Mobile money for financial inclusion: policy and regulatory perspective in zimbabwe

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Alex Bara

Research Fellow

Zimbabwe Economic Policy Analysis and Research Unit (ZEPARU)

55 Mull Road, Belvedere


+263 772 962 491

+ 263 4 778423;


The arrival of mobile telephony and innovative technology is forcing regulators to re-evaluate their rules for financial service provision. Mobile phone technology is bringing new dimension where nonbanks are now able to offer financial products. Nonbanks like Mobile Network Operators (MNOs) may be well-placed to dramatically expand the reach and range of financial services for the poor and unbanked. Zimbabwe has also adopted mobile financial service, currently, being provided by both banks and non-bank institutions. Inevitably, it has been confronted with the regulatory challenges associated with Mobile Money (MM). The country has benchmarked it policy and regulation for MM products driven by MNOs MM service on international standards, more specifically, on the Kenya’s M-PESA Model. Whilst currently there is no legislation which directly regulates MM in Zimbabwe, the Central Bank (Reserve Bank of Zimbabwe -RBZ) has used the National Payment System Act to regulate MM and has internally developed some operational policy guidelines to enable direct supervision of MM. The major shortfalls of the current policy include lack of clarity on the model which the country adopts, non-enforcement of interoperability and lack of emphasis on financial inclusion. Zimbabwe can learn from the MM regulation of countries such as Kenya, South Africa, Indonesia and Philippines, particularly on issues to do with consumer protection, Know Your Customer (KYC) procedures, capitalisation of service providers and the general environment of mobile financial services. This paper makes a number of recommendations, firstly, the need for enactment of an Electronic Money Act, which covers issues of interoperability, among other. Secondly, the RBZ must enable technology to reach its full potential and must be pro-active soon after innovation, in coming up with suitable regulation. Third, engaging international development partners in coming up with such regulation may also help since these partners have the technical expertise and the financial capacity to handle such initiatives. Fourth, the RBZ is also encouraged to consider the peculiarities of the local environment in drafting the suitable regulation on MM by looking into cases where its adopted model (the M-PESA) model succeeded and failed as well. Fifth, there is also need to harmonise regulation to address issues of potential conflict of regulators and individual institutions. Lastly, the Regulator must link Mobile Money to Financial Inclusion.

Key words: Mobile Money, Banking, Regulation, Financial Inclusion, Mobile Network Operators (MNOs), Zimbabwe.


Mobile Money (MM) is one development which has managed not only to revolutionise the way banking is done but also to promote financial inclusion in most developing countries. One positive aspect of MM has been the capacity of countries to leap-frog the financial development stages, which some developed world went through, by utilising technological innovation. Financial services can now be offered to outlying and marginalised areas without need for establishing physical banking institutions. Technology has also enabled integration of markets across countries, shortening of distances between points of transactions, and more importantly brought efficiency in financial transactions. Whilst there has been such positive development, its existence has forced the inter-linkages and inter-operability of previously unrelated economic segments. Such a fusion is now occurring between the banking industry and the telecommunication industry, creating a concept called mobile banking, which would enable transaction cost reduction and increase in outreach to enable poor unbanked people to access micro financial services. For example, Mobile Money has brought together people, ICT, Mobile Network Operators (MNOs) and financial institutions.

This fusion is necessitating a change in the regulatory and institutional environment to accommodate and adapt to this synthesis. Traditionally, banks use network platforms of telecommunication companies to carryout financial transactions with little if any involvement of these companies in financial service provision. The current developments, where even telecommunication companies are also actively involved in financial matters, inevitably have some implication on the policy and regulation. Policy and regulatory frameworks are required not only to enable provision of financial services like MM, but also to enable supervision and control of providers of the service. However, regulation, by its nature, reacts to innovation and there are trade-offs which occur there-of. The regulatory framework has an impact on the reach, type, nature and extent of MM products which could be offered.

This paper determines the policy and regulatory frameworks which enable provision of the MM products by banking institutions and mobile phone companies in Zimbabwe. Specifically, the paper determines the current policy and regulatory framework, establish its adequacy, assess its impact on future development of the MM products, determine its current challenges and propose policy recommendation on the regulatory framework. The paper also establishes the regulatory formulation process, institutions involved and the possible impact on the efficient operation and adoption of MM products. In order to ascertain this, the study carried out an interview with the regulator of the financial sector, the Central Bank, to establish provision of the current policy for the establishment, regulating and controlling MM. Interviews were also held with MM providers to assess the impact of regulatory framework on operation of companies and banks offering MM services and establish challenges and constraints being faced by providers of MM. The study identifies international best practices on MM regulation, especially of countries where Mobile Money has been successful, and draws lessons for Zimbabwe. The paper gives recommendations on the necessary adjustments which the country does to the current regulation in order to promote MM.

It envisaged that this research would benefit both the regulator and service providers in coming up with the more favourable regulatory environment for Mobile Financial Service. To the regulator, the research would help in highlighting some of the challenges which service providers are facing as well as highlighting some of the weakness and shortfalls of the current policy. It would assist the regulator in coming up with appropriate regulation and in refining existing policy frameworks. To the service providers, this research provides them with a deeper insight into the MM issue, especially from the regulation side. It gives them clarity on issues and they may use it for lobbying of policy refinement or on any policy review advocacy initiatives.

    1. Basics about MM and Financial Inclusion

Mobile Money refers to a suite of financial services offered through mobile phones and other hand-held mobile devices. These services can include 1) person-to-person transfer of funds, such as domestic and international remittances, 2) person-to-business payments for the purchase of a range of goods and services, and 3) mobile banking, through which customers can access their bank accounts, pay bills, or deposit and withdraw funds (Dolan, 2009). Simply put, Mobile Money is a service that enables money to be transferred through a mobile phone. Mobile Money provides unbanked mobile phone users with a secure platform, which introduces easy to use menus on their phone to send messages through an audited system and is an ideal medium of storage of money for both the banked as well as unbanked subscribers (Akinkugbe-

Financial inclusion means that the majority of the population has broad access to a portfolio of quality financial products and services. Financial inclusion, include the following core elements:

  • Broad access to a range of financial products and services;

  • Financial literacy and financial capability initiatives, and a consumer protection framework; and

  • Minimum requirements for these financial products and services in terms of availability, quality, cost and sustainability (Reyes, Cañote, and Mazer, 2011).

According to CGAP, harnessing the power of technology could dramatically increase access to financial services for poor people around the world. Promoting financial inclusion requires creating or enhancing market incentives to develop and provide financial products and services focused on populations with low levels of access. It also involves use of other types of financial products and services, as well as empowering financial users with the tools needed to better understand financial products and services offered. Mobile money is one channel through which financial inclusion can be attained. The significance of mobile banking goes well beyond developing countries and financial inclusion. By providing a clear disaggregation of the components of banking, it throws light on the nature of financial services in general. By identifying the different components of financial services so clearly, mobile banking helps to establish where the focus of regulation should lie in all financial systems (Klein and Mayer, 2011).


Bank(s) offer individual accounts that can be used through bank-managed branchless channels
e.g CBZ Mobile Banking
Bank(s) offer individual accounts accessed through nonblank-managed agent networks and /or technology platforms

e.g. Emali Card (Tetrad Bank)

Bank(s) issues electronic value which is purchased from bank and redistributed by nonblank directly to customers


Cell Card, Kingdom Bank

Nonbank issues electronic value and holds matching-value assets in pooled account in regulated bank


EcoCash (Econet),

Onewallet (Netone)

Bank-Based Model Nonbank Based Model

Mobile Money is one of the many branchless banking products which are being offered in Zimbabwe. In Zimbabwe, and most probably in most countries, Mobile Money (MM) is offered through two ends, that is, through banking institutions and through Mobile Network Operators (MNOs). Bank based Mobile Money products were the first to be introduced before MNOs introduced their own products. Banking institutions, from commercial banks, building societies and merchant banks, offer MM products, mainly anchored on money transfer and payments.

Figure : Banks involvement in Mobile Money

Source: Tarazi and Breloff, (2010)
Banking institutions uses the MNOs platforms to enable account holders to access banking services through their mobile phones. Generally, financial institutions which offer MM products offer the following, account access (inquire/check bank balance), bill payments, payments at registered merchants (retail shops), money transfer and air time purchase.

On the other hand, MM products are also offered by MNOs, which currently are restricted to transfer of funds only, given that MNO based MM is still at its infancy stage1. Most MNO driven MM products are still on the early stages of implementation and hence caution is still being observed before rolling out of more advanced products. The MNO based MM product concept is by and large modeled around the M-PESA concept. As such, mobile money in Zimbabwe has developed to the extent which mobile banking has gone. However, according to Tarazi and Breloff, (2010), while the distinction is often made between bank-based and nonbank-based models of branchless banking, the reality is both banks and nonbanks typically play roles in any branchless banking scheme (see Figure 1). In a bank-based model, customers have a direct contractual relationship with a licensed financial institution (even though a customer may deal exclusively with nonbank agents who conduct transactions on the bank’s behalf). In a nonbank-based model, the customer does not have a direct contractual relationship with a licensed bank, and instead exchanges cash for electronic value recorded in a virtual account on the server of a nonbank, such as an MNO or an issuer of stored-value cards.

    1. MM and Financial Inclusion in Zimbabwe

The wide-spread use of mobile phone technology has opened new markets across the world, most notably in the financial sector with mobile phones widely used to provide financial services (AFI, 2011). The use of Mobile Money (MM) is one avenue through which inclusive financial development is being promoted in Zimbabwe. This is a fairly recent phenomenon which has a potential to increase financial inclusion. Zimbabwe is one country which, despite having an arguably well-developed financial sector, still has high levels of financial exclusion2. Building an inclusive financial sector serving the asset poor households and marginalized communities, remains a key task of policy (XLRI Jamshedpur, 2011). Zimbabwe has a high mobile penetration rate, standing at 66% in 2011, and is the third in Southern Africa after Botswana, 125%, and South Africa, 102% (The Zimbabwe Independent, 13 October 2011). In Zimbabwe, there are more people with cellphone than with bank accounts, as such, mobile phones provides a good avenue to push for financial inclusiveness in the country. All the three mobile network operators in Zimbabwe have created platforms which enable carrying out of banking services without need for getting into the physical bank. For example, Netone, has “One Wallet”, Telecel has “Skwama” and Econet has “EcoCash” and all these products have mobile money transfer features similar to those offered through banks. The use of MM is one phenomenon which needs great support by policy makers, service providers and consumers given its potential in reducing financial exclusion (Bankable Frontier Associate, undated).


    1. Overview

Mobile Money is still at the early stages of development in Zimbabwe, as such, the accompanying specific regulation which governs provision of MM has not yet been fully developed. All ‘licencing’ and supervision of MM is done by the Central Bank, given that MM product is a financial product. Within the RBZ, supervision of MM is resident in the National Payments Systems (NPS) Division. The Division oversees the operation of the MM products, particularly its compliance with the National Payment System Act of the country. The Central Bank uses a set of internally developed operational guidelines and policy frameworks, to regulate MM products. The RBZ, however, abides by international standards in regulating mobile money and branchless banking. Specifically, the RBZ indicated that they draw much from the EU, the Bank of International Settlements and Bankable Frontiers Associates guidelines in creating the operating policy frameworks. Besides, Mobile Money has, by and large, been structured along the Kenyan’s M-PESA Model. The policy guidelines currently being used by the Central Bank have not yet been made public.

On the electronic money model, the RBZ is following a bank-based model on the e-money products and innovations, even on those which are offered by non-bank institutions. The Central Bank’s primary focus when regulating e-money is on risk of the products and compliance of the underlying bank to financial regulations. In the current arrangement, the RBZ has a direct relationship with banks, and the banks are partnering the network providers, thus RBZ has an indirect relationship with the network providers. Under its policy on MM, the RBZ has relaxed the Know Your Customer (KYC) requirements on MM in order to allow the marginalised people to participate in these products. However, the MNOs themselves have registration details of mobile phone users as per POTRAZ requirements that all mobile lines be registered, a platform which the RBZ rides on. In addition, the RBZ works together with POTRAZ and the Registrar General’s Office to ensure that no lines are registered under dead people’s name. Besides, minimum KYC are met during opening of MNO based MM accounts and during cashing–out since a National Identification Document is required for every transaction. Furthermore, for MNO driven products, it is a requirement by the RBZ that the amounts sitting in the network provider’s e-money virtual account be equal or less than the amount (baking the e-money product) in the trustee account. There is a limited to the trustee account which must not be exceeded and in the event of reaching the limit, MNOs need to open another trust account with a different bank. This is done in order to avoid concentration of risk on one bank.

MM products offered by Banks are not very much difficult to regulate since the primary institutions offering them are already regulated under by RBZ under the Banking Act. Banks are, however, required to apply for ‘permission’ to offer such products and the RBZ do regular checks to see if the products complies with the National Payments Systems Act requirements. For example, the RBZ checks on the security features and potential risk of the products to the whole National Payment System and the financial sector at large. At the end of each week, banks are required to provide returns to the RBZ on daily balances, volume and value of transactions which were done through the mobile money platform, among other regular bank submission to the Bank. Hence, the regulation of MM offered directly by banks is not a major issue as it is covered by current regulation. The only challenge which may be to the RBZ is to assess the robustness of the system and telecoms platforms on which banks operate their MM products. In that regard, the RBZ has to rely on the principal regulator, POTRAZ, in providing adequate regulation since these platforms is beyond the Central Bank’s mandate and capacity.
MM products offered by MNOs pose some regulatory complexities, since the Central Bank does not deal directly with MNOs and there are no specific regulations which have been developed to rationalise that. This is because, MNOs are primarily regulated under the telecommunications sector, but they are now offering financial products which are regulated in the financial sector. In Zimbabwe, MNOs are regulated by the Post and Telecommunication Regulatory Authority of Zimbabwe (POTRAZ), which falls under the Ministry of Transport, Communication and Infrastructure Development. POTRAZ allows MNOs to offer what it regards as Value Added Services (VAS) and MM is one such service. POTRAZ regards MM as a VAS, and as such, its regulation lies in the line ministry or authority under which such a service primarily lies. In this case, MM is supervised under the financial sector and by the RBZ. MNOs do not meet the requirements to offer financial products, as per financial sector standards. As such, all MNOs are required to partner a Banking Institutions which provides the financial service to the MM product. The RBZ would ensure that MM products do not create ‘credit’, do not store value, and that MNOs do not offer other products outside the regulated ones. By and large the operation of MNOs in provision of MM products is modeled in the form and structure which the Central Bank of Kenya did when it authorised rolling out of M-PESA (see Figure 2).

Figure : Flowchart of a Case of MNO Provided MobileMoney

Source: Citigroup (2010)

    1. Issues Raised by MM Service Providers3

In conversation with some Mobile Money service providers around the country, some common issues emerged as they were discussing their concerns about Mobile Money. Although most service providers indicated that they do not have any challenges with the current regulations and policy on MM, there are still some implicit challenges which are affecting operators. Fundamentally, service providers hindered on the delays and difficulties in getting licences or authorisation to offer their MM products. This was common among MNOs who noted that the Central Bank took a lot of time in assessing their applications and granting of permission. It could have been due to the need for assessing suitability of MNO in offering banking products since they are not regulated under the financial regulations. Current regulation also gives indications on the ceiling amounts which could be send per each transaction. Service providers indicated that the set limits, which vary from one operator to the other, are determined by the Central Bank guidelines on anti-money laundering. Providers are going to face similar challenges again as they expand their MM products or introduce more e-money products.
It also came out that banks are advocating for MM to be bank-based with MNOs only providing the platform, while MNOs are arguing that they are equally capable to providing MM service. As a result, policy requires all MNOs to partner a banking institution which provides physical backing for the virtual accounts held at the MNO. For example, if there is $2m worth of balances in the virtual accounts there should be an equivalent $2m in the trustee account held at the Bank. The MNOs, just like banks, provides weekly reports to the central bank detailing the volumes/values that have been made through their facility and also corresponding information about the trustee account held at the backing bank. This lack of clarity on whether to pursue bank-based or telcom based mobile money may present future regulatory challenges on the part of the regulator. Banks believe that having MNOs offering MM products brings unfair competition since MNOs have an urge on the mobile gateways which they own and they are not regulated by the strict financial regulations like banks.

    1. Regulation Effect on Financial Inclusion

Whilst financial inclusion is the net beneficiary of any mobile money or mobile banking initiative, the current regulation and policy seem not to drive towards that. The restrictiveness in terms of products range which MNOs can provide and the periodic returns requirements by the central bank do not promote reaching into deeper areas. More-so, the requirement that the KYC procedures, though relaxed, still needs to be followed by MM providers still likens MM provision to provision of ordinary banking service since KYCs are some of the restrictive practices which makes exclusion of the poor from the banking sector increase. KYC also makes service provision costly given the documentation which is required. Whilst the advent of technology could have eased the challenge, the current regulation still need to be changed in order to accept, for example, electronic copies of identification particulars and move away from current hard copy requirement.

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