World Bank urges Zimbabwe to reform its consumer protection laws

The World Bank has advised government to overhaul the country’s consumer protection laws and promote financial literacy but says inclusion remains low due to lack of confidence in the banking sector, a report has shown.

Widespread closure of banks in Zimbabwe — six since 2012 and the seventh, Tetrad Investment Bank under judicial management — mainly due to  shareholder delinquency and non-performing loans has resulted in permanent prejudice to thousands of depositors.

Government has since crafted a Consumer Protection Bill which is seen shielding the long suffering public and is currently awaiting presidential assent.

According to a World Bank report titled: Zimbabwe: Diagnosis review of consumer protection and financial literacy launched yesterday, government needs to implement  reforms in the banking, insurance and capital markets to strengthen consumer protection bodies.

The report contains findings and recommendations from a World Bank mission to Zimbabwe between July 14 and July 25, 2014.

“The increased availability of mobile financial services raises important consumer protection issues. Relevant risks include the significant take-up of the services (even if the amounts involved are small), the fact (mobile money transfers) are regulated by the Postal and Telecommunications Regulatory Authority of Zimbabwe (Potraz) rather than financial sector regulators, the important role of unregulated intermediaries, the rapidity of innovation, and the limited written disclosures and records of accounts and transactions,” reads the report.

“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.”

Ecolife was a life assurance product ran by telecomms giant Econet Wireless, which it discontinued three years after terminating a partnership with a Namibian firm Trustco Mobile and First Mutual Life Assurance over contractual disagreements.

At the time of termination, it is estimated that 1.2 million mobile phone subscribers had taken up the product.

The World Bank also said the financial services sector should improve on minimum disclosures.

“The Microfinance Act contains important consumer protection provisions for the microfinance sector but there are concerns about its scope of application and implementation. In particular, it needs to be actively supervised and enforced and it is not clear why the Act does not apply to financial co-operatives and only applies in a limited way to banks and building societies,” it said.

“There is an important need to protect pension and insurance assets of consumers. Pension and insurance schemes in the country were severely and adversely affected by the hyperinflationary period and the switch to the multi-currency economy.”- The Source

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