Policy Guidance

FIGURE 13: PHILIPPINES CONSUMER PROTECTION EDUCATION

The central bank (Bangko Sentral Ng Pilipinas or BSP) is in a partnership with the Department of Trade and Industry (DTI) and two networks of Microfinance Non-Governmental Organizations (MFNGOs) to facilitate information sharing and greater access to finance for MSMEs served by DTI Negosyo Centers — a one-stop-shop where MSMEs can seek support such as processing of permits, linkage to financial institutions, and capacity building.

One of BSP’s tasks under this partnership is to help enable Negosyo Centers deliver financial education sessions as part of the broader capacity building program for MSMEs. Technical discussions on the content of modules and tools resulted in agreements focused on topics related to DFS, in line with DTI’s banner programs promoting e-commerce. Module and tools development is ongoing and expected to be rolled out to more than 1,000 Negosyo Centers around the country to benefit their MSME clients.

The BSP continues to enhance the financial literacy of its country residents, with a focus on expanding strategic and multi-sectoral partnerships to reach priority sectors such as MSMEs. While the financial literacy programs are not fintech-specific, there is an emphasis on the importance of personal finance, maximizing the benefits of the use of digital financial products and services, and consumer protection, among others.

The BSP is also implementing a Digital Literacy Program as part of its financial education advocacy and while this program is not MSME-specific, it targets the public and MSMEs can also benefit.

Source: Bangko Sentral Ng Pilipinas, 2021. (https:// www.bsp.gov.ph/Pages/InclusiveFinance/ FinEdConsumerProtectionCampaigns.aspx). Philippines Department of Trade and Industry, 2021. (https://www. negosyocenter.gov.ph/negosyocenter)

Policy Guidance

The examples above provide useful guidance on measures and directions that regulators in AFI member countries have taken to promote crowdfunding while safeguarding privacy concerns that protect investors. The promotion of new technologies for financing MSMEs has advantages, but a careful understanding and consideration of risks is necessary to ensure that investors and consumers (entrepreneurs or MSMEs) are protected. Policy recommendations for the regulation of lending-based and investment-based crowdfunding platforms are as follows:6

TABLE 4 POLICY GUIDANCE FOR COLLECTION, PROTECTION, AND USE OF DATA

Accuracy and reliability

Regulatory and supervisory institutions should mandate measures that ensure alternative data collected is compliant with the law, matched to the correct customer, obtained from trustable sources, and updated and relevant to the purpose for what is being used.

Accountability Operators using alternative data for credit scoring and evaluations of customers must be able to see the data source. Where data is sourced directly from customers, operators should take adequate measures to implement data protection and privacy principles.

Consent

Consumer’s Rights

A consumer’s consent must be sought when alternative data is being used for a different purpose than the one specified for the data collection. When data is provided by a third party, mechanisms should be in place to obtain consent from the data owner. Operators should be required to enter into agreements with their clients governing the main terms of the client-platform relationship.

Operators should put in place mechanisms that allow consumers access to their data and request the deletion of data. In addition, consumers should also be able to decline the use of their data for certain purposes (i.e. marketing) and should be allowed to transfer their data to another location without affecting its usability.

Data Collection The collection of big data that involves personal information for credit scoring and evaluation should be collected and processed in accordance with the law. The legal basis could involve the consumer’s consent to collect and process what is necessary, such as, for the performance of a contract to which the data subject is a party.

Security Operators should conduct periodic cybersecurity risk assessments, develop policies and procedures to effectively respond to cyber incidents, communicate cyber incidents to the appropriate regulator, and devote resources to assess, monitor and mitigate consequences of cyber-incidents.

Transparency Many operators do not offer standardized pricing policies. This has caused challenges in pricing transparency of lending products and services. These are challenges not addressed by traditional annual percentage rate (APR) rules. Specific business conduct requirements for a platform should be in place to provide adequate disclosure to investors and borrowers on various elements such as: (i) how the platform operates and earns its revenue, (ii) financial disclosure of offerings that may differ according to the size of offerings, (iii) risks of engaging in offerings.