Transcript

Basic Approaches for Digital Financial Services That Support Financial Inclusion

John Owens, Senior Policy Advisor, Digital Financial Services, AFI Moscow, Russia 9th October, 2014

Global Data on Financial Inclusion

Source: Demirguc-Kunt & Klapper (2012), World Bank Policy Research Paper 6025

2.5 billion of adults do not have access to formal financial system

AFI | Alliance for Financial Inclusion

The Alliance for Financial Inclusion

•  120 Institutions

•  95 Countries

•  Unique Peer Learning Network Working Groups

•  7 Policy Areas

•  More than 53 tangible policy changes

•  Shaping global discussions (G20, G24, SSBs)

•  Platform for public private dialogues

•  Maya Declaration: 52 concrete commitments

Building the Network

Activating the Network

Enhancing Network value

Policy-Driving Network

Independent Network

AFI | Alliance for Financial Inclusion

Growing Relevance of Financial Inclusion Globally

•  Financial Inclusion is no longer only a development concern but a cornerstone of economic development framework and model

•  Ministries of Finance and Central Banks are including Financial Inclusion in their mandate together with stability and integrity

•  Financial Inclusion is more and more understood in a broad framework including access, usage and quality of a range of financial services

•  Developed countries are increasingly facing financial exclusion problem

•  G20 recognizes the benefits of financial inclusion for inclusive

growth, stability and integrity

AFI | Alliance for Financial Inclusion

Financial Inclusion Policy Trends

•  Technological innovation to reduce cost of delivery and increase access on a large scale

•  Proportionate financial sector policy and regulation is critical enabling factor

•  Increased importance of data to make informed policy decisions

•  Quality aspects (consumer protection) of financial Inclusion

•  Coordinated national strategies for financial inclusion

AFI | Alliance for Financial Inclusion

Opportunities

•  Growing alignment of interests among governments, private sector and global community

•  Greater understanding on the issues related to financial inclusion as well as more data

•  Recognition of country specific conditions and developing and emerging countries led approaches

•  More open communications with International Standard Setting Bodies

•  Technological innovation and enabling regulatory framework are driving new digital financial service models that support financial inclusion

AFI | Alliance for Financial Inclusion

Benefits & Opportunities of Digital Financial Services

Source IFC Infographic: Bonny Jennings www.itldesign.co.za I AFI | Alliance for Financial Inclusion

AFI | Alliance for Financial Inclusion

Ø  E-money Services

Ø Mobile Financial Services

Ø Use of Agents

Key Models of Digital Financial Services

Show VIDEO OF CLIENTS USING MOBILE PAYMENTS HERE

AFI | Alliance for Financial Inclusion

AFI | Alliance for Financial Inclusion

Convergence & Interoperability: A driving force for Financial Inclusion

Financial Inclusion

AFI | Alliance for Financial Inclusion

Mobile Money Supporting Financial Inclusion in Other Ways

2012

2006 13%

29% 20 Million bank accounts

4 Million bank accounts

24 Million registered mobile money users

Percentage of adults using a bank account in Kenya

M-Shwari: Mobile Money & Banking

Small Value and Credit Savings

M-Shwari, a savings and credit product from Safaricom and

Commercial Bank of Africa (CBA) has registered a phenomenal

uptake. The product enables M-PESA subscribers registered for at least 6 months to get a loan,

anywhere from

$1.15 to $235 for a 30 day term

instantly into their e-wallets.

AFI | Alliance for Financial Inclusion

Launch  Services  

–  Customer  

Adop6on  

Regulatory  

Issues  Customer  

Perspec6ve  

Product  

Development  

Environment  Ins6tu6onal  

Perspec6ve  

Product  Tes6ng  

Developing Your Road Map

AFI | Alliance for Financial Inclusion

Digital Financial Inclusion Policy Trends

Ø  Technological innovation to reduce cost of delivery and increase access on a large scale

Ø  Proportionate financial sector policy and regulation is critical enabling factor

AFI | Alliance for Financial Inclusion

Ø  Increased importance of data to make informed policy decisions

Ø Quality aspects (consumer protection) of financial Inclusion

Ø  Coordinated national strategies for expansion of digital financial ecosystems leading to more inclusive environments

Digital Financial Inclusion Policy Trends

AFI | Alliance for Financial Inclusion

Ø  Reporting requirements must be clear and focus on the information needed to:

Ø  Assess whether service providers are sound Ø  Risk management protocols are effective Ø  Consumer protection policies are adequate

Ø  Regulators should be careful to avoid excessively burdensome and overlapping requirements, which may stifle innovation and limit market competition.

Key Regulatory Policies For DFS

AFI | Alliance for Financial Inclusion

1)  Risk management frameworks and resulting data for risks pertaining to operations, liquidity, money laundering, and terrorist financing

2)  Consumer protection

3)  Public disclosure of information

4) Outreach and financial inclusion

Four Key Areas in Digital Financial Services Reporting

AFI | Alliance for Financial Inclusion

Ø  Proportionate AML/CFT

– Tiered KYC Regulations

Ø  E-Money Operator Regulations

Ø  Remote Account Opening Rules

Ø  Agent Regulations

Ø  Interoperability

Key DFS Regulatory Options to Support Financial Inclusion

AFI | Alliance for Financial Inclusion

DFS Experiences in Tanzania Create an enabling legal and regulatory environment

Ø  Support market development and encourage innovation Ø  Proportionate regulation

Partnerships and cooperation Ø  Partner with Telco Regulator Ø  Encourage market cooperation (non-banks and banks)

Government Uptake of Usage of DFS Ø  Revenue payments (Licenses and small taxes)

Adoption of DFS in National Financial Inclusion Strategies Ø  Public and private sector adoption for national financial

inclusion goals Interoperability

Ø  Consider private sector initiatives enhancing or developing interoperability

AFI | Alliance for Financial Inclusion

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

Female Male Female Male

7.00% 11.50% 10.10% 17.90% 7%

5.90%

41.10%

45.10%

30.40% 27.10%

17.20%

14.30%

Use informal mechanisms only

Have/ use non-bank formal products

Have/ use bank products

2013

2009

DFS Experiences in Tanzania

AFI | Alliance for Financial Inclusion

Bangladesh: Mobile-Enabled Agent Banking Success

AFI | Alliance for Financial Inclusion

Central Bank Issued Clear Guidelines: Ø  Agent Banking &

Allowable Services

Ø  Eligibility Criteria for Agents

Ø  Allowance of Non-Exclusive Agreements

Ø  Risk & Operational Issues

Ø  Consumer Protection Principles

Results: Ø  150,000 active agents

Ø  13.1 M registered clients

Ø  6.5 M active clients

Philippines  Example  of    Mobile-­‐enabled  E-­‐Money  

Challenges  for  Rural  Banks  •  Reaching  deeper  into  rural  areas  without  

costly  investments  in  infrastructure  •  Reducing  costs  of  servicing  clients  •  Avoiding  risks  from  robbery,  holdup    

Philippines Example of Mobile-enabled E-Money •  Central Bank allowed e-money

services to be linked and used by rural banks to offer basic banking services

•  Accreditation process was via the Rural Bankers Association of the Philippines (RBAP) that developed and received approval for standard procedures used by the industry.

•  Accredited more than 1,100 rural banking units and benefited > 300,000 rural bank clients.

•  Processed over P17 B (US$400 M) in mobile phone banking transactions.

Solomon Islands: Mobile Banking for Financial Inclusion

AFI | Alliance for Financial Inclusion

Central Bank Was Key To Financial Inclusion Thru

Ø  Agent Banking Regulations

Ø  Expanded Eligibility Criteria for Agents

Ø  Tiered KYC Regulations

Ø  Close dialogue with the Private Sector in Developing Policies

Ø  Financial Literacy and the role of the Private Sector

Results: Ø  From 80% without a bank

account 5 years ago, 80% now have access to basic banking services

[email protected] www.afi-global.org

Thank you! [email protected]

@jvowens


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