Microfinance Policymakers Forum advocates to use technological advancements for financial inclusion

Microfinance Focus, Dec. 26, 2009: Bank Negara Malaysia in collaboration with the CGAP, a microfinance group based at the World Bank and the Alliance for Financial Inclusion (AFI) organized the Microfinance Policymakers Forum 2009 on 2 and 3 December 2009.  Discussions of the workshop focused on key considerations and recent developments in institutional structures, as well as regulatory and supervisory requirements necessary for effective adoption and application of branchless banking.

The two-day workshop held at Lanai Kijang, Bank Negara Malaysia involved key policymakers and regulators from 17 Asian countries including Afghanistan, Bhutan, Timor Leste, India, Indonesia, Korea, Lao PDR, Malaysia, Thailand, Vietnam and Philippines.

“All of the participants are focused on the needs of the poor as they consider new regulations for this innovative way to expand access to financial services; and this is vital for the success of any branchless banking regulation” Michael Tarazi, Senior Regulatory Specialist at CGAP said.

“Representatives are being thoughtful and cautious as they think about merging the domains of finance, payments, and telecommunications to create a framework that balances customer needs with concerns around security, risk and regulation”, says Tarazi.

“Countries in emerging markets have been some of the first to innovate ways to go beyond traditional bank branches to bring financial services to the poorest. Many came to this workshop to share their experiences with one another on how to implement sound policy in a range of new fields. Peer to peer advice and mutual learning can be one of the most effective ways to unlock the potential of financial inclusion”, says Alfred Hannig, Executive Director, Alliance for Financial Inclusion.

“In terms of addressing the policy concerns, Bank Negara Malaysia has taken measures to put in place the payment infrastructure, promote a broad product range to cater for the different payment needs of consumers and business as we have also developed a transparent and cost-effective pricing framework to provide the incentive structure that would spur the adoption of electronic means of payments”, says Dato’ Zamani Abdul Ghani, Deputy Governor Bank Negara Malaysia.

Branchless banking presents a special challenge for policymakers as they balance greater access with consumer protection. Among the challenges are:
•    Allowing non-bank third parties, such as local merchants, to conduct “cash-in/cash-out” functions and to interact directly with customers and to perform ‘Know Your Customer’ procedures for remote account opening.
•    Adopting the right measures to address money laundering and combating the financing of terrorism (AMLATFA)
•    Ensuring effective consumer protection to avert potential issues that may arise with the use of mobile phones and the use of agents, including issues such as privacy and fraud.
•    Identifying the right regulatory space for the issuance of e-money and other stored-value instruments (particularly when issued by parties other than licensed and supervised banks).
•    Allowing an appropriate balance of competition and cooperation in retail payment systems in order to promote a certain degree of interoperability.
•    Getting the balance right in competition policies – providing the right incentives for pioneers to invest in the branchless banking business without allowing for the formation of customer-unfriendly monopolies.

© 2009, Microfinance News. All rights reserved. 2008-09