Financial Consumer Protection in the Ethiopian Banking Sector: Analysis of the Legal and Institutional Framework
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Date
2020
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Addis Ababa, Ethiopia
Abstract
The Banking sector is strategic and vital for economic development. The 1929 economic crisis
evidenced how important it is and how the regulatory framework is needed to protect the sector
and the overall economic sphere of society. The banking regulatory framework may generally be
bifurcated into prudential and market conduct regulation. Prudential regulation was majorly
used and implemented until the 2008 Global Financial Crisis. Afterward, however, market
conduct regulation got emphasizes and started to be implemented in the financial sector. Market
conduct regulation is about protecting consumers and ensuring that they are treated fairly by
financial institutions.
Ethiopia has also recognized financial consumer protection under the national financial
inclusion strategy in 2017. Before this year, however, there were fragmented and scattered
provisions that were used for financial consumer protection in different legislations besides the
general consumer protection laws. Recently, a new banking law has specifically alienated the
subject matter to be regulated by the National Bank of Ethiopia. Following this mandate, the
National Bank came up with a tailored financial consumer protection directive that applies only
to financial service providers, including banks.
This thesis, hence, particularly interests itself to evaluate the adequacy of the financial
protection law of Ethiopia against the G20-High Level Principles on financial consumer
protection and relevant countries’ experience. The thesis argues that Ethiopia has endeavored to
craft a comprehensive legal framework as well as institutional arrangements. However, there
are gaps such as the issue of juridical person coverage in financial consumer definition, external
dispute resolution mandate of the National Bank, non-existence of standard for sales practices
including tying of product as well as pyramid selling, incomprehensiveness of fraud monitoring
and prohibition, non-existence of national document for education & awareness creation on the
subject matter, under-resourced of institutional framework or unit, the gap in coordination and
cooperation among stakeholders are inter-alia. Hence the thesis call for due consideration of
incorporating these gaps and a better framework be deliberated.
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Keywords
Legal and Institutional Framework