Over-Indebtedness: Consumer Protection and Financial Education

This document presents an overview of discussions at a workshop that focused on the problem of over-indebtedness, and the role of consumer protection and financial education in overcoming this problem.The workshop made the following main points:

• The establishment of commercial, profit-making microfinance models over the last few years has led to:
  • Competition and large and diversified services;
  • Microfinance institutions (MFIs) moving towards more easily-accessible economic activities and zones in order to limit operational expenses.
• The diversity of MFI programs in very competitive markets yields both positive effects as well as negative effects such as over indebtedness.
• The search for market share and profitability should not lead to MFIs' losing sight of their responsibility towards their clients and the microfinance sector.
• The development of microcredit should not be accompanied by an increase in default cases and over indebtedness, which could yield results that are contrary to the goal of microfinance which is checking financial exclusion.

The workshop concludes that MFIs can create value for their clients in a structured, controlled and sustainable manner in saturated sectors through credit bureaus, consumer protection and information dissemination to clients.