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Golden Sibanda and Munesu Nyakudya
ZIMBABWE should put in place effective and coordinated institutional, legal and regulatory framework for consumer protection and financial literacy to increase access to financial services and raise the quality of service provision, the World Bank has said.
This follows findings from the World Bank’s recent survey on consumer protection and financial literacy, which identified yawning gaps in systems and processes governing provision of financial services and framework for creating awareness on financial services.
The survey found out that Zimbabwe’s legislative system and institutions that speak to issues of consumer protection and financial literacy were disjointed and that there also was no framework explicitly dedicated to issues of consumer financial protection and literacy.
In that regard, head of the research mission for the CPFL survey and World Bank senior financial sector Ms Ros Grady said there was need for strong laws and regulation on CPFL and increased supervision of implementation of rules and regulation on this policy.
“In this topic we looked at institutional arrangements, what regulators are there, are there any gaps, are there any overlaps, who is responsible for consumer protection, in a nutshell, do they have the resources and the capacity they need. The regulators we spoke to had a keen interest on consumer protection, but no special expertise, which is understandable because the legal framework is fairly limited,” Ms Grady said.
Government is, however, already working on consumer protection laws and the Consumer Protection Bill, which will set up the consumer protection commission and court, at advanced stages. But Ms Grady says this will come on terms of existing flawed practices. As such, the survey made recommendations for reforms around institutional framework and capacity building, legal and regulatory systems, transparency and consumer disclosure, business conduct, dispute resolution mechanisms and CPFL training.
According to the World Bank’s consumer protection and financial literacy survey in Zimbabwe, sound CPFL framework was important in light of low levels of financial inclusion and the historic financial sector fragility before and post dollarisation of the economy.
“Zimbabwe does not have a co-ordinated financial literacy strategy and no assessment has been made of financial capability levels,” the World Bank noted in its survey.
The need to develop functional and effective CPFL framework, the World Bank said, also comes against the background were Zimbabwe is experiencing rapid innovation in mobile financial services, which pose risk to payment systems and financial sector.
Further, the dynamics on the technological front mean there is a need to develop a proportionate regulatory and supervisory regime for new service providers such as telecommunication companies, mobile phone providers and agent network managers. In addition, the important role of unregulated intermediaries, the rapidity of innovation, and the limited written disclosures and records of accounts and transactions also indicate the need for an effective governance system relating to CPFL.
“If any of these risks eventuate, the potential for a significant loss of trust in the Zimbabwe financial sector cannot be underestimated, especially given the country’s history of financial fragility and the EcoLife failure,” said the World Bank in its survey report.
The World Bank noted that the Reserve Bank of Zimbabwe had taken significant steps to supervise this sector, but there remained an urgent need to establish a sound legal and regulatory environment for the protection of consumers of such services.
Online Reporter