Fragmented Oversight Hampers Consumer Protection in Financial Services
By Ninette Mwarania, Manager, Planning, Policy & Research – Competition Authority of Kenya
The Government’s Fourth Medium Term Plan has prioritized stability, inclusion and improved consumer protection in the financial sector, and identified various strategies to resolve longstanding market challenges. The recently launched National Financial Inclusion Strategy (NFIS) 2025 – 2028 serves as a key policy framework in advancing this ambition. Under the theme, Leveraging Digital Transformation and Financial Literacy to enhance Financial Inclusion, the Strategy intends to bridge accessibility gaps, foster economic growth, and contribute positively to socio-economic stability.
The NFIS lists the fragmented regulatory landscape as a major challenge. Suboptimal cooperation between regulators has led to negative outcomes, especially regarding the identification of potential account holders. Consumers are still required to present physical identification documents to operate an account. A collaborative and unified effort by different regulatory agencies, enabling adoption of alternative consumer verification methods like digital IDs, would remove unnecessary access barriers. Additionally, reviewing and repurposing the financial service providers’ policies will reduce exclusion and enable broader participation by diverse user groups. Countries like Estonia, India, and Singapore have adopted the digital IDs enabling their citizens to access banking services as well as a range of Government services.
Just recently, my friend flagged unexplained fees and charges in her bank statement, and reached out with a query regarding where she should lodge a complaint. He inquiry was whether the matter falls under the remit of my employer, the Competition Authority of Kenya, which has a consumer protection mandate, or the Central Bank of Kenya, the banking sector regulator. This exemplifies the dilemma consumers face. This issue also persists in sectors such as insurance, electricity distribution, and telecommunication. Lack of clarity about remedial channels, compounded by overlapping mandates, leads consumers into forum shopping among regulators, resulting in inconsistent and incoherent outcomes depending on who takes up their matters. This fragmentation creates an ideal environment for issues to fester, eroding consumer trust. The NFIS calls for a proactive and structured dialogue to enhance clarity on consumer redress. A unified consumer protection framework, as proposed in the new strategy, will enhance supervision and coordination, ensuring consumer welfare issues are directed to the appropriate agency, with clear thresholds, timelines and reporting mechanisms to ensure that all complaints are resolved to the effectively and to the satisfaction of consumers.
Ineffective communication and a lack of shared market intelligence between regulatory bodies undermines their oversight effectiveness. Errant businesses exploit such gaps to disenfranchise Kenyans. For instance, one regulator may be unaware of the complaints lodged with another, highlighting the missed opportunity for proactive alignment of information-sharing and coordinated handling of grievances. To ameliorate this persistent issue, regulators should consider developing a centralized complaint‑management system accessible to all financial‑sector regulators. Such a platform would harmonize the process, and generate valuable data through which recurring and cross‑cutting issues can be flagged and attended to efficiently, with the aim of preventing recurrence. Consumer-generated market insights can enable regulators to collaboratively formulate targeted policies to address systemic problems. In addition, it is paramount to develop consumer empowerment strategies to complement institutional reforms. Enhanced public awareness campaigns, tailored to the gaps identified through the aforementioned data, will additionally ensure consumers are adequately empowered about their rights and responsibilities in the marketplace.
The NFIS provides a solid foundation, backed by a clear implementation plan and a robust monitoring and evaluation framework. To realize its goal, a deliberate policy alignment across financial sector regulators, recognition of digital identification as a valid onboarding tool, harmonized consumer protection mandates, shared systems for complaint management, and data-driven supervision are critical. This will reduce exclusion, eliminate regulatory arbitrage and strengthen consumer trust, while enabling providers to innovate responsibly. Afterall, financial inclusion is not only about access; it also should lead to fairness, transparency and, most importantly, increased consumer trust.