores in Hobiganj. Mr. Jalal’s shops are decorated with colorful flags to attract customers and are filled with an assortment of sanitation products such as handwashing stations and off-set pit latrines. With a catalogue in hand, Mr. Jalal markets his products to local villages and gives households the chance to move up the sanitation ladder. Customers are able to choose the materials and colors of their latrine and are most importantly, able to choose the type of sanitation facility that fits into their budget. Products range from Tk 1,600 (US $20) to Tk 20,000 (US $250), and all Sanitation Marketing entrepreneurs offer an installment plan for families to pay for their products over time. WSP additionally connects these entrepreneurs to the local government in order to establish whether any families in the area are eligible for subsidies. In the Hobiganj district alone, Sanitation Marketing has been able to support over 17 entrepreneurs like Mr. Jalal to serve hundreds of happy customers.
The fallout from the April 24 collapse of the Rana Plaza building in Dhaka, Bangladesh has had severe domestic and international reactions. The international buyers and governments have responded vehemently to these events. Careful reappraisal of labor issues has been universally identified as a key area of reform. The objective is to ensure workers’ safety and workers’ rights. Poor labor standards can adversely affect Bangladesh’s overall reputation in the exporting sector. The government has been pressured to take a series of measures to improve workers’ safety. Representatives of the Bangladesh government, the European Union and the International Labor Organization met in Geneva on July 8, 2013 to promote improved labor standards and responsible business conduct in Bangladesh’s garment industry. Following up on the commitments made in Geneva, Bangladesh’s legislature recently amended the Bangladesh Labor Law to provide improved protection, in law and practice, for the fundamental rights to freedom of association and the rights to collective bargaining, among others.
Are these good economics and good politics now and in the future?
Let’s take a second and ponder over the word “Youth,” and play a game of word association. What comes to your mind? Given that I fall into the youth bucket, my list of associations is mostly positive, with a few exceptions. Yet, from a development perspective, youth can sometimes be perceived as the (excuse the word play) “problem child” demographic - What can we do with them, and how do we do it?
Did you know that approximately 1/5th of South Asia’s population lies between the ages 15 to 24? What is more, young adults also comprise 50% of the unemployed in the region. While many may view this as a sad state of affairs, Youth Solutions, the recent collaboration between Microsoft and the World Bank, viewed it as an opportunity for empowerment.