MOBILE MONEY FOR FINANCIAL
INCLUSION: POLICY AND REGULATORY
PERSPECTIVE IN ZIMBABWE.
Alex Bara
Research Fellow
Zimbabwe Economic Policy Analysis and Research Unit (ZEPARU)
55 Mull Road, Belvedere
Harare
+263 772 962 491
+ 263 4 778423;
alexabara@yahoo.com
Abstract
The arrival of mobile telephony and innovative technology is
forcing regulators to re-evaluate their rules for financial service
provision. Mobile phone technology is bringing new dimension
where nonbanks are now able to offer financial products.
Nonbanks like Mobile Network Operators (MNOs) may be
well-placed to dramatically expand the reach and range of
financial services for the poor and unbanked. Zimbabwe has
also adopted mobile financial service, currently, being provided
by both banks and non-bank institutions. Inevitably, it has been
confronted with the regulatory challenges associated with
Mobile Money (MM). The country has benchmarked it policy
and regulation for MM products driven by MNOs MM service
on international standards, more specifically, on the Kenya’s MPESA Model. Whilst currently there is no legislation which
directly regulates MM in Zimbabwe, the Central Bank (Reserve
Bank of Zimbabwe -RBZ) has used the National Payment
System Act to regulate MM and has internally developed some
operational policy guidelines to enable direct supervision of
MM. The major shortfalls of the current policy include lack of
clarity on the model which the country adopts, non-enforcement
of interoperability and lack of emphasis on financial inclusion.
Zimbabwe can learn from the MM regulation of countries such
as Kenya, South Africa, Indonesia and Philippines, particularly
on issues to do with consumer protection, Know Your Customer
(KYC) procedures, capitalisation of service providers and the
general environment of mobile financial services. This paper
makes a number of recommendations, firstly, the need for
enactment of an Electronic Money Act, which covers issues of
interoperability, among other. Secondly, the RBZ must enable
technology to reach its full potential and must be pro-active
soon after innovation, in coming up with suitable regulation.
Third, engaging international development partners in coming
up with such regulation may also help since these partners have
the technical expertise and the financial capacity to handle such
initiatives. Fourth, the RBZ is also encouraged to consider the
peculiarities of the local environment in drafting the suitable
regulation on MM by looking into cases where its adopted
model (the M-PESA) model succeeded and failed as well. Fifth,
there is also need to harmonise regulation to address issues of
potential conflict of regulators and individual institutions.
Lastly, the Regulator must link Mobile Money to Financial
Inclusion.
Key words: Mobile Money, Banking, Regulation, Financial
Inclusion, Mobile Network Operators (MNOs), Zimbabwe.
1.
INTRODUCTION
Mobile Money (MM) is one development which has managed
not only to revolutionise the way banking is done but also to
promote financial inclusion in most developing countries. One
positive aspect of MM has been the capacity of countries to
leap-frog the financial development stages, which some
developed world went through, by utilising technological
innovation. Financial services can now be offered to outlying
and marginalised areas without need for establishing physical
banking institutions. Technology has also enabled integration of
markets across countries, shortening of distances between points
of transactions, and more importantly brought efficiency in
financial transactions. Whilst there has been such positive
development, its existence has forced the inter-linkages and
inter-operability of previously unrelated economic segments.
Such a fusion is now occurring between the banking industry
and the telecommunication industry, creating a concept called
mobile banking, which would enable transaction cost reduction
and increase in outreach to enable poor unbanked people to
access micro financial services. For example, Mobile Money
has brought together people, ICT, Mobile Network Operators
(MNOs) and financial institutions.
This fusion is necessitating a change in the regulatory and
institutional environment to accommodate and adapt to this
synthesis. Traditionally, banks use network platforms of
telecommunication companies to carryout financial transactions
with little if any involvement of these companies in financial
service provision. The current developments, where even
telecommunication companies are also actively involved in
financial matters, inevitably have some implication on the
policy and regulation. Policy and regulatory frameworks are
required not only to enable provision of financial services like
MM, but also to enable supervision and control of providers of
the service. However, regulation, by its nature, reacts to
innovation and there are trade-offs which occur there-of. The
regulatory framework has an impact on the reach, type, nature
and extent of MM products which could be offered.
This paper determines the policy and regulatory frameworks
which enable provision of the MM products by banking
institutions and mobile phone companies in Zimbabwe.
Specifically, the paper determines the current policy and
regulatory framework, establish its adequacy, assess its impact
on future development of the MM products, determine its
current challenges and propose policy recommendation on the
regulatory framework. The paper also establishes the regulatory
formulation process, institutions involved and the possible
impact on the efficient operation and adoption of MM products.
In order to ascertain this, the study carried out an interview with
the regulator of the financial sector, the Central Bank, to
establish provision of the current policy for the establishment,
regulating and controlling MM. Interviews were also held with
MM providers to assess the impact of regulatory framework on
operation of companies and banks offering MM services and
establish challenges and constraints being faced by providers of
MM. The study identifies international best practices on MM
regulation, especially of countries where Mobile Money has
been successful, and draws lessons for Zimbabwe. The paper
gives recommendations on the necessary adjustments which the
country does to the current regulation in order to promote MM.
It envisaged that this research would benefit both the regulator
and service providers in coming up with the more favourable
regulatory environment for Mobile Financial Service. To the
regulator, the research would help in highlighting some of the
challenges which service providers are facing as well as
highlighting some of the weakness and shortfalls of the current
policy. It would assist the regulator in coming up with
appropriate regulation and in refining existing policy
frameworks. To the service providers, this research provides
them with a deeper insight into the MM issue, especially from
the regulation side. It gives them clarity on issues and they may
use it for lobbying of policy refinement or on any policy review
advocacy initiatives.
1.1
Basics about MM and Financial Inclusion
Mobile Money refers to a suite of financial services offered
through mobile phones and other hand-held mobile devices.
These services can include 1) person-to-person transfer of funds,
such as domestic and international remittances, 2) person-tobusiness payments for the purchase of a range of goods and
services, and 3) mobile banking, through which customers can
access their bank accounts, pay bills, or deposit and withdraw
funds (Dolan, 2009). Simply put, Mobile Money is a service that
enables money to be transferred through a mobile phone. Mobile
Money provides unbanked mobile phone users with a secure
platform, which introduces easy to use menus on their phone to
send messages through an audited system and is an ideal
medium of storage of money for both the banked as well as
unbanked subscribers (Akinkugbe-http://234next.com).
Financial inclusion means that the majority of the population
has broad access to a portfolio of quality financial products and
services. Financial inclusion, include the following core
elements:
 Broad access to a range of financial products and
services;
 Financial literacy and financial capability initiatives,
and a consumer protection framework; and
 Minimum requirements for these financial products and
services in terms of availability, quality, cost and
sustainability (Reyes, Cañote, and Mazer, 2011).
According to CGAP, harnessing the power of technology could
dramatically increase access to financial services for poor
people around the world. Promoting financial inclusion requires
creating or enhancing market incentives to develop and provide
financial products and services focused on populations with low
levels of access. It also involves use of other types of financial
products and services, as well as empowering financial users
with the tools needed to better understand financial products and
services offered. Mobile money is one channel through which
financial inclusion can be attained. The significance of mobile
banking goes well beyond developing countries and financial
inclusion. By providing a clear disaggregation of the
components of banking, it throws light on the nature of financial
services in general. By identifying the different components of
financial services so clearly, mobile banking helps to establish
where the focus of regulation should lie in all financial systems
(Klein and Mayer, 2011).
2.
MOBILE MONEY IN ZIMBABWE
Mobile Money is one of the many branchless banking products
which are being offered in Zimbabwe. In Zimbabwe, and most
probably in most countries, Mobile Money (MM) is offered
through two ends, that is, through banking institutions and
through Mobile Network Operators (MNOs). Bank based
Mobile Money products were the first to be introduced before
MNOs introduced their own products. Banking institutions,
from commercial banks, building societies and merchant banks,
offer MM products, mainly anchored on money transfer and
payments.
Bank(s) offer
individual accounts
that can be used
through bankmanaged branchless
channels
e.g CBZ Mobile
Banking
Banking institutions uses the MNOs platforms to enable account
holders to access banking services through their mobile phones.
Generally, financial institutions which offer MM products offer
the following, account access (inquire/check bank balance), bill
payments, payments at registered merchants (retail shops),
money transfer and air time purchase.
On the other hand, MM products are also offered by MNOs,
which currently are restricted to transfer of funds only, given
that MNO based MM is still at its infancy stage 1. Most MNO
driven MM products are still on the early stages of
implementation and hence caution is still being observed before
rolling out of more advanced products. The MNO based MM
product concept is by and large modeled around the M-PESA
concept. As such, mobile money in Zimbabwe has developed to
the extent which mobile banking has gone. However, according
to Tarazi and Breloff, (2010), while the distinction is often made
between bank-based and nonbank-based models of branchless
banking, the reality is both banks and nonbanks typically play
roles in any branchless banking scheme (see Figure 1). In a
bank-based model, customers have a direct contractual
relationship with a licensed financial institution (even though a
customer may deal exclusively with nonbank agents who
conduct transactions on the bank’s behalf). In a nonbank-based
model, the customer does not have a direct contractual
relationship with a licensed bank, and instead exchanges cash
for electronic value recorded in a virtual account on the server
of a nonbank, such as an MNO or an issuer of stored-value
cards.
Bank(s) offer
individual accounts
accessed through
nonblank-managed
agent networks and
/or technology
platforms
e.g. Emali Card
(Tetrad Bank)
Bank(s) issues
electronic value which
is purchased from
bank and redistributed
by nonblank directly to
customers
e.g
Cell Card, Kingdom
Bank
Bank-Based Model
Nonbank issues
electronic value and
holds matching-value
assets in pooled
account in regulated
bank
e.g
EcoCash (Econet),
Onewallet (Netone)
Nonbank Based Model
Figure 1: Banks involvement in Mobile Money
Source: Tarazi and Breloff, (2010)
1
With the first MNO to offer such products being Telecel which
introduced its Skwana Product in 2010
2.1
MM and Financial Inclusion in Zimbabwe
The wide-spread use of mobile phone technology has opened
new markets across the world, most notably in the financial
sector with mobile phones widely used to provide financial
services (AFI, 2011). The use of Mobile Money (MM) is one
avenue through which inclusive financial development is being
promoted in Zimbabwe. This is a fairly recent phenomenon
which has a potential to increase financial inclusion. Zimbabwe
is one country which, despite having an arguably welldeveloped financial sector, still has high levels of financial
exclusion 2 . Building an inclusive financial sector serving the
asset poor households and marginalized communities, remains a
key task of policy (XLRI Jamshedpur, 2011). Zimbabwe has a
high mobile penetration rate, standing at 66% in 2011, and is the
third in Southern Africa after Botswana, 125%, and South
Africa, 102% (The Zimbabwe Independent, 13 October 2011).
In Zimbabwe, there are more people with cellphone than with
bank accounts, as such, mobile phones provides a good avenue
to push for financial inclusiveness in the country. All the three
mobile network operators in Zimbabwe have created platforms
which enable carrying out of banking services without need for
getting into the physical bank. For example, Netone, has “One
Wallet”, Telecel has “Skwama” and Econet has “EcoCash” and
all these products have mobile money transfer features similar to
those offered through banks. The use of MM is one
phenomenon which needs great support by policy makers,
service providers and consumers given its potential in reducing
financial exclusion (Bankable Frontier Associate, undated).
2
A survey conducted by the National Task Force on Microfinance
between December 2005 and March 2006 showed that 70 percent of the
economically active population in Zimbabwe are excluded from access
to formal financial services. In the Financial Inclusion Index (IFI)
modeled by Sarma (2007), Zimbabwe is ranked number 38 out of 45
countries measured.
Index Financial Inclusion- Using Three Dimensions
Country
D1
D2(Availab D3(Usage IFI
IFI
(Depth
ility**)
***)
Ran
*)
k
Switzerland
0.73
1
0.89
0.873
1
India
0.167
0.154
0.308
0.2096
21
Bangladesh
0.071
0.105
0.196
0.124
33
Zimbabwe
0.050
0.073
0.179
0.101
38
Uganda
0.002
0.000
0.078
0.027
45
Key
0.6 < IFI < 1 – high financial inclusion
0.4 < IFI < 0.6 – medium financial inclusion
0 < IFI < 0.4 – low financial inclusion
Source: Sarma M (2007), Index of Financial Inclusion (A concept note)
3.
3.1
POLICY AND REGULATION OF MM IN
ZIMBABWE
Overview
Mobile Money is still at the early stages of development in
Zimbabwe, as such, the accompanying specific regulation which
governs provision of MM has not yet been fully developed. All
‘licencing’ and supervision of MM is done by the Central Bank,
given that MM product is a financial product. Within the RBZ,
supervision of MM is resident in the National Payments
Systems (NPS) Division. The Division oversees the operation of
the MM products, particularly its compliance with the National
Payment System Act of the country. The Central Bank uses a set
of internally developed operational guidelines and policy
frameworks, to regulate MM products. The RBZ, however,
abides by international standards in regulating mobile money
and branchless banking. Specifically, the RBZ indicated that
they draw much from the EU, the Bank of International
Settlements and Bankable Frontiers Associates guidelines in
creating the operating policy frameworks. Besides, Mobile
Money has, by and large, been structured along the Kenyan’s
M-PESA Model. The policy guidelines currently being used by
the Central Bank have not yet been made public.
On the electronic money model, the RBZ is following a bankbased model on the e-money products and innovations, even on
those which are offered by non-bank institutions. The Central
Bank’s primary focus when regulating e-money is on risk of the
products and compliance of the underlying bank to financial
regulations. In the current arrangement, the RBZ has a direct
relationship with banks, and the banks are partnering the
network providers, thus RBZ has an indirect relationship with
the network providers. Under its policy on MM, the RBZ has
relaxed the Know Your Customer (KYC) requirements on MM
in order to allow the marginalised people to participate in these
products. However, the MNOs themselves have registration
details of mobile phone users as per POTRAZ requirements that
all mobile lines be registered, a platform which the RBZ rides
on. In addition, the RBZ works together with POTRAZ and the
Registrar General’s Office to ensure that no lines are registered
under dead people’s name. Besides, minimum KYC are met
during opening of MNO based MM accounts and during
cashing–out since a National Identification Document is
required for every transaction. Furthermore, for MNO driven
products, it is a requirement by the RBZ that the amounts sitting
in the network provider’s e-money virtual account be equal or
less than the amount (baking the e-money product) in the trustee
account. There is a limited to the trustee account which must not
be exceeded and in the event of reaching the limit, MNOs need
to open another trust account with a different bank. This is done
in order to avoid concentration of risk on one bank.
MM products offered by Banks are not very much difficult to
regulate since the primary institutions offering them are already
regulated under by RBZ under the Banking Act. Banks are,
however, required to apply for ‘permission’ to offer such
products and the RBZ do regular checks to see if the products
complies with the National Payments Systems Act requirements.
For example, the RBZ checks on the security features and
potential risk of the products to the whole National Payment
System and the financial sector at large. At the end of each
week, banks are required to provide returns to the RBZ on daily
balances, volume and value of transactions which were done
through the mobile money platform, among other regular bank
submission to the Bank. Hence, the regulation of MM offered
directly by banks is not a major issue as it is covered by current
regulation. The only challenge which may be to the RBZ is to
assess the robustness of the system and telecoms platforms on
which banks operate their MM products. In that regard, the RBZ
has to rely on the principal regulator, POTRAZ, in providing
adequate regulation since these platforms is beyond the Central
Bank’s mandate and capacity.
the financial sector. In Zimbabwe, MNOs are regulated by the
Post and Telecommunication Regulatory Authority of
Zimbabwe (POTRAZ), which falls under the Ministry of
Transport, Communication and Infrastructure Development.
POTRAZ allows MNOs to offer what it regards as Value Added
Services (VAS) and MM is one such service. POTRAZ regards
MM as a VAS, and as such, its regulation lies in the line
ministry or authority under which such a service primarily lies.
In this case, MM is supervised under the financial sector and by
the RBZ. MNOs do not meet the requirements to offer financial
products, as per financial sector standards. As such, all MNOs
are required to partner a Banking Institutions which provides the
financial service to the MM product. The RBZ would ensure
that MM products do not create ‘credit’, do not store value, and
that MNOs do not offer other products outside the regulated
ones. By and large the operation of MNOs in provision of MM
products is modeled in the form and structure which the Central
Bank of Kenya did when it authorised rolling out of M-PESA
(see Figure 2).
MM products offered by MNOs pose some regulatory
complexities, since the Central Bank does not deal directly with
MNOs and there are no specific regulations which have been
developed to rationalise that. This is because, MNOs are
primarily regulated under the telecommunications sector, but
they are now offering financial products which are regulated in
Figure 2: Flowchart of a Case of MNO Provided Mobile‐Money
Source: Citigroup (2010)
3.2
Issues Raised by MM Service Providers3
In conversation with some Mobile Money service providers
around the country, some common issues emerged as they were
discussing their concerns about Mobile Money. Although most
service providers indicated that they do not have any challenges
with the current regulations and policy on MM, there are still
some implicit challenges which are affecting operators.
Fundamentally, service providers hindered on the delays and
difficulties in getting licences or authorisation to offer their MM
products. This was common among MNOs who noted that the
Central Bank took a lot of time in assessing their applications
and granting of permission. It could have been due to the need
for assessing suitability of MNO in offering banking products
since they are not regulated under the financial regulations.
Current regulation also gives indications on the ceiling amounts
which could be send per each transaction. Service providers
indicated that the set limits, which vary from one operator to the
other, are determined by the Central Bank guidelines on antimoney laundering. Providers are going to face similar
challenges again as they expand their MM products or introduce
more e-money products.
It also came out that banks are advocating for MM to be bankbased with MNOs only providing the platform, while MNOs are
arguing that they are equally capable to providing MM service.
As a result, policy requires all MNOs to partner a banking
institution which provides physical backing for the virtual
accounts held at the MNO. For example, if there is $2m worth
of balances in the virtual accounts there should be an equivalent
$2m in the trustee account held at the Bank. The MNOs, just
like banks, provides weekly reports to the central bank detailing
the volumes/values that have been made through their facility
and also corresponding information about the trustee account
held at the backing bank. This lack of clarity on whether to
pursue bank-based or telcom based mobile money may present
future regulatory challenges on the part of the regulator. Banks
believe that having MNOs offering MM products brings unfair
competition since MNOs have an urge on the mobile gateways
which they own and they are not regulated by the strict financial
regulations like banks.
3.3
Regulation Effect on Financial Inclusion
Whilst financial inclusion is the net beneficiary of any mobile
money or mobile banking initiative, the current regulation and
policy seem not to drive towards that. The restrictiveness in
terms of products range which MNOs can provide and the
periodic returns requirements by the central bank do not
promote reaching into deeper areas. More-so, the requirement
3
Appendix 1 gives detailed information for each service provider
interviewed.
that the KYC procedures, though relaxed, still needs to be
followed by MM providers still likens MM provision to
provision of ordinary banking service since KYCs are some of
the restrictive practices which makes exclusion of the poor from
the banking sector increase. KYC also makes service provision
costly given the documentation which is required. Whilst the
advent of technology could have eased the challenge, the current
regulation still need to be changed in order to accept, for
example, electronic copies of identification particulars and move
away from current hard copy requirement.
3.4
Shortcomings of Current Policy and Regulation
Mobile money models are still in their infancy, but as these
models gain traction and expand, other regulatory challenges
will arise, including (i ) whether to treat e-money as savings
products (rather than as simply funds transfer) and (ii ) how to
level the playing field among different kinds of entities offering
similar services (Tarazi and Breloff, 2010). The scenario is
currently prevailing in Zimbabwe. Whilst there currently are no
clear cut dire regulatory framework challenges on Mobile
Money, as the sector develops, more and more challenges are
posed.
The RBZ currently faces some challenges in regulating MM and
one of them is perception. The RBZ indicated that some banks
believe that by offering MM, MNO providers are now into
banking, hence they must be regulated just like banks, or be
stopped altogether. The RBZ’s position, however, is that all MM
products are bank products, with MNOs just being agents for
marketing a bank product. As such, there is no need for MNOs
to be treated like banks. The other challenge is on pricing of
MM products. Banks in Zimbabwe are accused, by the banking
public, for having high service charges and the transacting
public want the RBZ to regulate the prices. The same is being
said about the current charges of MM products, which even the
RBZ feels are too high for the common people. Nonetheless, as
it stands the RBZ does not regulate bank charges and policy
does not provider for control of service charges. The other
challenge is that currently there is no an Electronic Money Act
in place, making it difficult for the Central Bank to effectively
regulate e-money products. The RBZ uses internally developed
guidelines and the biggest challenge with internally developed
guidelines is that they can be changed by the regulator at any
time and to suit any situation hence it can be subject to abuse.
Furthermore, the legal enforceability of such polices is always
subject to interpretation as there is no direct relation of such
policy to existing Acts.
To cover policy gaps caused by lack of a specific and
comprehensive legislation, the RBZ is using moral suasion. For
example, the current policy and regulations does not enforce
interoperability of the institutions in MM provision. The RBZ is
using moral suasion to try and talk with banks and MNOs to use
platforms which enables inter-linkages of banks and transfer of
funds across all MNOs without change of existing infrastructure
and systems in use. Currently banks and MNOs are making selfnegotiations to try and ensure interoperability of the systems.
The banks and MNOs are currently working on using the
already existing ZIMSWITCH gateway to offer a mobile money
product which is accessible across banks and across all network
operators, through the ZimSwitch Instant Payment Interchange
Technology (ZIPIT) system. Lack of backing regulation renters
the RBZ ineffective in enforcing banks to corporate on the
infrastructure and compete on service provision. Below we
explore some of the general short comings of the current policy
and regulation on MM.



Policy is not providing for potential conflict of regulators. It
is not uncommon to have clashes and conflict of regulators,
especially where there is overlap in areas of influence. In
this case, when MM is being driven by MNOs, primarily
regulated under telecommunications, there is likely to be
conflict of there are policy changes in the sector, which
could affect provision of financial products. In some
instances conflicts could even arise on which authority to
attribute success of the products. Should success be
attributed to the financial sector or the telecommunication
and ICT sector?
Policy is not addressing potential conflict between Banks
and MNOs. Banks relay heavily on MNOs to offer MM
products and at the same time MNOs are offering the same
products being offered by their clients. As such, there is
likely to be conflicts given that there is temptation that
MNOs may not give equal up-time to gateway platforms
which banks are on as compared to the platform on which
its product is resident. Although in Zimbabwe, there are
agreements between banks and MNOs which require MNOs
to fairly treat banks; there is always scope for cheating or
breaching, besides such agreement at times not legally
binding. The RBZ, however, indicate that ever since the
introduction MM products, no bank has brought in a
complaint of unfair treatment by any MNO regarding
uptime of their connectivity ports.
The current policy does not enforce Financial Inclusion as
the primary reason for MM provision. The current drive is
seemingly initiatives by private institutions which want to
make more profits by tapping into the unbanked markets.
For banks it is mainly increasing client and deposit base and
broadening of markets. The RBZ generally is not driving
provision of MM to promote financial inclusion. Rather the
issue of financial inclusion is just an added benefit or spill
over benefit of MM products. If financial inclusion is at the
centre of provision of MM in Zimbabwe, then the e-money
model would have been driven by the Central Bank and



3.5
regulation would have been crafted to include incentives to
those institutions which provide such service.
Current policy on MM in Zimbabwe does not allow MNOs
to offer more products apart from funds transfer. Despite
the RBZ indicating that current licences of MM provides
for more products, like international remittances and
payments, the Central Bank still needs to assess the success
of local money transfer first before allowing expansion into
other services.
Current policy also does not provide for a legal framework
to deal with problems and challenges which may emanate
from systems and service provision.
Agents which would be used by MNOs to reach out to the
clients (cash-in and cash out agents) are also regulated
under a varying legislation, depending on the nature of
business of the agent, but are supposed to provide financial
service without supervision of the financial regulator (at
least with the current set up where MM is mainly funds
transfer, there is not much financial service involved, as
such, agents are able to handle these simplified transactions.
But the fact still remains that their operations remain
outside the radar of the monetary authorities).
Regulation and Policy Formulation Process in
Zimbabwe
In Zimbabwe, the financial legislation, just like any other
legislation, is formulated through the Parliament where a Bill is
debated, in both Houses of Parliament (The Parliament and
Senate), and when passed and is signed by the country’s
President, it then becomes an Act. There are also some
regulation and policy directives which are designed by the
financial regulator, the RBZ, mostly in consultation with the
parent ministry, Ministry of Finance and these are announced
during Monetary Policy Statements. Such policies are mostly in
line with the primary mandate of the Central Bank which is
enshrined the RBZ Act. On the other hand, the Ministry of
Finance can make some regulatory changes or additions to the
current Act and announce these through Statutory Instruments
(SI). The long process of establishing legislation normally
forces regulators to use internal guidelines and policy
frameworks to regulate new developments. As the sector
develops, there is need for a separate Act which details all
operational issues regarding provision of the service.
4.
MM AND REGULATION IN OTHER COUNTRIES:
LESSONS FOR ZIMBABWE
Central banks worldwide are constantly reviewing their
regulatory position with regard to e-money in its various forms
(SARB, 2009). Currently, policymakers and regulators in
countries like Namibia Indonesia, Mexico, Philippines, Kenya
and Pakistan are drafting regulations for the era of mobile
money. They struggle with adapting banking regulation to
mobile banking (Klein and Mayer, 2011). More specifically,
central banks are continuously investigating the impact e-money
products will have on the regulatory and operational
requirements that are necessitated by these means of payments
(SARB, 2009). CGAP indicated key regulatory trends the
organisation had identified over the last 12 months in the mobile
money market. These include on-going development of ‘emoney’ regulation, consumer protection, and competition and
interoperability4.
Kenya
M-PESA was launched in 2007 into a vacuum of clear
guidelines and precedents that dictated how money could move
around a mobile ecosystem. This was due to a loophole in the
banking regulations and the service did not, at that time, require
a banking license to operate (Collings, 2011). By 2008, the
regulation of M-PESA’s services was not yet formalized by the
Central Bank, which had agreed to allow the transactions under
the assumption that “remittance is not banking” (CBK; 2008)
and should be viewed as a payment service. The agreement,
apart from M-PESA’s strict control and supervision of
transactions and float, there were restrictions on the size of
transaction (Bångens and Söderberg, 2008). The coming on
board of M-PESA and lack of clear regulation on its operation
created conflict with banks which viewed M-PESA as
competition. Clearly the established retail banks in Kenya
viewed the upstart mobile operator-led service that acted like a
bank, as a threat. There were efforts to make M-PESA be
regulated just like other banks.
As Mobile banking developed in Kenya, The Central Bank of
Kenya launched draft regulations to guide on, electronic retail
transfers by banks and non-banking institutions while ensuring
that risk management is adhered to and at the same time
protecting customers. Under the regulations, for the provisions
of the electronic retail transfer, a payment services provider
other than a bank or financial institution, are required to apply to
Central Bank for authorization before commencing such
business. The draft offers guidelines for payment service
providers and electronic transfers such as capital requirements,
risk management tools, execution of payments and rules on
outsourcing. The rules were made in accordance with Section
4A of the Central Bank of Kenya Act. The regulations come at a
time when the National Payment System Bill that will help to
4
Makin, (2010) argued that regulators in general need to give due
consideration to the following principal regulatory issues around
branchless banking issues: The risk of a high profile scheme failure,
non-bank institutions leading schemes and suitability of KYC
regulation.
encourage innovation in products such as mobile banking and
allow non-banking institutions perform stand-alone functions,
among other things, is before parliament (CBK,2011).
South Africa
In a move to promote both financial inclusion and mobile
banking, in 2004, the South Africa Government established an
enabling regulatory policy framework called the Financial
Sector Charter (the “Charter”). The Charter requires existing
banks to provide effective access to first order financial services
to 80% of the low income population by 2008. The government
committed itself in the Charter to amend regulations that hinder
the extension of financial access by private financial institutions.
The Charter enabled the creation of low cost accounts targeting
the poor, the Mzanzi Accounts. In addition, all large retail banks
offered mobile phones as an additional access channel to
existing bank accounts. South Africa has also seen the
emergence of two mobile banking models, WIZZIT and MTN
MobileMoney. With these models, the mobile phone is not only
used as an access channel to existing bank accounts, but the
bank account application is fully integrated with the mobile
phone, enabling the customer to use the mobile phone itself as a
payment instrument. WIZZIT is a start-up founded by two
independent entrepreneurs in 2004 to target the almost 50% of
unbanked South African adults and it operates in partnership
with the Bank of Athens. MTN Mobile Money is a MM product
offered by MTN, one of South Africa’s two largest mobile
operators since 2005 as a joint venture with Standard Bank
(CGAP, 2008).
The Philippines:
The country has been a pioneer, directly regulating and
supervising MNO e‐money providers since the early 2000
(Citigroup, 2010). In the Philippines, e-money can be issued by
banks, NBFIs as well as other institutions (money transfer
agents). It has to be issued and redeemed at par and cannot earn
interest nor have insurance attached to it. The money transfer
institutions have to be large enough to be considered safe. As a
result, they need to have a minimum capital of 100 million pesos
(about 45 pesos to a dollar). Their activities are limited to emoney issuance and related activities such as money transfer/
remittances, but not credit. E-money issuers have to maintain
the equivalent of the money issued either in bank deposits or in
government securities. They also have to obtain a quasi-banking
license from the central bank. In 2006, the Central Bank of
Philippines passed a circular for consumer protection from
electronic banking, relating to the requirements to safeguard
customer information; prevention of money laundering and
terrorist financing; reduction of fraud and theft of sensitive
customer information; and promotion of legal enforceability of
banks’ electronic agreements and transactions (Ashta, 2010).
Indonesia and Afghanistan:
Indonesia has instituted progressive e‐money policies to foster
an MNO issued e‐money model. Non‐banks can issue e‐money
provided that the funds are placed in accounts at commercial
banks. Moreover, Indonesian regulators mandate fund isolation
by disallowing the MNO to finance operations with e‐money
float. Specifically, the regulation states that the float at the
commercial bank must total 100% of the funds derived from
sales proceeds of electronic money that represent the issuer’s
liability towards e‐money holders. Afghanistan’s e‐money
regulations additionally require fund isolation, stating that liquid
assets must be held in a trust account at a banking organization
(Citigroup, 2010).
4.1
An “enabling environment” for mobile financial
services
According to the Bankable Frontier Associates (2009), an
enabling environment for mobile financial service has two key
dimensions: 1) Openness: new, potentially transformative,
mobile money models, are allowed to start up; and 2) Certainty:
clear regulatory frameworks or guidance exists in a way which
reduces arbitrary regulatory discretion over new approaches and
hence the risk for private sector operators (see Figure 3).
Figure 3: The Enabling Environments for Mobile Money
Source: Bankable Frontier Associates (2009).
4.2
Lessons for Zimbabwe
Whilst the current policy on MM in Zimbabwe conforms to
international standards and is consistent with some policies in
other countries, there are a few issues which need emphasis,
especially in view of the need for development of specific MM
regulation.
 Customer Protection: Just like other ordinary financial
products, customer protection is equally important in MM
products, especially issues to do with safeguarding of
sensitive customer information, prevention of money
laundering and addressing the issue of misdirection of funds
when crafting regulation on MM.
 Capitalisation of MNOs. In MM provision, especially for
MNOs, capitalisation of the service provider is equally
important. For example in Philippines, the money transfer
institutions need to have a minimum capital of 100 million

5.
pesos (about US$45 million) to be considered safe. In
addition, MNOs must not be allowed to use e-money float
to fund operations.
Enabling environment for MM is very important to the
success of MM and Zimbabwe can adopt (regulatory)
environment of SA and Philippines and openness of
Kenyan environment and the certainty in the Indonesian
environment.
POLICY AND REGULATORY
RECOMMENDATIONS
Policies and regulations are meant not only to facilitate smooth
operation of products or products concepts but, more
importantly, to mitigate risks associated with provision of such
products. There are many risks associated with mobile money
since it borrows from both the telecommunications and banking
sector risks. Some of the risks related to banking includes
include credit risks, liquidity risks, interest rate risks, and
reputation risks while risks involved in telecommunications
include risk for the telecom operator, risks for telephone users
and risks for the system (Ashta, 2010). Combing the two sectors
would result in more and increased risks5. Managing these risks
depends on the ability of the government to impose financial
service regulations and supervision on mobile bankers. Often it
is not clear how the basic design of Mobile Money regulation
might potentially differ from traditional banking regulation
beyond general statements that regulation should be calibrated
to the risks of a particular scheme (Klein and Mayer, 2011). In
Zimbabwe, despite adopting MM in the mode which successful
countries have done, there are some regulatory issues which can
be recommended to further refine the development of mobile
financial services. Below are some recommendations which
would assist in refining the current policy and regulation on
Mobile Money in Zimbabwe.
1.
2.
3.
There is need for policy clarity on the model which the
Central bank is following. The RBZ indicated that it is
following a bank-based model for MM products, even for
those driven by MNOs. Lack of policy clarity is driving
perceptions, some of which is very detrimental to the
development of MM products.
Developing legislations which regulate e-money. The RBZ
indicate the need to develop an Act which governs
electronic money given that there are now many financial
products which are e-based (inducing ATMs, Internet
Banking and Mobile Money). These products are currently
being governed by internal policy guidelines which have
limitations and their own challenges. The Act must also
ensure that it enforces interoperability of system and
infrastructure so that financial institutions are left to
compete on service but cooperating on infrastructure. Such
an approach would reduce cost of providing e-money
services, hence reduction in charges to customers.
and telecommunication sectors. These regulations must
address potential conflict between the sectors (both at
regulator and individual player’s level), allow or promote
interoperability of the sectors and institutions involved.
4.
Regulation pro-activeness soon after an innovation:
Innovations normally respond to market needs. Regulations
follow thereafter in order to protect consumers and ensure
safety and financial stability. Generally, regulation is
always lagging behind innovation. Whilst that is acceptable
for new innovations, there is no excuse why regulators
would not move with time to avoid delay in adoption of the
innovation as well as creating an environment which
promotes development of these new innovations.
Monitoring and understanding financial sector innovations
by policy makers and regulator is therefore critical, to
enhance efficiency and access as well as ensure a sound and
stable sector. The financial sector should not consider lack
of legal infrastructure as an impediment.
5.
Enabling technology to reach its full potential: The RBZ
seemingly has a passion for promoting financial inclusion
and has drafted many programmes to which promotes
inclusion, but the biggest challenge is lack of effective
implementation. The Central Bank must promote initiatives
which are aimed at promoting financial inclusion through
technology. Mobile technology has the potential to reduce
the cost of financial services and expand the outreach of
financial services particularly to those hitherto excluded
from formal financial services.
6.
Leveraging on development partners: Inevitably, the
Central Bank must facilitate development of legislation on
mobile financial services as more and more products are
introduced and technology enable certain transactions
which are currently not possible. On that mandate, there is
scope for the RBZ to engage developmental partners and
leverage on them in the development of sound regulations
for mobile finance. The RBZ must engage partners to seek
support in the development of appropriate regulations that
enhance safe, sound and effective systems; consumer
protection; inclusiveness and efficient oversight of mobile
platforms.
7.
The RBZ must look into why the M-PESA Model was not
equally successful in SA and identify the similarities which
could be drawn with the South African case. Zimbabwe
situation is not similar to Kenya, where the M-PESA model
of MM was successful, neither is it to the South African
Case where the same model was not equally successful. The
regulator must take into account local situation, especially
the structural set up of the financial sector and the economy
at large, and make comparison with other countries, when
Harmonisation of regulation: Zimbabwe must come up with
harmonised regulation which draws from both the financial
5Additional risks include: High velocity of circulation of money which
is not accounted for by the financial system which could be
inflationary; Prudential regulation using Basle 2 or earlier guidelines,
protects banks and, ultimately, their clients from the risk of banks going
bankrupt but these regulations do not apply to telecoms; the billing risk
in telecommunications becomes a banking transaction risk in mobile
banking; The risk of fraud is based on elusiveness and rapidity.
Elusiveness is because one can use hundreds of small mobile
transactions to cover up huge movements of funds for illegal or
purposes; the risk of privacy of information also increases; and
Interoperability, so useful to network power-functions, dynamically
increases mobile banking risks (Ashta, 2010).
making local regulation. For example, unlike Kenya, the
local environment is characterised by good network of
banks and high number of banks, there is need to weigh the
benefits of having a bank only versus a bank-and- MNObased MM service.
8.
6.
Linking MM to Financial Inclusion. Regulation has a
unique responsibility and opportunity to provide clarity in
pushing forward the financial inclusion agenda. Zimbabwe
must have a vision to attract the poor to formal financial
services through models that use mobile phones. Along
with development partners, the Government must start
supporting the model by using mobile financial services to
deliver government to person transfers (CBK, 2011). The
RBZ must ensure that the regulatory framework must
include financial inclusion as one of the broader objective
of mobile finance. Financial inclusion cannot be driven by
the telecommunications sector; rather MNOs should just
provide the platform through which financial institutions
could reach the unbanked. The regulator should implement
policies which encourages technology based financial
inclusion.
CONCLUSION
A clear e‐money regulatory framework can help increase
adoption of mobile money, and ultimately, financial inclusion
amongst the poor. The challenge is to craft policies and
regulations that mitigate the risks to customer funds without
stifling the dynamism, creativity, and potential of these new
actors. Zimbabwe’s Mobile Money product, although still at its
early stages of development stage, has been offered in line with
international best practice and modelled along the M-PESA
Model. The major challenge is on the regulation side, where
currently there is no specific legislation for MM provision. The
RBZ is currently using the National Payment Systems Act and
internally developed guidelines on MM provision. The major
challenge, however, remains that of addressing potential conflict
of regulators and institutions, risk mitigation, ensuring
interoperability which facilitates development of MM service.
Forward-thinking regulators in several countries have crafted
innovative approaches to meet this challenge. Fundamentally, it
is mainly the drive of the regulator in terms of widening of its
mandate, risk taking and development of regulations which
promote innovation. Zimbabwe still has a chance to refine its
current policy by making comparison with international best
practice, successful countries and fuse it with the peculiarities of
the local environment. By and large, Zimbabwe must come up
with a legislation which supports development on mobile
financial service. Policies related to fund safeguarding and
isolation allows regulators to meet their goals of customer
protection and financial inclusion.
ACKNOWLEDGEMENTS
This research was made possible with the assistance of
institutions which provided information used in this paper.
These institutions include Econet Wireless Zimbabwe, NetOne
Cellular, The Reserve Bank of Zimbabwe (RBZ), CBZ Bank,
Tetrad Investment Bank and the People‘s Own Savings Bank
(POSB). Mention should also go to Mr. G Chiwunze and Mr. E
Mugocha of ZEPARU who assisted with collecting of
information and conducting interviews.
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APPENDIX 1 POLICY REGULATORY ISSUES AFFECTING SERVICE PROVIDERS
Table A1: Policy Regulatory Issues affecting Service Providers
(1) Econet Wireless Zimbabwe: EcoCash Mobile Money
 Econet is in partnership with a local bank TN Bank which provides physical backing for the virtual accounts (EcoCash) held at
Econet. Thus if there is $2m worth of balances in the virtual accounts there should be an equivalent $2m in the trustee account
held at TN Bank
 The network provider provides weekly reports to the central bank detailing the volumes / values that have been made through
the EcoCash facility and also corresponding information about the trustee account held at the backing bank.
 The EcoCash product follows the central bank guidelines on anti-money laundering which the limit the value of each
transaction to $200 and $500 every month.
 The central bank gave a blanket approval (that is not time bound) to Econet that allows it to provide other related financial
services with its EcoCash product.
 POTRAZ regulates the platform that carries the virtual accounts/system. POTRAZ will seek to ensure that the network has
room to carry the additional features and products that utilizes the network infrastructure. POTRAZ does not regulate the
Mobile Money product but it is regulated by the Central bank since it is a financial product
 There are also mechanism in place to correct the misdirected funds
 The company also submits regular (daily) returns to the RBZ on the transaction activities on EcoCash.




(2) E-Mali Cash Card from Tetrad Investment Bank
Provision of the mobile banking facility is constrained by capacity issues with the telecommunication companies especially
with Telecel were more banks are offering their mobile facility through their platform and the same MNO offers its own MM
product.
There is no interference by the telecoms regulator (POTRAZ) since the carrier in this case the mobile network operator is the
one regulated.
The E-Mali product has to comply with the Central Bank Know Your Customer (KYC) requirements and the Anti-money
Laundering requirements which put a cap on the value of transactions to $1000.00.The compliance issues are mainly managed
by the main banking unit and not by department which runs E-Mali product.
They also have to furnish the regulatory authority with returns (MPSD 7) which states the volume, value of transactions and the
number of people using the facility.
(3) CBZ Mobile Banking
 The launch of the CBZ mobile banking product was delayed due to the lengthy verification process that the financial regulator
had to undertake i.e. the mobile banking system is put under a stress test to ascertain its ability to withstand certain risks both
internal and external.
 The mobile banking system is separate from the core banking system used by the banks main arm. However the virtual
accounts are backed by the creation of a suspense account in the core banking system.
 The Mobile Banking Unit gets connectivity ports from the Mobile Network Operators (MNO) who only provides a platform
which allows the mobile bank clients to interact with bank system. Hence the bank has no interface with telecoms regulator
(POTRAZ) and is not subjected to its compliance requirements.
 The Mobile Banking Unit has to furnish the Central Bank with monthly returns detailing their monthly activities.
(4) One Wallet- NetOne Cellular
 NetOne has partnered with a Banking Institution (FBC) which backs its virtual account held in its system. The financial
regulator has restricted the MNO to be backed by only one institution.
 The One Wallet product has a cap on the amount of money (placed on it by the financial regulator) that can be transferred per
transaction.
 It also has to comply with central banks Know Your Customer (KYC) guidelines.
 Net One has to furnish the Central Bank with periodic returns about the volume and nature of transactions on the One Wallet
system.

The operations of the One Wallet product is not entirely regulated by POTRAZ but only as a value added product.
(5) POSB Bank
 The bank uses a ZimSwitch (a platform which enables inter-linkage of banks such an account holder access his bank from
another bank) Mobile platform for its Mobile Money Service.
 The Bank reports to the NPS Division of the RBZ on a regular basis. The type and transactional limits in place (example
$1,000 ZIPIT limit) are examples of their policy guidance.
 The biggest challenge was getting all MNOs to connect, as well as getting all 19 financial institutions connected to ZimSwitch
to use the shared central system to ensure minimal costs and national inter-operability
 Both POTRAZ and the RBZ play an active role in governing and guiding the offering of mobile money through the shared
ZimSwitch Mobile system. All products offered by ZimSwitch Mobile are for banked individuals only, thereby differing the
service functionality from standard MNO based products. The MNOs play the role of “distribution channel” rather than owner
of the mobile banking product.