The Fletcher School

Calendar » | Giving to Fletcher » | Ginn Library »

Connecting Stakeholders and Identifying the Challenge - M-Banking 2009: Balancing Innovation and Regulation

• Brought together 300 Government, Business, NGO and Academic leaders.
• Facilitated in-depth discussion between disparate stakeholders on the current status of mobile and branchless banking, its challenges, and future opportunities.
• Identified a common desire by both telecommunications firms and the banking sector for government regulatory action.
• Commitment by the Center for Emerging Market Enterprises, at The Fletcher School, to fund further research on key mobile and branchless banking issues.

O

n Monday, May 25, 2009 Kenya’s Deputy Prime Minister and Minister for Finance, the Honorable Uhuru Kenyatta, officially opened “M-Banking 2009: Balancing Innovation and Regulation”, the first conference organized by the Fletcher School to be held in Africa. The conference was the result of a partnership between the Kenya School of Monetary Studies (Nairobi, Kenya) and The Center for Emerging Market Enterprises (CEME), The Fletcher School, Tufts University (Massachusetts, U.S.A.).

M-Banking 2009 was motivated by the dramatic worldwide increase in mobile financial service offerings and usage. Mobile financial services encompass the range of financial functions individuals can transact via their mobile phone. Also known as mobile banking (m-banking), the activities can include accessing of bank account information, making payments, transferring funds between bank accounts, and the storage and transference of value between phones without necessity of bank accounts.

In Kenya, the development of the mobile banking sector has been rapid and profound. Since the debut of a Kenyan m-banking system in 2007, usage has surged, with over six million accounts recorded in 2009. Eleven thousand new accounts are added to one service, Safaricom’s M-Pesa system, per day. The nation is now a leader in the m-banking arena, boasting companies that are seen as models for m-banking providers throughout the world. Kenya’s experience with m-banking has demonstrated the technology’s utility in serving the unbanked poor, as well as highlighted the necessity for the development of new policy frameworks that enable both continued innovation and provide necessary, and forward thinking, regulation.

The debate around m-banking in Kenya has heightened over the last few months. Regulatory agencies, commercial banks, and telecommunication companies have all formulated differing stances on the future direction of m-banking services, market penetration and inclusiveness.

It is against this background that the Kenya School of Monetary Studies and CEME organized the M-Banking 2009 conference. The conference brought together international and domestic practitioners, regulators and academics to share experiences and knowledge, as well as to explore policy options for enabling opportunities and addressing key challenges. The conference aimed to identify how the advent of m-banking can allow for economic growth an increased prosperity both for individuals and for the nation as a whole.

Throughout the conference, speakers and presenters stressed the key opportunities offered by m-banking. Speaking during the official opening, Deputy Prime Minister Kenyatta explained that creating a vibrant, inclusive, and globally competitive financial sector would require competitive innovations by key stakeholders in order to tap into the vast reservoir of funds that exist outside of the formal financial system. He emphasized the importance of soundness, efficiency, accessibility and affordability in branchless banking, highlighting the Government’s commitment “to putting in place enabling legal and regulatory environment covering the financial sector, national payment systems, anti-money laundering, electronic communication and consumer protection.”

Several key themes permeated many of the panels. The first of these centered on the benefits and opportunities mobile and other forms of branchless banking offer. Financial access was identified as leading to job creation and an improvement in the livelihoods of some of the most economically marginalized individuals in Kenya. Professor Kwesi Botchwey, from The Fletcher School, noted “the real potential of m-banking lies in what it can bring in the way of accentuating the efforts in poverty reduction. The real potential will be reached when we can tap m-banking to enable full access to financial services.”

A second key theme of discussion centered on the challenges presented by the advent of m-banking. Security was voiced several times as a central concern. Some security challenges involved network security, including the danger of criminal hacking. However, the majority of security concerns were focused on non-technical threats. These included consumers lending out their account for others usage, forgetting or giving away their password, or utilizing the network to engage in criminal activity, such as money laundering or criminal financing.

Page 1 | Page 2