Basic Approaches for Digital Financial Services That Support Financial Inclusion

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  • 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

    E-money Services

    Mobile Financial Services

    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 Custo

    mer

    Perspec6ve

    Product

    Development

    Environment

    Ins6tu6onal

    Perspec6ve

    Product Tes6ng

    Developing Your Road Map

    AFI | Alliance for Financial Inclusion

  • Digital 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

    AFI | Alliance for Financial Inclusion

  • Increased importance of data to make informed policy decisions

    Quality aspects (consumer protection) of financial Inclusion

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

    Digital Financial Inclusion Policy Trends

    AFI | Alliance for Financial Inclusion

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

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

    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

  • Proportionate AML/CFT

    Tiered KYC Regulations

    E-Money Operator Regulations

    Remote Account Opening Rules

    Agent Regulations

    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

    Support market development and encourage innovation Proportionate regulation

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

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

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

    inclusion goals Interoperability

    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: Agent Banking &

    Allowable Services

    Eligibility Criteria for Agents

    Allowance of Non-Exclusive Agreements

    Risk & Operational Issues

    Consumer Protection Principles

    Results: 150,000 active agents

    13.1 M registered clients

    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

    Agent Banking Regulations

    Expanded Eligibility Criteria for Agents

    Tiered KYC Regulations Close dialogue with the

    Private Sector in Developing Policies

    Financial Literacy and the role of the Private Sector

    Results: From 80% without a bank

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

  • info@afi-global.org www.afi-global.org

    Thank you! John.Owens@afi-global.org

    @jvowens

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