1 CONSUMER CONSUMER PROTECTION PROTECTION AND AND FINANCIAL EDUCATION IN INDONESIA: FINANCIAL EDUCATION IN INDONESIA: Ch ll d O t t Challenges and Opportunities Halim Alamsyah Deputy Governor – Bank Indonesia OECD-ADBI 12 th Roundtable on ‘Capital Market Reform in Asia’ Tokyo, 8 February 2012 1 Common Terms on Customer Protection Definition Customer Protection in Banking: “Laws and/or regulation which ensure fair interaction between consumers (bank customer) and producers (banks)” Sources of unfair interaction • Asymmetries information • Power imbalances in the markets C f t t ti Coverage of customer protection framework 1. Transperancy of Products 2. Promotion of Competition 3. Elimination of Unfair Practices 4. Education of Customers (Ardic; Ibrahim; Mylenko: 2011)
Transcript
1
CONSUMER CONSUMER PROTECTION PROTECTION AND AND
FINANCIAL EDUCATION IN INDONESIA:FINANCIAL EDUCATION IN INDONESIA:
Ch ll d O t tChallenges and Opportunities
Halim AlamsyahDeputy Governor – Bank Indonesia
OECD-ADBI 12th Roundtable on ‘Capital Market Reform in Asia’
Tokyo, 8 February 2012
1 Common Terms on Customer Protection
Definition
Customer Protection in Banking: “Laws and/or regulationwhich ensure fair interaction between consumers (bankcustomer) and producers (banks)”) p ( )
Sources of unfair interaction
• Asymmetries information
• Power imbalances in the markets
C f t t tiCoverage of customer protection framework
1. Transperancy of Products2. Promotion of Competition3. Elimination of Unfair Practices4. Education of Customers
(Ardic; Ibrahim; Mylenko: 2011)
2
2What should Financial Institutions Provide…??*
providing inexpensive and providing inexpensive and speedy mechanisms to addressspeedy mechanisms to address
ensuing fair, nonensuing fair, non--coercive and coercive and reasonable practices in the reasonable practices in the selling and ad ertising oselling and ad ertising off
REDRESS CHOICE
speedy mechanisms to address speedy mechanisms to address complaints and resolvecomplaints and resolve
DisputesDisputes
selling and advertising oselling and advertising of f financial products and services, financial products and services,
and collection of payments.and collection of payments.
providing full, plain, adequate providing full, plain, adequate and comparable information and comparable information about the prices,about the prices, terms and terms and
conditions (and inherent risks) conditions (and inherent risks) of financial products and of financial products and
servicesservices
ensuring control over collection ensuring control over collection and access to personal financial and access to personal financial
informationinformation
Greater Significancy of Customer Protection3
New business model and financial channelsNew business model and financial channels
Financial Product become more complexFinancial Product become more complex
Greater number of people rely on financial servicesGreater number of people rely on financial services
Complementary aspect of Customer Protection*
• Laws and Regulations
p p yp p y
Lack of financial literacyLack of financial literacy
Laws and RegulationsEnsuring Fairness, Transperancy and recourse rights
5 Bank Indonesia Focus: Element of Customer Protection
Customer Protection PurposePurpose
Measure Measure Preventive
Financial Literacy
Product Transparenc
Financial Capability
Redress
Resolution
Complaint Dispute
Measure Measure TypeType
TargetsTargets
Financial Education as part of customer protection program because it will increase financial literacy that makes customers:
Able to manage their financial better. Protect from engaging in unfair practices of financial institutions. Self confidence to engage in financial activities.
Education Transparency & Business
Conduct
p& Dispute
Mechanism
Dispute Resolution
ProgramProgram
4
6 Bank Indonesia Focus: We have been doing…
Transparency Institutional
Set up (Dispute
Improved transparency of information on banking products
Banking mediation and
Following action of Customer
Complaintp y
of Product & Business Conduct
EducationComplaint
and Dispute Mechanism
p ( pResolution,
Market conduct regulation & supervision)
Promoting public education for customers and encourage banks to
(see Appendix 1)
Formulation of standards for customer complaints mechanism (including monitor and
evaluate the
Complaint
(see Appendix 4)
empower customers and improve customer’s confidence to the bankingsector
Objective
geducate customers regarding financial products
(see Appendix 2)
evaluate the compliance to
regulations governing customer complaints
mechanism)
(see Appendix 3)
Establish minimum standards for transparency of product information
Appendix 1: Transparency of products
Transparencyof Product &
B iinformation• Characteristic of product that should be disclosed to customer
• Usage of customer’s personal data for comercial purposes.
Be part of banks’ corporate
Business Conduct
governance
5
6 Bank Indonesia Focus: We have been doing…
Transparency Institutional
Set up (Dispute
Improved transparency of information on banking products
Banking mediation and
Following action of Customer
Complaintp y
of Product & Business Conduct
EducationComplaint
and Dispute Mechanism
p ( pResolution,
Market conduct regulation & supervision)
Promoting public education for customers and encourage banks to
(see Appendix 1)
Formulation of standards for customer complaints mechanism (including monitor and
evaluate the
Complaint
(see Appendix 4)
empower customers and improve customer’s confidence to the bankingsector
Objective
geducate customers regarding financial products
(see Appendix 2)
evaluate the compliance to
regulations governing customer complaints
mechanism)
(see Appendix 3)
Encourage banks to educate consumers on Encourage banks to educate consumers on financial products and promote intermediary financial products and promote intermediary function of a bankfunction of a bank
Issuance of Blueprint for Public Education in Issuance of Blueprint for Public Education in kk
Education
Appendix 2: Financial Education
Banking in 2007Banking in 2007
Establishment of working group on public Establishment of working group on public education in banking to implement the blueprinteducation in banking to implement the blueprint
Member of the working group:Member of the working group:• Bank Indonesia• Banks (commercial banks, rural banks, Islamic banks)• Banks associations
N b k fi i l i tit ti• Non‐bank financial institution• Credit card association
BI campaign programs on financial education: BI campaign programs on financial education: “Ayo ke Bank” (2008), “Ayo ke Bank” (2008), ““3P3P” (2009)” (2009)
Launching of “Indonesia Saving Launching of “Indonesia Saving MovementMovement” ” and and basic saving product: TabunganKu (2010)basic saving product: TabunganKu (2010)
6
Education Financial education is something that can not be ruled out to establish the financial literatedcommunity; good understanding in financial
Appendix 2: Financial Education
The Importance of Financial Education:
y; g g finstitutions, financial products and services, as well as financial management to achieve a better living in the future.
Financial education is an effort to change public behavior. Therefore, financial education is a longterm program (more than 5 years).
Because of the financial institutions are still Because of the financial institutions are still dominated by banks, the financial education begins with implementing banking education programs.
Bank Indonesia in this regard have been initiated implementing banking education since 2007 and intensified starting in 2008 with the declaration of banking education year.
Education
Appendix 2: Financial Education
Goals of Financial Education:
To build people’s interest in banking (bank minded and awareness);
To increase public awareness in banking products and services as well as awareness of rights and obligations of customers;
To increase public awareness in prudential aspects of financial transactions (risk awareness); andtransactions (risk awareness); and
To increase awareness of availability of complaints and dispute settlement mechanism to resolve problems with the banks.
7
Education
Appendix 2: Financial Education
Financial Education program consist of:
1. National Campaign of Banking Education Programs.
I t t d ti l i h lti l i h la. Integrated national campaign channelsnational campaign channels;b. Setting a single theme for the first round of
national campaign: “Ayo ke Bank’”(Let’s go to the Bank).
c. Launch new saving scheme called “tabunganku” (My Saving) to accommodate the needs of community to save.y
2. National coordination program in Financial Educations.
a. Coordination among Financial Authorities;b. Coordination with Other Agencies;c. Coordination with Financial Institutions.
Public Service TV Commercial
Art Show Branches Education Car
Above The Line Below The Line
Integrated National Campaign Channels in Banking Education
Appendix 2: Financial Education
Ayo ke Bank!
TV Commercial
SignageRadio
News Paper
Brochures
Posters(Let’s Go to
Public Relation
Promotion
Websites
Uniform
Visits ATM
(The Bank!)
8
Education
Appendix 2: Financial Education
A comprehensive program is directed to all consumers:
• Skills to make informed decisions
• Skills to understand the impact of decisions of
Those outside formal education •• Rural areasRural areas
•• Low incomeLow incomeimpact of decisions of individuals, businesses and governments on the lives of others
School
•• Mass mediaMass media •• SectoralSectoral
Special focus onSpecial focus on
Appendix 2: Financial Education (Progress)
20112011• BI campaign
• Launching of “Indonesia Saving Campaign” and basic saving product: “TabunganKu”
20072007
20082008
200920092010
20112011BI campaign programs on financial education: “Ayo ke Bank” (2008)
• BI campaign programs on financial d ti
• Integration of financial education in elementary and junior high school curriculum (pilot project)
• Student Saving Movement campaign
20072007• Issuance of Blueprint for
Public Education in Banking• Establishment of working
group on public education in banking to implement the blueprint
education:“Whatever the product, remember ‘3Ps’ Ensure Benefits, Understand the risk, Consider Costs”
p g• Extension of information
access (enhancement of BI’s website with consumer education and information)
• Financial Education for Migrant worker
9
Blueprint
2007 2008 2009 2010 2011
Distribution of leaflets, booklets, brochures, and comics
Education cars
Education Task Force
2012
Appendix 2: Financial Education (Progress & Work plan)
National Campaign “Lets Go to the Bank”
Education cars
MoU with Ministry of education, Ministry of SME, SIKIB
Specific theme of educationa : card edu.day, edu to migrant worker
Advertising
TabunganKu Intensive Indonesia Saving Movement and
National Campaign of “3P”Indonesia Saving Movement
Student Saving Movement
TabunganKu Campaign in 6 pilot project areas
MoU with Ministry of Manpower and Transmigration
Web Consumer Information & education
Elementary and Junior high School Curicula
Education to migrant worker
Increasing quality of TabunganKu
High School & University Curicula
Financial Literacy Survey
Appendix 2: The Progress of ‘TABUNGANKU’
No monthly administration Fee
Low initial deposit (only Rp20 000/± USD 1 8 for
• One of service channel of TabunganKuis TabunganKu Cars. These car operatesin some places as center of public crowdsuch as schools, markets, office buildings,residential areas etc
Main featuresMain features TabunganKu Car
Rp20.000/± USD 1,8 for commercial banks and Rp10.000/ /± USD 0.9 for rural banks)
Low interest rate
residential areas etc.
• Services provided by the car mainly toreceive TabunganKu account opening.
• The operation of TabunganKu car iscooperation with banking industry
... the need for special savings products for low-income communities and beginner depositors...
Numbers of account Value (Rp. Million)
2.176.032 2.446.482
Achievement of TabunganKu
As per Dec 2011 :
10
Appendix 2: The Next Step of ‘TABUNGANKU’
Extending saving movement and TabunganKu programs to primary targets ( students,
• Competition between TabunganKu and bank’s saving products with similar features to T b K
Saving MovementSaving Movement Future Challenges: TabunganKu
primary targets ( students, farmers, labour, fisherman, small business, etc)
Enhancing the role of regions in education, saving and TabunganKu campaignprograms.
Increasing numbers of account of TabunganKu
to TabunganKu
• Improvement of TabunganKufeatures to fulfill consumer’spreference, such as:
– Withdrawal in any officebranches
– ATM servicesof TabunganKu
TabunganKu would be associated with the requirement to obtain micro credits and other government programs in order to increase public welfare.
• TabunganKu as initial productin introducing consumer toother banking products andservices according to theconsumer needs.
6 Bank Indonesia Focus: We have been doing…
Transparency Institutional
Set up (Dispute
Improved transparency of information on banking products
Banking mediation and
Following action of Customer
Complaintp y
of Product & Business Conduct
EducationComplaint
and Dispute Mechanism
p ( pResolution,
Market conduct regulation & supervision)
Promoting public education for customers and encourage banks to
(see Appendix 1)
Formulation of standards for customer complaints mechanism (including monitor and
evaluate the
Complaint
(see Appendix 4)
empower customers and improve customer’s confidence to the bankingsector
Objective
geducate customers regarding financial products
(see Appendix 2)
evaluate the compliance to
regulations governing customer complaints
mechanism)
(see Appendix 3)
11
Establish minimum requirements for consumer complaints mechanism.
M it d l t
Complaint and Dispute Mechanism
Appendix 3: Complaint Mechanism
Monitor and evaluate implementation of regulations governing the customer complaint mechanism.
Banks are required to report to Bank Indonesia in quarterly basis.
6 Bank Indonesia Focus: We have been doing…
Transparency Institutional
Set up (Dispute
Improved transparency of information on banking products
Banking mediation and
Following action of Customer
Complaintp y
of Product & Business Conduct
EducationComplaint
and Dispute Mechanism
p ( pResolution,
Market conduct regulation & supervision)
Promoting public education for customers and encourage banks to
(see Appendix 1)
Formulation of standards for customer complaints mechanism (including monitor and
evaluate the
Complaint
(see Appendix 4)
empower customers and improve customer’s confidence to the bankingsector
Objective
geducate customers regarding financial products
(see Appendix 2)
evaluate the compliance to
regulations governing customer complaints
mechanism)
(see Appendix 3)
12
.
Market Conduct Framework in Consumer Protection
Objectives: To support market conduct implementation in banking industry
To strengthen of fair treatment for banking customerInstitutional
Appendix 4: Institutional Set up
Regulation Supervision EducationComplaint and
Mediation
To increase financial capability
To coordinate other financial authority in implementing consumer protection
Institutional Set up
Formulation of policy and
regulation in customer protection
(base on audit result, customer complaints, and
reports)
Surveillance and enforcement
Improvement offinancial capability
Ensuring complaint and mediation
process to maintain customer rights and
obligations
provide a simple and rapid process of dispute resolution on banking matters at a lower cost.
Complaints that are escalated intoInstitutional
Appendix 4: Institutional Set up
Complaints that are escalated into disputes between customer and bank may be settled using mediation scheme provided by Bank Indonesia
There will be an independent banking mediation agency outside of Bank Indonesia in the future to handle
Set up
banking mediation
Dispute with financial demands ≤ IDR 500 million.
13
Challenges and Next Step: Indonesia Case7
Continuous program for UnbankedUnbanked people ispeople is
Challenges: Next Effort:
Continuous program for financial education to increase financial literacy.
Continuous program to provide financial access to the people in the bottom of the pyramid
Increasing market discipline,
Unbanked Unbanked people is people is still highstill high. . (32% of Indonesian population doesn’t have bank account)
Rapid development Rapid development of banking products of banking products and servicesand services g p
business conduct and self regulation dealing with customer protection
Involvement of many stakeholders as a watchdog
and servicesand services
Financial education Financial education is never ending effort is never ending effort and it is high costand it is high cost
Institutional Set up (Dispute
Resolution, Market conduct
regulation & supervision)
Dr. Halim AlamsyahDep t Go ernor of Bank IndonesiaDeputy Governor of Bank Indonesia
Radius Prawiro Tower, 24th FloorJl. M.H. Thamrin No. 2 Jakarta 10350 Indonesia
