“Three quarters of the world’s poor don’t have a bank account, not only because of poverty, but the cost, travel distance and amount of paper work involved in opening an account” (World Bank).
In recent years banks, non-banking financial institutions, and mobile phone operators, supported by international aid organisations, local governments and central banks, have introduced new and innovative ways of bringing banking solutions to people who didn't previously have access to banking services, promoting financial inclusion. There's been huge growth in this area in the Pacific, where large populations living in rural, difficult to reach areas, now have access to affordable telecommunications and technology.
It's estimated that 60% of Pacific Islanders now have access to mobile phones (in 2006 the region’s mobile phone penetration was under 10%). It has been reported that there are now more Pacific Islanders with mobile phones than bank accounts.
The rollout of ‘rural banking’ and ‘mobile banking’ solutions have required banking regulators to tackle traditional requirements, including for example anti-money laundering and counter-terrorism financing (AML/CTF) requirements, and banking via ‘agents’, in new ways.
Papua New Guinea
In most Pacific island countries where mobile banking has been introduced, the central bank or local regulatory authority has dealt with proposal on an ‘ad-hoc’ basis. As far as we know, PNG is the first country to propose formal regulation which specifically deals with mobile banking.
In March 2012, the Bank of Papua New Guinea (BPNG) issued its first mobile banking licence (Licence) to Digicel Financial Services Limited. In its press release announcing the issue of the Licence, BPNG noted that it considers mobile banking as ‘banking business’ and it requires companies wishing to offer mobile banking to be licensed under the Banks and Financial Institutions Act 2000.
A mobile banking regulation and prudential standard have been developed by BPNG to licence and regulate providers of mobile banking and mobile payment services:
- It is intended that the regulation (assuming assented to by Parliament in its current form) will require non-bank mobile banking service providers to obtain a Licence to provide mobile banking and mobile payment services while licensed financial institutions can offer mobile banking as an added product of banking business under their existing banking licence.
Some key features of the proposed mobile banking prudential guideline include that the non-banking institutions must:
- establish a risk management framework to address inherent risks in mobile banking and mobile payment services;
- have in place customer due diligence and know your customer policies and procedures to ensure compliance with AML/CTF requirements under the Proceeds of Crime Act 2005;
- provide details of all agency arrangements, including comprehensive agency agreements and reporting and monitoring mechanisms;
- ensure interoperability, so that customers are not restricted to one mobile network operator only; and
- maintain a ‘pool of funds’ with a licensed bank and establish a ‘Trust Deed’ between the licensed bank and the non-bank institution for management of the pool of funds.
The Reserve Bank of Fiji (RBF) issued Banking Supervision Policy Statement No. 18 ‘Agent Banking Guideline’ (Agent Banking Guideline) on 1 January 2013, which introduces guidelines for commercial banks when appointing agents to represent them in areas or communities where there are no reliable, safe and sustainable access to commercial banking services.
The Agent Banking Guideline specifies permitted ‘Agent Banking’ activities, which can be performed by agents as agreed to in a contract with the commercial banks, and include:
- Deposit and withdrawal, and transfer of funds
- Disbursement and payment of loans
- Payment of retirement and social benefits
- Balance enquiry and generation and issuance of mini bank statements
- Collection of documents in relation to account opening, loan application, and debit card application
- Agent mobile phone banking services
- Collection of commercial bank mail/correspondence for customers
- Any other activity the commercial banks or RBF may prescribe
The Agent Banking Guideline sets out minimum provisions for agent contracts, including measures to mitigate risks associated with agent banking services including limits, customer transactions, cash management, cash security, security of agent premises, AML/CTF requirements, and suitable limits on cash holdings by the agent and limits on individual customer payments and receipts. Any contract between a commercial bank and an agent or the terms of the agent banking services provided by an agent to a customer must not attempt to exclude the liability of the commercial bank to any customer for the acts, omissions or defaults of its agent.
Finally, the Central Bank of Solomon Islands (CBSI) in February 2013 introduced ‘Simplified Customer identification and Verification Guidelines’ with the express intention of relaxing the legal and policy barriers that hinder Solomon Islanders from accessing financial services. Because often potential customers do not have the official documentation, such as passports, driver’s licences, or birth certificates, required by the commercial banks to open bank accounts, relaxed customer due diligence requirements have been introduced to facilitate financial inclusion. The revised customer due diligence requirements allow people to open bank accounts with minimum identification requirements such as reference letters from clergymen, or village chiefs.