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State Bank of Pakistan has cleared the way for banks to use agents to handle cash, and outlined a risk-based approach to customer due diligence to enable banks to extend their reach to lower-income clients. The regulations also come with detailed guidance on minimum standards for data and network security, customer protection, and risk management procedures.

But only for banks… This shouldn’t be a surprise. SBP’s policy paper on branchless banking (last year) was clear on this point: a nonbank model “may be allowed at a later stage after we have sufficient experience in mitigating agent related risks using bank led model and need to think about mitigating only e-money related risks.” So for now, mobile phone companies are still waiting for the door to be opened to them as well, test the waters without clear permission and detailed guidance, or find a JV with a bank. For those with deep pockets, buying a bank outright might be an option, too.

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Stefan Staschen works with CGAP’s technology and policy teams.  

Kenya’s banking law and regulations look all too familiar: if an institution accepts deposits and uses this money for lending or investment, it needs to have a bank licence. And banks can only transact through their head office or branches. Full stop. But the Central Bank of Kenya has realized that operating through full-fledged branches, which are subject to detailed regulatory requirements, is a very expensive proposition. If the huge gap of banking services in remote and rural areas is ever to be closed, alternative delivery models will be required. Branchless banking models such as mobile phone banking (pioneered in Kenya by M-Pesa, which is run by a mobile network operator and not a bank) and the use of retail agents will be low-cost alternatives allowing for increased rural penetration. The Central Bank Governor, Prof Njuguna Ndung’u, has now pledged to institute necessary regulatory changes allowing banks to offer financial services outside bank branches.

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