Trade in Financial Services: Mobile Banking in Southern Africa

Transcription

1 Trade in Financial Services: Mobile Banking in Southern Africa Robert Stone Oxford Policy Management 12 November 2009

2 What we will cover The context: the regulatory environment for m-banking Mobile banking in Southern Africa demand and supply The diagnostic study Key recommendations 1

3 What makes a regulatory environment? Linguistic culture Banking sector Strength Sophistication Francophone Anglophone Lusophone Legal culture Common Law Civil Law Regulator Independence Integration Sophisitcation Ownership Depth South Africa Mixed... and the quality of the courts THE REGULATORY ENVIROMENT Political culture Democratic Resources Telecom sector Civil Society Totalitarian Strength Sophistication Ownership Political stance Laissez faire Robust Depth Dirigiste Weak 2

4 The common challenge policy makers and regulators share a common challenge: how to formulate a proportionate regulatory regime that gives space for innovation and permits branchless banking to scale up safely. CGAP Focus Note No.43, Regulating Transformational Branchless Banking, January 2008 Policy makers distinguish between Additive branchless banking, which merely adds to the range of choices or enhances the convenience of existing customers of mainstream financial institutions; and Transformational branchless banking, which extends to customers who would not be reached profitably with traditional branch-based services David Porteous, The Enabling Environment for Mobile Banking in Africa, UK DFID,

5 The hierarchy of outreach Purely Additive Expanded functionality for existing fully served clients Extending functionality for existing partially served clients Extending the reach of existing served outside branched areas Redesigning products to serve more customers in branched areas Transformational Serving the unserved outside branched areas Source: Oxford Policy Management, Testing Remote Access Models in Southern African Countries, FinMark Trust,

6 <== Median Median + ==> Poverty ratio (proportion of population below poverty line) Zambia: outlet numbers OUTLET NUMBERS BY at TYPE district AT DISTRICT LEVEL level BY POPULATION DENSITY / POVERTY RATIO LEGEND: Bubble size shows number of branches per district: HIGH DENSITY HIGH POVERTY LOW DENSITY HIGH POVERTY branch only 10 branches branches branches 55 ` 45 State FIs Private banks/bs HIGH DENSITY LOW POVERTY LOW DENSITY LOW POVERTY MFIs <== Lusaka 1000 <= Higher Density => <= Median + Median => Population Density (population per Km2) Source: Oxford Policy Management with PMTC Zambia, Supply-side Study of the Inclusiveness of Zambia s Financial System (FinMark Trust and Government of Zambia, 2008) 5

7 Uncharted waters Transformational branchless banking moves into uncharted regulatory waters. In its application to branchless banking, existing financial system regulation is likely to be both over- and underprotective simply because it was not designed with the types of actors and relationships in mind that are critical to transformational branchless banking models. CGAP Focus Note No.43, Regulating Transformational Branchless Banking, January

8 CGAP s recommendations on the content of regulations Permit nonbank retail outlets to serve as agents Evolve a risk-based AML/CFT approach Clarify the legal boundaries of retail payments, e-money etc. Allow non-bank participation in electronically stored value on defined terms Robust but simple consumer protection Consider the likely longer-range competitive landscape CGAP Focus Note No.43, Regulating Transformational Branchless Banking, January

9 What we will cover The context: the regulatory environment for m-banking Mobile banking in Southern Africa demand and supply The diagnostic study Key recommendations 11

10 Key elements of cross-border demand Labour migration Refugees Cross-border trade Informal trade within SADC estimated at $17.6 billion a year but almost entirely through unrecorded cash-to-cash transactions. So not much scope for MMT there? Source: M. Musonda, Overview of Informal Trade in the SADC Region-Where are we now? Regional Workshop for SADC Informal traders February. Harare,

11 Major migration patterns 13

12 Southern Africa migration patterns are complex Bilateral estimates of migrant stocks Source: University of Sussex and World Bank estimates, Note: Bilateral migration data were created by applying weights based on bilateral migrant stocks (from population censuses of individual countries) to the UN Population Division's estimates of total migrant stocks in See World Bank Global Economic Prospects 2006: Economic Implications of Remittances and Migration. 14

13 The formal remittance market is small (and expensive) Southern Africa has the smallest formal market on the continent Western, 10,399 Estimated remittance receipts, 2008 (US$ billion) Eastern, 5,929 Central, 2,600 Southern, 1,979 Total Africa: US$38,011 billion Northern, 17,164 Source: IFAD, cited by Leon Isaacs, IAMT, at the MMT pre-conference workshop, 4 May and bank remittances out of South Africa are very expensive Cost of international transfers Taxi driver R Friends/relatives R Post Office money order R Post Office telegraphic money order R Inter-account payments R Source: 2005 figures form FinScope, cited in S. Truen, R. Ketley, H. Bester and B. Davis (2005). Supporting remittances in Southern Africa. Estimating market potential and assessing regulatory obstacles, Finmark Trust and CGAP 15

14 Two contrasting models: WIZZIT and M-PESA WIZZIT, South Africa Launched March 2005 Full banking licence Full (Exemption 17) bank accounts with Maestro debit card Useable on any mobile network Wizzkids By mid-2009 >250,000 customers M-PESA, Kenya Launched March 2007 Unlicensed Prepaid limited transactions (funds held in Trust account) Useable on Safaricom only Agent network By mid 2009 >5 million customers 16

15 What we will cover The context: the regulatory environment for m-banking Mobile banking in Southern Africa demand and supply The diagnostic study Key recommendations 17

16 Purpose of the study The objective of the project is to positively influence the expansion of access to finance through the rapid, but safe, take off of domestic and cross-border branchless banking, with appropriate protections for customers and the financial system. The key focus of the study is on cross-border payment services. Focus countries: Angola, Malawi, Mozambique, South Africa and Zambia Data for Namibia also taken into account as the principal receiving country in the region for Angolan migrants 18

17 Coverage of country diagnostics Domestic branchless banking regulatory framework Permissibility of a non-bank based branchless banking model Permissibility of outsourcing provision to retail agents Perspectives of the Central Bank and other policy makers Provision of electronic money services by banks Effect of AML/CFT requirements on access to finance Regulatory framework for cross-border transactions Types of institutions that may offer cross-border services Transaction limits and other exchange control requirements Identification requirements Classified as: permissive, in between (or in transition), restrictive or unclear 19

18 The regulatory spectrum in the focus countries Domestic Branchless Banking Regulatory Framework Nonbank-based branchless banking model permissible? Outsourcing to retail agents permissible? Regulator/Policymaker Perspectives on outsourcing Electronic money services Effect of AML/CFT [1] Regulatory Framework for Cross-Border Transactions Who can offer them Transaction limits [2] Identification requirements Angola Malawi Mozambique South Africa Zambia [1] Information on the effects of AML/CFT for Angola is incomplete [2] Transaction limits in South Africa are restrictive for PostBank but not very restrictive for banks. Source: Oxford Policy Management, work in progress for World Bank Permissive In between, or in transition Restrictive Unclear 20

19 So it s going to be difficult! The five countries covered in the study a. have very different regulatory regimes in relation to the potential for m-banking in general and for cross-border m-banking in particular; and b. they are at very different stages in the development of their m-banking facilities 21

20 What we will cover The context: the regulatory environment for m-banking Mobile banking in Southern Africa demand and supply The diagnostic study Key recommendations 22

21 Recommendations for regulators and policy makers In Mozambique, South Africa and Zambia: continue improving the regulatory framework for domestic branchless banking and low- value cross border transfers In Angola and Malawi: as a first step, creating a regulatory space for such transfers Permit pilots, in order to validate feasibility validate the potential positive impact enable stakeholders to gain experience and allow the regulatory framework to expand 23

22 Elements of the proposed follow up action plan 1. Support for branchless banking initiatives targeting the unbanked 2. Providing opportunities for stakeholders in target countries to learn from branchless banking pioneers worldwide 3. Creating opportunities for extensive stakeholder collaboration and 4. A possible pilot project for cross-border transfers 24

23 Where do we go from here? On the positive side, there are useful comparisons and lessons that can be drawn upon by the focus countries and other SADC countries The problem is, that much of the action required to promote cross-border trade has to be taken at the country level So is this a regional programme, or a collection of country programmes? What is regional and what is multi-country? a subject for another BBL? 25

24 Thank you Robert Stone Oxford Policy Management 26