southern africa roundtable on making finance work for africa may 7-9, zambezi sun hotel,...
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Southern Africa Roundtable on Making Finance work for Africa
May 7-9, Zambezi Sun Hotel, Livingstone, Zambia
Finance and Technology – What are the opportunities?
By
Stephen Mwaura Nduati
Central Bank of Kenya
Enabling Environment for Mobile Banking in Africa2
Introduction• Access Challenges:
• Financial Services – Kenya, Tanzania, Zambia, South Africa
• Mobile Telephones - Kenya
• Growth in Bank Branches and in ATM Services - Kenya
• Local Money Transfer Services – Kenya
• Enabling Environment for Mobile Banking
• Regional Payment System Initiatives
• Way forward
Enabling Environment for Mobile Banking in Africa3
Access to Financial Services - Kenya
Financial Access Strand
19%
8%
35%
38%
Formal - Regulated banks,building societies or Postbank
Formal Other - SACCOs andMFIs
Informal - ASCA and ROSCAs
Unbanked - No formal orinformal financial productsused
Source - National Survey on Access to Financial Services in Kenya 2007
Enabling Environment for Mobile Banking in Africa4
Access to Financial Services – Tanzania
9%
2%
35%54%
Formal
Semi - Formal
Informal
Excluded
Source – Finscope: Key findings of the finscope survey in Tanzania 2006
Enabling Environment for Mobile Banking in Africa5
Access to Financial Services - Zambia
15%
8%
11%
66%
Formal Bank
Formal Other
Informal
Financially - Excluded
Source – Finscope: measuring financial access in Zambia November 2006
Enabling Environment for Mobile Banking in Africa6
Access to Financial Services – South Africa
51%
7%
9%
33%Formal - Bank
Formal - Other
Informal
Unbanked
Source – FinMark Trust: Making financial markets work for the poor (2006)
Enabling Environment for Mobile Banking in Africa7
Growth in Bank Branches - Kenya
NUMBER
0
200
400
600
800
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
Year
Bank
/Bran
ches
NUMBER
0
100
200
300
400
500
600
700
1999
2000
2001
2002
2003
2004
2005
2006
*
Num
ber
of A
TM
s
USAGE
0
2,000
4,000
6,000
8,000
10,000
12,000
1999
2000
2001
2002
2003
2004
2005
2006
*
Num
ber
of t
rans
acti
ons
'000
'
ATM Growth - Kenya
Source: Central Bank of Kenya
Enabling Environment for Mobile Banking in Africa8
Local Money Transfer Services - Kenya
Local Money Transfers
42%
20%
7%
18%
8%
3%
2%
Sent with family/friend
Through bus or matatu
Using money transfer services
Post Office money order
Directly into bank account
By cheque
Paid into someone else'saccount, who then passed it on
Source - National Survey on Access to Financial Services in Kenya 2007
Enabling Environment for Mobile Banking in Africa9
Access to Mobile Telephones - Kenya
National Mobile Phone usage
27%
27%
46%Own phone
Via family/friend
No access
Source - National Survey on Access to Financial Services in Kenya 2007
Enabling Environment for Mobile Banking in Africa10
Enabling Environment for Mobile Banking
• What is m-payment and m-banking?• Why is m-payments and m-banking relevant?• Emerging experiences & models• Policy Framework• Possible roles for policy makers• Enabling environment policy balance• Key concerns (certainty, security issues,
competition)
Enabling Environment for Mobile Banking in Africa11
What is m-payments and m-banking?
Form of money:
Issued by/liability of:
Channel:
Cash e-money Bank money
Central Banke-money institution (could be bank or Telco) Commercial bank
Physical exchange
Digital cash Smart card
Mag stripe card Mobile phone Internet
POS/ATM
Branch & cheque
Account based or digital wallet
Source – Bankable Frontier Association
Enabling Environment for Mobile Banking in Africa13
Which model? Macro
payment
$/Eu10
Micro payment
Remote Local
Source: Mobey Forum WP v1.1
Traditionally, bank driven
(linked to deposit account or credit card)
Telco driven
(linked to pre-paid account)
Enabling Environment for Mobile Banking in Africa14
Why is m-payments and m-banking especially relevant? • Broadens access to financial services:
Unbanked with cell phone: SA 20%+Rural coverage and penetration increasing
• Leapfrogging access to e-banking • Focal point to assess and consider general
development issues in the retail banking system
• Enhancement of safety, security & efficiency• Positive impact on social & economic growth
Enabling Environment for Mobile Banking in Africa15
Emerging Experiences & models• Europe:
• Collapse of Simpay & other models• Nordic region most advanced
• Asia:•Japan:
•DoCoMo: FeliCa 10m by end 2005•Korea:
•10m enrolled from 2003 onwards•Philippines
• SMARTmoney: 2.5m/ 20m customers (2000) • Globe G-Cash: 1.2m (2004)
Source – Bankable Frontier Associates
Enabling Environment for Mobile Banking in Africa16
Africa today:
• Zambia & DRC– Celpay: 2002 onwards
• South Africa: – MTN Mobile Banking: 2005- – Wizzit: 2005- – Paym8: 2003-
• Kenya: – M-Pesa: 2007 launched
Source – Bankable Frontier Associates
Enabling Environment for Mobile Banking in Africa17
Policy Framework
E-commerce
AML-CFT
Bank Agency Payment
systemsBank outsourcing
Comp-etition
Telco
regulation
EE: MOBILE PAYMENTS &
MOBILE BANKING
Enabling Environment for Mobile Banking in Africa18
Key Concerns - Certainty
There should be sufficient certainty around electronic contracting to protect both parties
Issues: • Repudiation risk• UNCITRAL model laws• Advanced digital signatures
Enabling Environment for Mobile Banking in Africa20
Competition
“The consumer should have the freedom to choose bank, mobile operator and handset and change them independently” Mobey Forum White Paper 2003, Customer Proposition
Issues: • Number portability• Platform access
– Movilpago case (Spain, 2000)
Enabling Environment for Mobile Banking in Africa21
Possible roles for policy makers
• Regulator
• Supervisor
• Standard setter
• Information gatherer
• Facilitator
• Coordinator
Enabling Environment for Mobile Banking in Africa22
Enabling environment:Policy balance
Stability of the financial system
Consumer protection
& choice
Efficiency
Broader access
Financial
integrity
Enabling Environment for Mobile Banking in Africa23
No of consumers
1. Pioneer 2. Breakout3. Consolidation4. Maturity
Market development
Questions for policy makers/ regulators1. Should policy makers promote inter-operability (to
get to efficiency and critical mass)? The gains from doing so could be offset by diminished product differentiation and stifled innovation.
2. Should public authorities be involved in the security of the means of payment? There are commercial incentives to achieve this, but also market wide externalities from not achieving it.
Source: Helen Allen, Bank of England 2003
Enabling Environment for Mobile Banking in Africa24
Regional Payment and Settlement Systems Initiatives
• Enhance regional financial stability and promotion of regional economic development through – East African Payment System Harmonization Committee and MAC directives on:– Cross Border Settlement model for the region– Harmonization of oversight benchmarks– Internet payments, e-commerce and e-banking
• BIS guidelines on Risk Management principles for e-banking• Management and supervision of Cross Border e-banking
activities
Enabling Environment for Mobile Banking in Africa25
Way Forward• Way forward:
– Appreciation that the payment system will remain dynamic – • New opportunities, • Market requirements and • Technological developments
– Enactment of e-legislation [e-transactions, communications & information]
– Enactment of AML and CFT Legislation– Enactment of Modern Payment System Legislation (Large
Value payment systems (RTGS), Retail payment system)– Enhancement of Regulatory Capacity to ensure that safety and
efficiency are maintained and that the following Questions are continuously addressed:-
• Why Regulate?• How?• When?