Namibia’s path to mobile money
MMU: Sergio, why is financial inclusion a priority for Namibia?
SdS: Namibia has a population of approximately 2.1 million, spread thinly across 824,292 square kilometres. As a comparison, Germany, with a population of 82 million, is only a third the size of Namibia. Namibia is classified as a middle-income country with GDP per capita of US$7,300, but that income is unequally distributed resulting in one of the highest Gini coefficients in the world. The high costs and difficulty associated with serving a low-density population has excluded much of the poorer population from the formal banking sector. Against this background, the Bank of Namibia in recent years has set a strategic focus on promoting financial inclusion in Namibia. This is currently documented as part of the Bank of Namibia (BON, the national central bank) Strategic Plan 2012 – 2016.
MMU: What makes mobile money functional to achieve financial inclusion?
SdS: According to a recent study 62% of Namibians are banked, but for 49% of them it still takes more than one hour to go to a bank. Low population density spread across the country means that traditional brick-and-mortar solutions are not cost-effective to reach the 38% of people who are financially excluded. There are 2,681,339 mobile connections in Namibia; alternative distribution channels such as mobile phones are key to driving financial inclusion, and also to making the financial system more efficient for the people who are banked but cannot easily get daily access.
MMU: The Central Bank has adopted a “test and learn” approach, with at least one deployment launched before the regulation was issued. Is that correct?
SdS: BON received its first application from a non-bank to provide Mobile Payment Services (MPS) at the end of 2009. The first full license for MPS in Namibia was issued in 2010, before any specific regulation for mobile payments was in place. Driven by the objective to promote financial inclusion and seeing the potential of MPS in contributing to this goal, BON used the existing regulatory framework for payment systems to issue this license.
MMU: Then BON has decided to develop a regulation for electronic money…
SdS: After issuing this first license, BON realised the need to develop a specific regulation that catered to the uniqueness of MPS and the adopted technology. The aim was to develop a regulation framework that safeguarded the national payment system and the public; enabled innovation and competition in payment services that could promote financial inclusion; and provided clear guidance to potential electronic money (E-Money) issuers. In the process of developing a regulatory framework, the bank decided to focus on regulation for e-money and not only MPS. The rationale behind this change was that E-Money would enlarge the scope of the regulation which would cover MPS as well as any similar services that may emerge in the future including payments via mobile phones, computers, cards, etc. This is consistent with the National Payment System Vision 2015 of Namibia to promote access to payment services by providing market access to non-banks that offer alternative innovative payment services such as mobile money. The oversight of the first deployment has given us the opportunity to learn important lessons that we have used for the development of the new regulatory framework.
MMU: Tell us about the new regulatory framework. What are the main points touched by the regulator?
SdS: After much investigation and consultation (within BON as well as with all relevant stakeholders, including banks and mobile network operators) on 28 March 2012 the Bank issued the new “Determination on the Issuing of E-Money” (PSD-3). PSD-3 was issued under the Payment System Management Act, 2003, as amended. The regulation considers numerous key policy issues such as protection of customer funds and the use of agents, and covers a number of services including opening an electronic money account; loading value onto an electronic wallet (cash-in); redeeming value from an electronic wallet (cash-out); paying bills; sending domestic money transfers; and receiving/disbursing domestic money transfers. This regulation is accompanied by guidelines for issuers of electronic money and other payment instruments, and a circular on the transaction and balance limits for electronic money accounts and the fees payable. The objective of this regulation is to encourage more players to enter the E-money space by providing an enabling environment for innovative financial services that promote both financial inclusion and customer protection.
MMU: Both banks and mobile network operators can apply to receive a license that would allow them to issue E-Money. What is the rationale?
SdS: A key policy decision taken was to allow both bank and non-banks to become E-Money issuers. The reason for this is to allow for greater competition and innovation. It is believed that with more players in the market there is a greater likelihood of reaching more of Namibia’s predominantly rural population. While some may have fears to allow non-banks to play in this space, BON believes that the risks are sufficiently mitigated in the approved regulatory framework to allay such concerns.