M-BANKING & REGIONAL FINANCIAL INTEGRATION IN EAST AFRICA David Porteous Making Finance Work for Africa Nairobi 4-5 March 2007
Finland ($37 460) Philippines ($1300) South Africa ($4 960) India ($720) Kenya ($530) 1. The promise of m-banking 97% 97% % mobile phone usage 45% Mobile penetration 2006: Uganda: 5.3% Tanzania: 5.2% But growing at CAGR 60-100% 15% 10% 10% 45% 96% % banked Numbers: GNIpc (Atlas) Current US 2005
2. Categorizing m-banking approaches • Additive m-banking: • Another channels for banked customers like internet. Becoming common in Nordics, Japan, Korea; but also in many developing countries • Transformational m-banking: • Targets unbanked, based on known needs: • Safe store of value • Cash in and out easily and cheaply • Ability to transfer P2P • Few models emerging in Philippines (G-Cash, SmartMoney), Africa including M-Pesa launched in Kenya 5/03/07
3. Regional policy and regulatory issues • Common operators • Celtel market integration plans • Regional retail banks • Labour mobility and growth of intra-regional remittances • Social Protection Payments to most vulnerable require transfer mechanism • e.g. Kenya SPP pilot
Specific regulatory issues to address • E-money • Who may issue it? What risks to manage? • 2. Non-bank agents for cash handling • Who may handle cash and on what basis? • Retail payment system interoperability • Who may join and when? • 4. AML/CFT • Should there be exemptions for CDD/ KYC on low value accounts and provision for remote opening?
Towards an enabling environment for m-banking Kenya’s recent move 2. Low certainty; High Openness 1. High certainty; High Openness Openness 4. Low certainty; Low Openness 3. High certainty; Low Openness Certainty
Conclusions • Challenge: • Rapid scaling possible, even likely, through ‘grey’ and overlapping regulation domains in many countries • Opportunity: • May introduce competitive more retail banking services, even to relatively remote areas • However, it requires coordination and policy focus within country, and across country • What can be learned from the 2 year pilot of M-Pesa in Kenya to date? • M-banking provides a lens through which to focus on how to provide conditions which encourage growth of a competitive, inclusive retail banking sector