Policy

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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Mobile banking, access to finance, and the attendant challenges and opportunities are all on the agenda at the Mobile Money Summit, which takes place May 14 – 15 in Cairo. This is an opportunity to hear from innovators, meet new partners, and engage with leaders from finance, telecom and the development community. CGAP is proud to co-organize this event with DFID, IFC, and the GSM Association, which represents more than 700 mobile network operators.

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Mobile operators find navigating financial regulation isn’t quite so easy as sailing through the telco world.

If they want to convince central bankers that hold the keys to the payments space, mobile operators will make persuasive arguments about how mobile financial services meet traditional thinking about deposits, the new domain of payment system regulation, and the hot button issue of anti-money laundering, especially when sending money across borders.

No operator better illustrates this than Vodafone and its M-PESA money transfer service. Read the rest of this page »

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New Report from Aite Group Considers Mobile Banking Models from Africa for the United States
Uganda: Barclays Starts Mobile Banking
Alternative Data and Its Use in Credit Scoring
Right Regulation Will Help Mobile Financial Services
Over 2 Trillion Text Messages Will Be Sent Worldwide and This Number Continues To Grow

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Black Hat Conference: Security Researchers Claim To Hack GSM Calls
Microfinance Braces for Hard Times in Post election Violence
Centurion Bank mulls mobile banking villages
Competition compels local banks to meet global standards
Equity now boasts of 2 million customers
Money is going mobile through phone services
mChek, Airtel bag Global Mobile Award 2008

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Operators, banks should cooperate on mobile payments

GrameenPhone Plans For Money Transfer Business In Bangladesh

Will mobile phones extend banking to all four corners of the world?

Regulating Transformational Branchless Banking

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Mobile banking and other technologies need a balanced regulatory approach

Washington D.C. (January 31, 2008) – Basic, everyday financial services are out of reach for more than two billion people in developing countries. But the rapid growth of branchless banking – including mobile phone banking – is reducing the cost and expanding the availability of such services.

“All of this innovation presents challenges and opportunities for regulators,” says Elizabeth Littlefield, CEO of CGAP. “Policy will determine not only where branchless banking is allowed, but also which business models turn out to make economic sense - and how far they will go in reaching poor people.”

Regulating Transformational Branchless Banking is a product of collaboration between CGAP and the UK’s Department for International Development (DFID), in partnership with the GSM Association, the global trade association for over 700 mobile phone operators. The authors also benefited from conducting three of seven diagnostic missions with the World Bank’s Financial Markets Integrity Unit.

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They both re-engineer something used for decades in rich countries , rethinking every assumption to make it affordable for low-income clients. And both may be safer than the alternatives poor people are already using.

Tata announced the Nano last week as an ultra simple but stylish car costing US$2500, closer to affordable for Indian families than any other new car. To slash prices, Tata engineers questioned everything conventional wisdom said is a “must have”: why not one large windshield wiper instead of two? Why does the beam connecting the wheel to the axle need to be made of solid steel? Today’s steel is far stronger than what Henry Ford started with, but no one had changed it yet. Less steel equals saved expense, and a lower cost in the quest for something rabidly cost-conscious consumers will buy in emerging markets like India.

But critics are bashing the Nano already for not getting close to meeting environmental and car safety standards like those in Europe, Japan and North America. Isn’t the Nano safer than the typical sight of an Indian family of 6 on one motorcycle, dodging trucks in traffic?

The lesson might be instructive for those watching the mobile banking space. Would mobile banking, through a licensed bank or reputable mobile carrier, be safer than the informal mechanisms poor people use now: stuffing cash in the mattress? or saving through poorly regulated cooperatives? sending money through bus drivers and friends, who might not deliver it at all? Research is needed to know. Read the rest of this page »

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Pakistan: State Bank issues draft policy
The launch of Branchless Banking (BB) by using delivery channels such as retail agents and mobile phones was announced Saturday by State Bank of Pakistan (SBP) Governor Dr Shamshad Akhtar.  The new system offers a significantly cheaper alternative to conventional branch-based banking and allows financial institutions and other commercial players to offer financial services outside the premises of traditional banks. BB can be used to substantially increase the outreach of financial services to “un-banked” communities. The provision of enabling a regulatory environment by careful risk-reward balancing is, however, necessary to use such models. (CGAP related resource)

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