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Consumer Protection & Financial Literacy in

Azerbaijan

Susan RutledgeCoordinator Consumer Protection &

Financial Literacy ProgramsBaku, June 24, 2009

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Increasing Depth of Financial Sector reduces Poverty

Increasing the use of financial services from the level of Peru to Chile reduces the number of people living on just $1 per day. from 10% of the population to 5% or even

lower (Beck, Demirguc-Kunt, Levine 2007)

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Consumer Protection & Financial Literacy expand Financial Sector

Consumer protection increases legal protection for financial consumers Builds consumer confidence Encourages consumers to use financial services

Financial literacy helps consumers understand financial products & services Helps consumers make informed financial decisions Helps consumers understand their obligations

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Rising Defaults in Household Loans can Pose Risks for Banks

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4 Critical Areas

1. Simple, easy to understand consumer disclosure

2. Code of conduct for financial institutions

3. Fast, effective recourse mechanisms to handle consumer disputes

4. Effective financial education programs to improve financial literacy

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Consumer Disclosure should be Easy to Understand

Key Facts Statement to have important terms and conditions on one page.

Consumers should be able to compare offers by different providers.

Full contracts should be easily accessible.

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Financial Institutions should follow a Code of Conduct

Financial institutions should be obliged to act responsibly when selling financial services.

Code of conduct should set high standards.

Code of conduct helps consumers know they have rights—and responsibilities.

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Recourse Mechanisms need to be Effective

Each financial institutions should have a complaints departments.

Aggregate complaint statistics should be analyzed and published.

A financial ombudsman could help consumers solve problems.

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Consumers also Need Financial Education

Financial education is a long-term program. It belongs not just to Ministry of Education

but also financial sector. Nationwide financial literacy survey of

households can provide baseline assessment of current levels of financial literacy.

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WORLD BANK

Consumer Protection & Financial Literacy in

Azerbaijan

Susan RutledgeCoordinator Consumer Protection &

Financial Literacy ProgramsBaku, June 24, 2009