All the financial institutions in the country are required to establish an internal department tasked with handling complaints from customers, according to a new directive issued by the National Bank of Ethiopia (NBE).

The directive, which covers banks, insurance companies and microfinance institutions, was approved at the end of last month and is expected to be effective after six months.

The directive is aimed at protecting low-income and less experienced financial consumers, according to the 50-page directive.

"Innovation and development in the financial infrastructure, products and services sector would possibly increase the risk and challenges," it reads, "particularly those that low-income and less experienced financial consumers face."

The directive says an internal complaint handling unit has to receive grievances in any language and has to give a unique tracking number to every compliant. The unit has to wind down investigations and announce the result of the outcome within 10 working days. The summary of the complaints has to be submitted to the board of the financial institutions and the central bank on a monthly basis.

Consumers can appeal to the central bank if they are not satisfied with the decision provided by the unit or if the unit does not respond to the applicants. The resolution provided by the central bank will be binding to the service provider but optional to the financial consumer.

The directive contradicts the law of the country, according to a legal director working at one of the banks who wanted to remain anonymous.

"The lawmaker is the central bank, and the appellate body is the central bank as well," he said. "There should be an independent body that oversees these cases, and I assume it could cause problems in the future."

A senior executive at one of the insurance companies shares the view of the legal director.

"If the central bank is a regulator and decision maker," said this insurance executive, "what's the purpose of the court then? The decision is going to be binding for the financial service provider and an option for the customer, which means the customer can take the case to the court still."

With the existing proclamation of the National Bank of Ethiopia, it cannot enact this directive, according to Belay Tulu, insurance supervision director at the central bank.

"There will be a revision of the establishment proclamation to add a provision that mandates the National Bank to oversee consumer protection in the financial sector," Belay said.