Microfinance Institution and Bank Articulations: Monetary Policy Implications

In recent years, microfinance sector has witnessed exponential growth. However, the sector, to a disturbing degree, has been replete with unethical practices, thus necessitating the need to recognize and protect the rights of microfinance clients. This study systematically reviews extant literature on efforts being made by microfinance institutions (MFIs), their regulators, microfinance networks and associations towards protecting clients in accordance with existing, applicable regulations. The researchers found that only a few studies have empirically analysed the level of implementation of the client protection principles (CPPs) in Africa. Information asymmetries still exist to the disadvantage of microfinance clients and issues of client protection vis-a-vis microfinance regulations remain topical. Privacy of client data, mechanisms for complaint resolution, fair and respectful treatment of clients, and transparent pricing are areas that require critical attention. The study recommends that regulatory agencies should ensure full adherence to client protection, and enforce appropriate regulations. MFIs and financial consumer protection agencies also need to educate individuals and/or clients, through financial literacy, and entrench the culture of protecting microfinance client base.