Objectives, Actors and Instruments of Holistic Consumer Policy in Microfinance - An Analysis of the Case of Peru
Until recently celebrated as a panacea against global poverty, microfinance has experienced a harsh landing on the ground of hard facts in the course of the last years. Impact studies don’t support the expectation of poor populations lifting themselves up and out of poverty by mere access to small loans, savings, insurances and other financial services. However, looking beyond these inflated expectations, the results of the studies suggest positive impact on life quality within the state of poverty, as microfinance can serve as a valuable risk management tool for poor households (e.g. by smoothening liquidity constraints). Yet, one should not ignore the other side of the coin which encompasses amongst others the unethical treatment of clients and over-indebtedness. Due to their particular profile, microfinance clients face comparatively stronger disadvantages towards the supplier side than other consumer groups. Moreover, the lack of safety nets renders poor populations especially vulnerable.
Within the microfinance industry, client protection is implemented through self-regulation of the supplier side (e.g. the SMART Campaign) and state ruling. However, approaches are to a large extent reactive (based on past negative experiences) and defensive (a protection for a passive client). Yet, modern consumer policy includes proactive and activating tasks such as consumer information and education. Effective consumer policy eliminates the structural disadvantages of the demand side and hence reestablishes a balance of power on the market.
In my dissertation project, I develop a comprehensive framework suitable to analyze the consumer policy of a national microfinance sector from a holistic point of view, taking into account different concepts and approaches. In a second step, the developed framework will be applied to the microfinance sector in Peru.