RC Solves Disputes Between Banks and Customers

Afghanistan’s financial sector has been plagued by disputes between banks and their customers, with many cases going unresolved. However, a new initiative is bringing hope of resolution to these long-standing issues.

The Current State of Financial Consumer Protection

According to industry associations, there are no specific codes of conduct in place for financial institutions, although most banks have internal policies and procedures that resemble internal guidelines. The legal and regulatory framework for financial consumer protection (FCP) is still developing, with many Microfinance Institutions (MFIs) operating without regulation.

• The Central Bank of Afghanistan (DAB) has a limited FCP department within its organizational structure, and while it does not have specific supervisory powers in this area, it can enforce minor violations.
• Product suitability remains a nascent concept in Afghanistan, with many financial institutions failing to cater to the needs of women and other marginalized groups.

Payment Systems and Infrastructure

Afghanistan’s financial infrastructure is lacking, with unreliable broadband and mobile connectivity affecting the National Payments System (NPS). The development of interbank payment systems has been slow, and there is limited interoperability between retail payments. Additionally, e-Know Your Customer (KYC) or digital onboarding infrastructure does not exist.

Challenges to Financial Inclusion

The lack of trust in electronic payments by the population, coupled with a lack of tailored transaction account products and limited network of access points, significantly limits financial inclusion.

• Few innovative payment products are geared towards women.
• Islamic financial institutions have been slow to enter the market.

Government Initiatives

Despite these challenges, the government has instituted large-scale programs to support electronic payments of salaries and benefits, such as those in the civil service, police, and military. However, challenges persist, with electronic payments rare outside of cities and the private sector and NGOs yet to fully embrace digital payroll delivery.

The National Financial Inclusion Strategy (NFIS)

To address these issues, a new initiative is being launched to implement the National Financial Inclusion Strategy (NFIS). The strategy will be coordinated by a council comprising relevant public and private stakeholders, along with development partners. The NFIS aims to improve financial inclusion through:

• Streamlined information collection
• Improved digital infrastructure
• Automation of lending operations

RC’s Expertise in Resolving Disputes

With RC’s expertise in resolving disputes between banks and customers, the initiative is expected to bring much-needed resolution to long-standing issues in Afghanistan’s financial sector. By promoting financial inclusion and improving payment systems, the country can look forward to a more stable and prosperous future.