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MMU Focus Areas – Regulation

The full potential of mobile money for financial inclusion is yet to be realised. One of the main challenges keeping mobile money deployments from launching and reaching scale is that few policy and regulatory environments are genuinely enabling. In many countries, significant regulatory barriers persist that constrain an operator’s ability to build sustainable mobile money services. For example:

  • Against the evidence coming from a number of countries where mobile money has been successfully deployed, some financial sector authorities refuse to license nonbank payment providers or e-money issuers.
  • Several financial regulators still impose account-opening requirements that the poor cannot meet, a conservative approach to interpreting the standards of the Financial Action Task Force (FATF) that doesn’t take into account the risk-based approach recommended by the FATF, the FATF guidelines on financial inclusion, and the experience of progressive countries that have adopted alternative and simplified opening procedures to overcome the obstacle represented by traditional identification criteria.
  • Lack of understanding or comfort with the risks that moving financial transactions outside of bank branches pose. In a number of countries it is still difficult, if not impossible, for mobile network operators to appoint cash merchants without which the mobile money business case and potential for financial inclusion is substantially degraded.

MMU provides mobile network operators with the necessary support to overcome these and other barriers in order to increase their ability to better meet the financial needs of poor and low-income customers, i.e., by training the operators on regulatory analysis and advocacy skills, dialogue between the mobile industry and financial sector authorities, helping mobile network operators to develop common positions on key policy issues, channelling these messages from the industry to the regulators and the standard setting bodies. In this section we highlight articles, blog posts and other resources that operators might find useful when researching this topic. For more information on the MMU regulatory workstream you can contact sdicastri@gsma.com.

1. GENERAL RESOURCES

Regulating New Banking Models that Can Bring Financial Services to All

Author : Claire Alexandre, Ignacio Mas & Dan Radcliffe, The Bill & Melinda Gates Foundation

Technology lets banks delegate ‘last mile’ cash management and customer servicing functions to third-party outlets. By making basic transactions available through local shops, there’s an opportunity to increase banks’ footprint and transform the basic economics of low-balance savings.

Mobile Banking and Financial Inclusion: The Regulatory Lessons

Author : Michael Klein & Colin Mayer, The World Bank

This paper sets out a framework for considering the design of regulation of mobile financial services. Since it lies at the interface between financial services and telecoms, MFS also raise competition policy and interoperability issues that are discussed in the paper. Finally, by unbundling payments services into its component parts, MFS provide important lessons for the design of financial regulation more generally in developed as well as LDCs.

2. MONEY LAUNDERING AND TERRORIST FINANCING

Methodology for Assessing Money Laundering and Terrorist Financing Risks

Author : Marina Solin, GSMA & Andrew Zerzan

This paper proposes a risk assessment methodology based on the existing framework and FATF recommendations. The methodology involves 5 steps, which will help operators and regulators to prevent money laundering and terrorist financing.

Download: French | Spanish

New guidance from FATF on AML/CFT and financial inclusion

Author : FATF/GAFI

Guidance paper which provides support to countries and their financial institutions in designing AML/CFT measures that meet the national goal of financial inclusion, without compromising the measures that exist for the purpose of combating crime.

Protecting Mobile Money Against Financial Crimes

Author : The World Bank

This book is a guide to preserving the integrity of mobile money. Based on fieldwork in eight national markets and research in several countries including India and South Africa, the book suggests ways to lower the risks associated with mobile money.

3. LICENSING OF Mobile operators

Industry’s recommended regulatory practices: Philippine e-money circular

Author : Marina Solin, GSMA

In 2009, the Philippines Central Bank (BSP) issued an ‘e-money’ circular that opened e-money issuance to non-banks, thus enabling regulation for mobile money solutions. This document highlights industry regulatory solutions which are relevant and helpful to facilitate the development of MMU.

Nonbank E-Money Issuers: Regulatory Approaches to Protecting Customer Funds

Author : Michael Tarazi & Paul Breloff, CGAP

The success of Kenya’s M-PESA has raised questions about regulating nonbanks—most notably mobile network operators (MNOs)—who work directly with customers.

4. CASE STUDY

Enabling mobile money transfer The Central Bank of Kenya’s treatment of M-Pesa

Author : AFI – Alliance for Financial Inclusion

Late in 2008, the Kenyan Government publicly – and suddenly – requested the Central Bank of Kenya (CBK) conduct an immediate risk-assessment of the service. This case study looks at the CBK’s process of assessing M-Pesa’s risk and determining how it fits within existing regulations.

5. OTHER RESOURCES

Putting the Banking in Branchless Banking: Regulation and the Case for Interest-Bearing and Insured E-money Savings Accounts

Author : Tilman Ehrbeck & Michael Tarazi, CGAP

E‑money represents a promising opportunity to provide low-income individuals with more than just payment and safe storage services. This paper explores the regulatory implications of interest-bearing and insured e-money savings accounts.

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