Among the recent developments in the financial sector is the newly passed Financial Service Consumer Protection law which prohibits banks from charging penalties on prepayments.

The law, which was championed by the National Bank of Rwanda with the aim of protecting clients of financial services providers, has been billed as a win for clients who include depositors, borrowers and insurance policyholders.

It comes to address challenges of retail customers having limited information about their financial transactions than do the financial institutions providing the services, which can result in hidden charges, excessively high-interest rates, clients making wrong financial decisions and insufficient avenues for redress.

This is the first comprehensive financial service consumer protection law in Rwanda. Previously, financial services consumer protection provisions were set out in several different laws.  The new law seeks to create a more level playing field between financial service providers and their clients.

The new law should set a precedent for financial institutions interactions with clients with regard to increasing transparency and information on transactions.

It is common to come across instances where clients are not aware of the charges of their accounts and services from their respective financial institutions.

For instance, often clients are unaware of the cost implications of maintaining a debit card, cheque book among others.  

This often leads to mistrust by clients with some building up assumptions that financial institutions operate with malicious intentions.

As Rwanda is working to increase the formally banked population from the current 36 per cent of adults, more members of the public are likely to embrace the services of financial institutions if they fully understand the cost implications and feel that their service provider of choice is honest enough.

The newly passed Finance Services Consumer Protection would be an ideal starting point with regard to transparency.