Access to justice in microfinance

Access to Justice in Microfinance
An Analytical Framework for Peru
YASMIN OLTEANU

Palgrave Studies in Impact Finance
Edited by Mario La Torre


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Sapienza University of Rome
Rome, Italy


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Yasmin Olteanu

Access to Justice in
Microfinance
An Analytical Framework for Peru

Yasmin Olteanu
Free University Berlin (D 188)
Berlin, Germany

Palgrave Studies in Impact Finance
ISBN 978-3-319-95323-6
ISBN 978-3-319-95324-3  (eBook)
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Acknowledgements

This book is the culmination of a journey. Like any good journey, it was
accompanied by passion and curiosity yet also drawbacks and frustrations. Although it is only my name which appears on the cover, many
people have been traveling with me, and their encouragement and trust
have contributed greatly.
First, I would like to express my gratitude to Prof. Dr. Barbara Fritz,
who with her insightful remarks, guidance and trust empowered me to
turn my first research idea into a manageable venture. She consistently
allowed this study to be my own work yet steered me in the right direction whenever it was needed. I am greatly appreciative for the position
she offered me at the Institute for Latin American Studies and the additional funding opportunities she channeled my way.
My deep-felt appreciation goes to Prof. Dr. Hansjörg Herr, who ever
since I first met him in my undergraduate studies has supported me academically and personally. His constructive comments and warm encouragement lifted me through some of this journey’s lows.
I would like to thank all the researchers and students, who contributed with valuable feedback and support—particularly the participants
of the research colloquium on economics at the Institute for Latin
American Studies. I am also deeply grateful to Prof. Dr. Claudia Gather
and the members of her research colloquium at the Berlin School of
Economics and Law, where I constantly received constructive and warm
support and developed friendships which will last.
v


vi   

Acknowledgements

I gratefully acknowledge the financial support from the Scholarship
for Women in Academia, which was granted by the Berlin School of

Economics and Law and funded by the Berlin Program for Equal
Opportunities of Female Researchers, Artists and Teachers in Higher
Education (Berliner Chancengleichheitsprogramm). The members of the
selection committee of this scholarship program were the first to believe
in this endeavor, and my admission to it was the tipping point which
turned a mere idea into a realistic project.
This study would not have been possible without the contributions of
my interview partners in Washington, D.C. and Peru, and the 400 plus
vulnerable financial consumers who agreed to be surveyed for this study.
Their experiences, opinions and knowledge were vital for answering the
research question. I would thus like to express my great thanks for the
invested time, effort and trust.
My deepest gratitude goes to my sisters Nadja and Sarah, and the
numerous friends and colleagues who have shared the thrills and cheers
along this journey. Your constant support has been invaluable to me.
And most of all, I would like to thank my loving, supportive, encouraging and patient husband Johannes, whose faithful support has been
vital and an invaluable pillar of strength.
This book is dedicated to Prof. Dr. Straub, who during the farewell
celebrations of my Master’s told me that I should consider pursuing a
doctorate—and to the 26-year-old me who, at that point, thought Well,
this is something I will maybe achieve in my next life.


Contents

1Introduction1
1.1 Background to the Research Problem
2
1.2 Research Objectives
4

1.3 Research Question
5
1.4 Significance of the Study
5
1.5 Structure of the Study
6
References
7
2 Theoretical Concepts9
2.1 Defining Access to Justice
9
2.2 Access to Justice and Poverty Alleviation
13
2.3 Access to Justice and Welfare Costs
16
2.4 Consumer Vulnerability
28
2.5 Consumer Complaining Behavior
34
2.6 Chapter Conclusion
40
References
43
3 Literature Survey55
3.1 Analytical Frameworks for the Analysis of Access to Justice 55
3.2 Relevant Findings on Consumer Complaining Behavior 60
3.3 Particular Access Barriers for Vulnerable
Consumer Groups
68
3.4 Chapter Conclusion

70
References
72
vii


viii   

Contents

4 Methodology and Data79
4.1 Philosophical and Methodological Considerations
79
4.2 Case Study Design and Case Selection
82
4.3 Data Collection and Analysis
86
4.4 Ethical Considerations
98
4.5 A Closer Look at the Data: Descriptive Statistics
99
4.6 Chapter Conclusion
106
References
108
5 Development of the Analytical Framework111
5.1 The Path to Justice
112
5.2 Defining the Levels of Analysis
113

5.3 The Operationalization of the Micro Level of Analysis
117
5.4 Chapter Conclusion: The Analytical Framework to
Evaluate the Access to Justice of Vulnerable Consumers
126
References
129
6 The Context: Peru133
6.1 Country Overview
133
6.2 The Microfinance Sector
138
6.3 The State of Financial Inclusion
152
6.4 Financial Consumer Protection
153
6.5 Chapter Conclusion
154
References
157
7 Application of the Analytical Framework163
7.1 The Macro Level: Peruvian Law and Its Implementation 163
7.2 The Meso Level: The Microfinance Sector
191
7.3 The Micro Level: Relevant Factors for the Decision to Seek
Justice
210
7.4 Chapter Conclusion
269
References

276
8 Discussion of the Findings283
8.1 Access Barriers Related to the Consumer Herself
283
8.2 Access Barriers Related to the Market or the Company
285
8.3 Situational Access Barriers
288
8.4 Social Access Barriers
289


Contents   

8.5 Cost-Related Access Barriers
8.6 Cultural Access Barrier
8.7 Chapter Conclusion
References

ix

291
295
296
300

9 Conclusion and Policy Recommendations305
9.1 Main Conclusions
305
9.2 Original Contribution to Knowledge

307
9.3 Limitations of the Study
308
9.4 Implications and Areas for Further Research
310
Index317


Acronyms

ACP
ASBANC
ASOMIF
BIC
CCB
CMAC
COPEME

CRAC
DCF
DEFASEG
EDPYME
FENACREP
FEPCMAC
GDP

Acciòn Comunitaria del Perú (private non-profit development
organization)
Asociación de Bancos del Perú (Banking Association of Peru)
Asociación de Instituciones de Microfinanzas del Peru

(Association of Peruvian Microfinance Institutions)
Schwarz’s Bayesian information criterion
Consumer Complaining Behavior
Caja Municipal de Ahorro y Credito (Municipal Savings and
Credit Institution)
Consorcio de Organizaciones Privadas de Promoción al
Desarrollo de la Micro y Pequeña Empresa (Consortium of
Private Organizations to Promote the Development of Small and
Micro Enterprises)
Caja Rural de Ahorro y Credito (Rural Savings and Credit
Institution)
Defensor del Cliente Financiero (Ombudsman of the Banking
Association)
Defensor del Asegurado (Ombudsman of the Insurance
Association)
Entidad de Desarollo para la Pequeña y Microempresa (Company
for the Development of Small- and Microenterprise)
Federación de Cooperativas de Ahorro y Crédito (Federation of
Credit and Savings Cooperatives)
Federación Peruana de Cajas Municipales de Ahorro y Credito
(Federation of Municipal Savings and Credit Institutions in Peru)
Gross Domestic Product
xi


xii   

Acronyms

GNI

INDECOPI

Gross National Income
Instituto Nacional de Defensa de la Competencia y de la
Protección de la Propiedad Intelectual (National Institute for the
Defence of Competition and Intellectual Property)
MFI
Microfinance Institution
MIDIS
Ministerio de Desarrollo e Inclusión Social (Ministry of
Development and Social Inclusion)
MIMP
Ministerio de la Mujer y Poblaciones Vulnerables (Ministry of
Women and Vulnerable Populations)
NGO
Non-governmental Organization
PAU
Plataforma de Atención al Usuario (Consumer Platform of the
SBS)
PEN
Peruvian Sol (Peruvian Nuevo Sol up to 2015)
SAC
Servicio de Atención al Ciudadano (Client Service Center of the
INDECOPI)
SBS
Superintendencia de Banca, Seguros y Administradoras Privadas
de Fondos de Pensiones (Superintendency of Banks, Insurance
and Pension Fund Administrators)
UIT
Unidad Impositiva Tributaria (Taxation Unit)

UNDP
United Nations Development Program
USD
United States Dollar
WOMWord-of-Mouth


List of Figures

Fig. 2.1
Fig. 2.2
Fig. 3.1
Fig. 3.2
Fig. 3.3
Fig. 4.1
Fig. 4.2
Fig. 4.3
Fig. 5.1
Fig. 5.2
Fig. 5.3
Fig. 5.4
Fig. 5.5
Fig. 6.1

Hirschman’s framework of Exit, Voice and Loyalty extended
by Kolarska et al. (based on Hirschman 1978; Kolarska and
Aldrich 1980, adapted by the author) 37
Day and Landon’s complaining behavior taxonomy extended
by Day’s 1980 alteration (based on Day and Landon 1977;
Day 2011, adapted by the author) 39

Barendrecht, Mulder and Giesen’s Path to Justice (based on
Barendrecht et al. 2006, adapted by the author) 57
Bahdi’s Three-Component Analytical Framework for Access
to Justice Research (based on Bahdi 2007, adapted by the
author)58
Bedner and Vel’s Process-Oriented Analytical Framework for
Access to Justice Research (based on Bedner and Vel 2010,
adapted by the author) 59
Geographical distribution of the quantitative and qualitative
samples100
Past problem and complaining experience in the sample: An
overview102
The three respondent clusters 104
Linking the three levels of analysis to the Path to Justice 113
The categories at the macro level of the analytical framework 114
The categories at the meso level of the analytical framework 115
The dimensions at the micro level of the analytical framework 116
The Analytical Framework to Evaluate the Access to Justice
of Vulnerable Consumers 128
Peru’s microfinance landscape: The supporting environment 151
xiii


xiv   

List of Figures

Fig. 7.1

INDECOPI: Bodies relevant for consumer protection

(based on El Presidente de la Republica 2012, compiled
by the author) 178
Fig. 7.2
Mediation procedure of the INDECOPI Consumer Service
Center (SAC) (based on Instituto Nacional de Defensa de la
Competencia y de la Protección de la Propiedad Intelectual
2017c, 20; adapted by the author) 180
Fig. 7.3
Complaint and allegation procedure of the consumer ­
platform of the SBS (PAU) (based on Superintendencia de
Banca, Seguros y ASP 2003, compiled by the author) 195
Fig. 7.4
The path to justice of a vulnerable financial consumer in Peru 207
Fig. 7.5
The seven identified relevant factors at the macro and meso
level of analysis 209
Fig. 7.6
The level of completed education of the respondents 213
Fig. 7.7
The level of completed education and the voicing of
complaints214
Fig. 7.8
The level of self-confidence of the respondents 216
Fig. 7.9
The level of self-confidence and the voicing of complaints 217
Fig. 7.10 Past satisfactory apology and future complaining intention 221
Fig. 7.11 The distribution of the index of past perceived justice 222
Fig. 7.12 Expected loss of access to financial services and the voicing
of complaints 224
Fig. 7.13 The distribution of the index of awareness of rights 227

Fig. 7.14 Awareness of the right to receive clear information and the
voicing of complaints 230
Fig. 7.15 The six problem clusters of vulnerable financial consumers
(in % of the respondents) 234
Fig. 7.16 Internal attribution of the cause of the problem and the
voicing of complaints 245
Fig. 7.17Knowledge of internal complaint mechanisms and the
voicing of complaints 250
Fig. 7.18 The distribution of the index of expected justice 257
Fig. 7.19 The level of education and the probability to voice a
complaint262
Fig. 7.20 The level of self-confidence and the probability to voice a
complaint263
Fig. 7.21 Expected loss of access to finance and the probability to
voice a complaint 264
Fig. 7.22Knowledge of internal complaint mechanisms and the
probability to voice a complaint 265


List of Figures   

Fig. 7.23
Fig. 7.24

xv

Histogram of the predicted probability to voice a complaint 266
The three respondent clusters and the probability to voice a
complaint267
Fig. 7.25Key findings of the analysis 270

List of Tables

Table 2.1
Table 4.1
Table 4.2
Table 4.3
Table 5.1
Table 5.2
Table 5.3
Table 5.4
Table 5.5
Table 5.6
Table 5.7
Table 5.8
Table 5.9
Table 6.1
Table 7.1

Singh’s taxonomy of consumer complaining responses
Sampling of regions
Overview of sample sets used for the analyses in this study
Interviewed stakeholders by stakeholder group, position,
region and gender
The eight guiding hypotheses at the micro level of analysis
of the analytical framework
The operationalized sub-hypotheses of hypothesis 1:
socioeconomic indicators
The operationalized sub-hypotheses of hypothesis 2:

attitude toward complaining
The operationalized sub-hypothesis of hypothesis 3:
market characteristics
The operationalized sub-hypotheses of hypothesis 4:
awareness of rights
The operationalized sub-hypotheses of hypothesis 5:
problem typology
The operationalized sub-hypotheses of hypothesis 6:
knowledge of options
The operationalized sub-hypotheses of hypothesis 7:
perceived access barriers
The operationalized sub-hypotheses of hypothesis 8:
expected justice
Peru’s microfinance landscape: the supply side
First dimension of the micro level of analysis: hypothesis
and sub-hypotheses

38
87
91
105
117
118
119
120
122
123
124
125
127

149
212
xvii


xviii   

List of Tables

Table 7.2
Table 7.3
Table 7.4
Table 7.5
Table 7.6
Table 7.7
Table 7.8
Table 7.9
Table 7.10
Table 7.11
Table 7.12
Table 7.13
Table 7.14
Table 7.15
Table 7.16
Table 7.17
Table 7.18
Table 7.19
Table 7.20
Table 7.21
Table 7.22

Table 9.1

First dimension of the micro level of analysis: confirmed
hypothesis215
Second dimension of the micro level of analysis: hypothesis
and sub-hypotheses 216
The experienced perceived justice of respondents with past
complaining experience 220
Second dimension of the micro level of analysis: confirmed
hypotheses222
Third dimension of the micro level of analysis: hypothesis
and sub-hypothesis 223
Third dimension of the micro level of analysis: confirmed
hypothesis225
Overview of the awareness of rights of the respondents 226
Fourth dimension of the micro level of analysis: hypothesis
and sub-hypotheses 229
Fourth dimension of the micro level of analysis: confirmed
hypothesis230
Problem clusters: overview of magnitude and complaining
behavior235
Fifth dimension of the micro level of analysis: hypothesis
and sub-hypotheses 244
Fifth dimension of the micro level of analysis: confirmed
hypothesis246
Sixth dimension of the micro level of analysis: hypothesis
and sub-hypotheses 249
Sixth dimension of the micro level of analysis: confirmed
hypothesis251
Seventh dimension of the micro level of analysis: hypothesis

and sub-hypotheses 252
Seventh dimension of the micro level of analysis:
confirmed hypothesis 253
Overview of the expected justice of the respondents 254
Eighth dimension of the micro level of analysis: hypothesis
and sub-hypotheses 256
Eighth dimension of the micro level of analysis: confirmed
hypothesis257
The regression equation to predict complaining behavior 261
Overview of sub-hypotheses confirmed at the micro level
of analysis 269
Policy recommendations resulting from this study’s
findings according to stakeholder group 315


Abstract

Financial services targeting the poor and vulnerable can bring considerable opportunities yet also significant risks to financial consumers.
One of these potential risks is the illegal or illegitimate treatment
of these consumers and their cases by the financial institutions that, at
times, are enabled by exploiting the various disadvantages which are particular to vulnerable target groups, causing substantial detriment to the
whole household of the concerned client. An enabling environment for
those vulnerable consumers experiencing injustice which also encourages
the decision to actively seek justice is thus highly relevant and contributes to the achievement of the 16th Sustainable Development Goal by
increasing their Access to Justice.
The central aim of this study is to gain an in-depth understanding of
the enabling and hampering aspects of the Path to Justice of a vulnerable
financial consumer in Peru. The study first develops an analytical framework which enables a thorough evaluation of the Path to Justice for vulnerable consumers from an economic perspective—from the decision to
seek justice to the final outcome. The framework is then applied to the
case of Peruvian microfinance. A mixed-methods approach comprising

quantitative and qualitative data sets collected from 18 stakeholders and
432 vulnerable financial consumers constitutes the base for the framework’s application.
There are 14 factors which act as access barriers to justice for the vulnerable financial consumer in Peru. Seven of them obstruct the decision to actively seek justice: A (i) low level of education, (ii) lacking
xix


xx   

Abstract

self-confidence, (iii) low levels of knowledge of the right to receive clear
information or (iv) of internal complaint mechanisms, the (v) expected
loss of access to finance, (vi) an internal attribution of the cause of the
problem and (vii) dissatisfaction with an apology received in a previous
complaint procedure.
Once having decided to voice a complaint, vulnerable financial consumers encounter seven additional access barriers: A (viii) partial lack
of protection by the existing forums, an (ix) expected biased treatment
of their cases, (x) complex procedures, (xi) high time investment, travel
costs related to the (xii) lack of regional presence of the necessary institutions, the (xiii) occurrence of mal-intentioned consumer associations and
a potentially (xiv) differing understanding and interpretation of justice.
The results suggest a variety of policy recommendations which are
specific for the case of Peru. The developed Analytical Framework to
Evaluate the Access to Justice of Vulnerable Consumers can be applied to
any sector or country and thus beyond this study serve researchers investigating the Access to Justice of vulnerable consumer groups in different
contexts.

Resumen
Los servicios financieros dirigidos a los pobres y vulnerables pueden traer
considerables oportunidades, pero también riesgos importantes para los
consumidores financieros.

Uno de estos riesgos potenciales es el tratamiento ilegal o ilegítimo
de los consumidores y sus casos por parte de las instituciones financieras
que, a veces, se benefician explotando las diversas desventajas particulares
para los grupos vulnerables, causando así un perjuicio sustancial a toda
la familia del cliente afectado. Por lo tanto, es sumamente importante la
existencia de un entorno propicio para aquellos consumidores vulnerables que experimenten injusticia, el cual aliente la decisión de buscar activamente justicia. Además, dicho ambiente contribuye a alcanzar la 16ª
Meta de Desarrollo Sostenible mediante el aumento de su Acceso a la
Justicia.
El objetivo central de este estudio es obtener una comprensión profunda de los aspectos posibilitadores y obstaculizadores del Camino a la
Justicia de un consumidor financiero vulnerable en el Perú. En el estudio primero se desarrolla un marco analítico que permite una evaluación
exhaustiva del Camino a la Justicia para los consumidores vulnerables


Abstract   

xxi

desde una perspectiva económica - desde la decisión de buscar justicia
hasta el resultado final. Luego, el marco se aplica al caso del sector de las
microfinanzas en el Perú. La aplicación del marco se basa en un enfoque
de métodos mixtos que comprende el análisis conjunto de datos cuantitativos y cualitativos recopilados de 18 partes interesadas y 432 consumidores financieros vulnerables.
Los resultados muestran que hay 14 factores que actúan como barreras de Acceso a la Justicia para el consumidor financiero vulnerable en el
Perú. Siete de ellos obstruyen la decisión de buscar justicia activamente:
Un (i) bajo nivel de educación, (ii) una falta de confianza en sí mismo,
(iii) bajos niveles de conocimiento del derecho a recibir información clara
o de (iv) los mecanismos internos de quejas, la (v) probable pérdida de
acceso a la financiación, (vi) una atribución interna de la causa del problema y (vii) insatisfacción con una disculpa recibida en un procedimiento
de queja anterior.
Una vez que han decidido presentar una queja, los consumidores
financieros vulnerables encuentran siete barreras de acceso adicionales: A

veces una (viii) falta de cubierta en absoluto por los foros existentes, la
(ix) sospecha de un tratamiento sesgado, (x) procedimientos complejos,
(xi) largos plazos, costos de viaje relacionados con la (xii) falta de presencia regional de las instituciones necesarias, la (xiii) existencia de asociaciones del consumidor que explotan al mismo y (xiv) interpretaciones
potencialmente diferentes de la justicia.
Estos resultados sugieren una variedad de recomendaciones de políticas específicas para el caso del Perú. El marco analítico desarrollado en
este estudio además puede aplicarse a cualquier sector o país, y de esta
forma es una nueva herramienta para investigar el Acceso a la Justicia de
los vulnerables grupos de consumidores en diferentes contextos.


CHAPTER 1

Introduction

El Banco nunca pierde.1
(Common saying in Peru and comment of numerous
vulnerable financial consumers surveyed for this study)

Financial services targeting the poor and vulnerable can bring considerable opportunities yet also significant risks to financial consumers.
One of these potential risks is the illegal or illegitimate treatment of
these consumers and their cases by the financial institutions that are, at
times, enabled by exploiting the various disadvantages which are particular to vulnerable target groups, causing substantial detriment to the
whole household of the concerned client. An enabling environment for
those vulnerable consumers experiencing injustice which also fosters the
decision to actively seek justice is thus highly relevant and contributes to
the achievement of the 16th Sustainable Development Goal2 by increasing the Access to Justice.
The central aim of this study is to gain an in-depth understanding of
the enabling and hampering aspects of the Path to Justice of a microfinance client in Peru. I first will develop an analytical framework which
enables a thorough evaluation of the Path to Justice for vulnerable consumers of any economic sector—from the decision to seek justice to
the final outcome. The framework will then be applied to the case of

Peruvian microfinance.

© The Author(s) 2018
Y. Olteanu, Access to Justice in Microfinance,
Palgrave Studies in Impact Finance,
/>
1


2 

Y. OLTEANU

1.1  Background to the Research Problem
For developing countries, the most vulnerable financial consumers
are considered to be those who have previously been excluded from
the financial system or due to their characteristics have challenges with
accessing it at all (Ledgerwood and Gibson 2013). Some of the features which have been identified as tending to increase the likelihood
of financial exclusion are (i) being particularly young or old (Financial
Sector Deepening Kenya 2016), (ii) living in rural as opposed to urban
areas (Ledgerwood and Gibson 2013), having another religion than the
majority population (Harris-White 2005), belonging to an ethnic minority (Ledgerwood and Gibson 2013), being female (Johnson 2000) and
living just above or below the poverty line (Hashemi and Montesquiou
2011). Among the adults who live on less than 2 USD per day, around
38% are small-holder farmers, 23% casual laborers, 19% low waged salaried, 11% microentrepreneurs and 5% fishermen or pastoralists (Wyman
2007). It is hence large and heterogeneous groups that cannot fully satisfy their needs for financial services.
In the beginning, approaches aiming at financially including these
societal groups primarily evolved around one product: Microcredit.
Microcredits targeted microentrepreneurs and aimed to alleviate poverty by investing in and, by this, growing their economic activity. The
perspective, however, has changed with the experience that the loans

were frequently not used for productive business purposes but rather
for consumption or other needs like, for example, school fees. The poor
and vulnerable need a variety of financial services in addition to microcredit to enable them to manage their liquidity and risks. As a consequence, the diverse financial services designed for and targeting the poor
or other formerly excluded groups of the society are today covered by
the term microfinance. For policymakers, yet another, broader concept
has gained momentum over the past years: Financial inclusion.3 While
the term microfinance includes credit, savings, insurance and non-financial services offered to the defined target group in a financially sustainable way, financial inclusion is multifaceted. It comprises the access to
an appropriate and affordable range of products, the effective use of this
offered product range and financial consumers who are well prepared
and informed so that they can make good financial decisions for their
households. Financial inclusion thus deliberately puts a focus on both,
sustainable operations of the providers and the clients’ interests and


1 INTRODUCTION 

3

protection. The concept hence can be understood as a reaction to the
mission drift identified in some markets, which has resulted in increased
financial and social vulnerabilities for the affected clients (Ledgerwood
and Gibson 2013). The term mission drift in this context stands for a
deviation from the original social and development-oriented approach
towards a profit-maximizing one by those financial institutions focusing on vulnerable target clients—the so-called microfinance institutions
(MFIs). A mission drift can manifest in diverse ways with one being the
cutting of costs by either increasing the average loan size or decreasing outreach to disadvantaged or rural groups (Hermes and Lensink
2011).4 Another is the improvement of the financial performance by
infringing basic business ethics imperatives when dealing with these vulnerable target groups (Hudon and Sandberg 2013; Serrano-Cinca and
Gutiérrez-Nieto 2014). The latter has diverse implications. Some MFIs
have designed products and prices that cater to their profit-maximizing

activities yet do not meet the needs of their clients and in some cases
even exploit their vulnerabilities (such as a lack of understanding of the
concept of interest rates). Some MFIs have engaged in reckless lending
and ultimately over-indebted their clients. A number of these specialized
financial institutions were also found to engage in illegitimate or even
illegal selling and collection practices with their clientele (Hulme and
Arun 2011). These developments do not only negatively affect these vulnerable target groups but can have destabilizing effects on the financial
system as a whole (Hudon and Sandberg 2013). They hence create the
need for a protection of the concerned vulnerable financial consumers,
which on the one hand is induced by the legal and regulatory framework
and on the other by self-regulation of the involved financial institutions
(Giggy and Wong 2015).
In its yearly assessment of the enabling environment for financial inclusion in 55 countries, the Economist Intelligence Unit takes
into account two indicators related to the protection of the clients: (i)
Market-conduct rules5 and (ii) grievance redress and operation of dispute-resolution mechanisms6 (Economist Intelligence Unit 2016). In
its 2016 report the legal and regulatory environment for financial client protection was found to be weak and underdeveloped in numerous developing countries. Many lack specific microfinance laws, and
the existing ones frequently do not cover client protection issues or are
inadequately enforced (Sluijs et al. 2014; Economist Intelligence Unit
2016). Many stakeholders have, however, endorsed the most prominent


4 

Y. OLTEANU

initiative of industry self-regulation: The Smart Campaign’s Client
Protection Principles. It promotes and certifies adherence to seven principles which call for (i) appropriate product design and delivery, (ii) prevention of over-indebtedness, (iii) transparency, (iv) responsible pricing,
(v) fair and respectful treatment of clients, (vi) privacy of client data, and
(vii) mechanisms for complaints resolution (Smart Campaign 2016).
Grievance, redress and complaints mechanisms are hence considered to be relevant on both levels: The legal and regulatory framework

on the one side and the codes of good conduct of the financial institutions themselves on the other. While there exist numerous studies on
the other indicators, redress and complaint mechanisms have so far gotten little attention in research. The few existing studies I found merely
include them as one of many aspects of client protection and most focus
on the question of if respective mechanisms exist.7 One study also takes
into account the quality of the respective enforcement (Makuyana 2015).
The pilot study series Voice of the Client also inquires as to whether the
surveyed financial consumers know and understand the existing mechanisms (MIX Market and HIVOS 2017). There is, however, a lack of
research which deliberately takes into account the appropriateness of the
different relevant steps and instruments for the vulnerable target group
of microfinance clients.

1.2  Research Objectives
This study aims to contribute to the understanding of a vulnerable financial consumer’s Path to Justice and, by doing this, to fill a part of the
research gap identified above.
It deliberately puts the client and her8 features, limitations and specific
needs at its center. This client focus reflects the industry’s original social
and development-oriented mission and enables an analysis which is centered around this vulnerable target clientele.
The output of the study will be twofold: On the one hand, I will
develop an analytical framework which can be used for future assessments of Access to Justice of vulnerable consumers and the respective
comparisons between different countries. On the other hand, the application of this framework to the case of the Peruvian microfinance sector
will allow me to draw concrete conclusions for this case and to formulate
policy recommendations.


1 INTRODUCTION 

5

1.3  Research Question
To achieve the objectives of this study, the following main research question will be addressed: Which factors contribute to or impede the Access to

Justice of vulnerable financial consumers in Peru?
Two guiding questions will help structuring the study. They this way
ensure the main research question is answered in a comprehensive way:
1. Which factors contribute to or impede the decision to enter the Path to
Justice?
2. Which factors contribute to or impede the moving along the Path to
Justice?

1.4  Significance of the Study
Gaining a deeper understanding of the path a vulnerable financial consumer takes when seeking justice—and of her challenges and needs when
starting or continuing on the path—is important for numerous stakeholder groups:
1. First, it’s important for the financial consumer herself, as a lack of
access to appropriate and effective grievance redress and complaint
mechanisms can result in various disadvantages and ultimately in
a refrainment from participating in and thus from benefiting from
the formal financial system altogether.
2. Second, suppliers profit from redress mechanisms which are well
adapted to their target clientele as this way they can learn about
the dissatisfactions and grievances of their clients and take action
to avoid losing them. By building up a comparatively better set-up
than competitors, they can also improve their positioning on the
market.
3. Third, regulators and other policymakers by establishing an effective
system and continuously improving it, can reduce opportunistic
behavior and thus market inefficiencies which can potentially render the market unstable.
4. Fourth, supporting organizations, funders and networks can use the
findings to assess and adapt their respective actions, requirements
or assistance.