The monthly newsletter from the Indicus Centre for Financial Inclusion documents the latest news and views in the financial inclusion space, to provide a knowledge base that will help build understanding around how to accelerate the poor’s access to high-quality financial services.
The lead stories this month showcase case studies of mobile money working for inclusion in three completely different countries. The first two experiences highlight the use of innovation, while following FATF guidelines of the risk-based approach, thus using mobile money networks to bring the unbanked onto the digital pathway to financial inclusion: a) Sri Lanka where the Central Bank has consciously allowed non-banks into the payments landscape with the objective of inclusion and b) Somaliland, where despite weak governance, the telecom company has adhered to FATF guidelines while achieving phenomenal success offering cash-in, cash-out, and digital payment transactions for free. In the third country study Zimbabwe, EcoCash has built up transaction volumes worth 22% of the country’s GDP in less than two years, by effectively managing an agent network and is now working for interoperability with the banking system.
This paper by Simone di Castri documents how the Central Bank of Sri Lanka has put in a regulatory framework for achieving financial inclusion through innovation, creating a level playing field for banks and non-banks. To this end, the Central Bank of Sri Lanka now allows non-banks to issue electronic wallets as long as they maintain equivalent funds held in a custodial account in one (or more) licensed commercial banks. The successful adoption of eZ Cash has many lessons for India, particularly in the KYC domain; the proportionate risk-based principle has been used to allow opening an entry-level account which customers can activate remotely from their mobile phone.
This paper by Claire Pénicaud and Fionán McGrath puts together the achievements of Telesom Zaad in Somaliland, offering cash-in, cash-out and digital transactions for free, while proactively applying strict KYC norms. This pricing model – coupled with a major customer awareness campaign – has led to remarkable activity rates. In March 2013, 270,000 active mobile money customers conducted on average ~40 digital transactions in a single month, broken down into 25 P2P transfers and bulk payments (e.g. salary), 9 airtime purchases, and 6 bill payments/merchant payments. As a benchmark, even the leading mobile money deployments in Kenya, Tanzania, Uganda, and Pakistan process only 2-5 digital transactions per customer per month. Despite weak regulatory capacity and the lack of a national id, the telco is following FATF recommendations of a risk-based approach to customer due diligence, along with monitoring of suspicious transactions.
Phil Levin has analysed the success of EcoCash in Zimbabwe where in 18 months, the number of mobile money accounts exceeded the country’s bank accounts and transaction volumes are around 22% of the country’s GDP. There are significant lessons to be learnt on delivering a simple product that addressed customer needs, on marketing and awareness through brand ambassadors, on maintaining a quality distribution network where 80% of revenue was given to agents as commissions etc. The move now is to integrate with the formal sector by providing interoperability with the banking system.
Section I: Policy – the latest from India’s policymakers
The Indicus Centre for Financial Inclusion was launched in 2011 to distil and disseminate information on accelerating the poor’s access to high-quality financial services. The Centre is supported by the Bill & Melinda Gates Foundation. http://www.indicus.net/icfi