Recently, thanks to The Banker Magazine, I came across two interesting articles on how Mobile Financial Services (MFS) have changed the game in Tanzania and Kenya, jurisdictions from which I feel we could draw a few lessons.
In this article, I focus on the article by Benno Ndulu, the governor of the Central Bank of Tanzania.
In due course, I will look at how Kenyan banks are competing head-to-head with the mobile network operators (MNOs) without any sense of an inferiority complex on their part or an attempt to seek anyone’s protection.
MFS definitely change the game
In just four years, mobile financial services have revolutionised the fiscal landscape in Tanzania in terms of enhancing access to and usage of financial services among the unbanked population.
This is something we have also seen happening in Zimbabwe since EcoCash came on board in August 2011 and subsequently TeleCash in January 2014.
Banking the unbanked
In addition to being used for payment and remittance services, mobile financial services have enabled people to store value in their mobile wallets, thus enhancing the potential to migrate the unbanked to the formal banking system.
In a country where it is often claimed that billions are circulating outside formal banking channels, MFS are our best foot forward when it comes to the quest to harness this “stray” liquidity.
A new paradigm
The entrance of MNOs into the financial market space creates a new paradigm for regulators and requires them to make bold decisions to allow MNOs to offer financial services, for long a conservative sector.
For their part, Tanzanians adopted an approach that permits mobile financial services to operate through a flexible regulatory framework and seeks to balance proportionate risk management measures, financial stability considerations and encourages innovations for financial inclusion. According to Ndulu,
Tanzania’s experience proves that these three elements are key to the successful development of mobile financial services
Banks and MNOs have to collaborate
The Tanzanian system makes collaboration between financial institutions and MNOs imperative as the latter are only allowed to offer money transfer services, leaving other financial services to institutions. The authorities say they continue to seek expansion of the potential space for collaboration and partnership which has enabled financial institutions to offer savings, insurance, pension and credit services via MNOs.
In Zimbabwe, however, it appears that it’s the MNOs that have blazed the trails in terms of offering savings and insurance products, although some banks such as CABS are beginning to catch up on this. Be that as it may, there is definitely scope for more collaboration in this country where MNOs have tended to be overprotective about their proprietary infrastructure, even at the risk of unnecessarily duplicating such infrastructure at the expense of overall, market-wide efficiencies.
Fostering interoperability is key
The Tanzanian authorities have continued to encourage innovation by instilling interoperability in the mobile financial services system from the outset and have since confirmed interoperability arrangements between three MNOs, something Ndulu claims to be the first of its kind in the world.
In Zimbabwe, we still sing a different, discordant and individualistic tune, but the voice of reason can still be heard, faint as it is.
“Government should make it mandatory for us to share infrastructure. We feel it should be done on a commercial basis where the person who puts up the infrastructure benefits more from their investment but allows others to benefit from it as well,” said Telecel general manager Angeline Vere, giving oral evidence before the Parliamentary Portfolio Committee on Communication, Technology, Postal an Courier Services in late June 2014, adding that MNOs were wasting a lot of money importing the same equipment which they could easily share on agreed terms.
Proactive and pro-customer policies are possible
The authorities in Tanzania have also set policies that allow the distribution of interest from trust accounts directly to mobile financial service users, and already one MNO is reported to be distributing interest payments directly to its MFS customers, according to Governor Ndulu.
Against the background of Zimbabwean MNOs who have sometimes been accused of monopolistic tendencies and exploitative pricing structures, this demonstrates that pro-customer policies are not only desirable but possible if pursued from a regulatory perspective since MNOs are normally largely driven by self interest.
Regulation must be proactive and pro-sustainability
The authorities must aim to ensure that the benefits ushered into the market by mobile financial services are sustained in the long-term through effective risk mitigation, ensuring the safety and integrity of this class of financial products, as the Tanzanian authorities are doing.
New innovations must be closely monitored to confirm they meet or exceed regulatory standards and above all, the regulatory authorities must work towards ensuring a level playing field in the financial market space in order to achieve the greatest good for the greatest number of stakeholders.
Feedback: firstname.lastname@example.org. Omen N. Muza writes in his personal capacity. You can view his LinkedIn profile at zw.linkedin.com/pub/omen-n-muza/30/641/3b8