Today I will analyze the monetary policy statement and its impact on the mobile money movement in Zimbabwe. I’m concentrating only on Section 3 subsection D from point number 45:

    i.           Non-adherence to #KYC principles, characterized by, among other issues, creation of mobile money accounts using fictitious and unverified identification particulars.

    This is a challenge that was brought about in the initial phases of mobile money where customer on-boarding/registration was incentivized, agents would get a commission for registration. Unfortunately, some members of the public took advantage of the gap and started fictitious registrations. I have always argued financial inclusion efforts should not be left to profit making enterprises alone.

    There is need for mobile money registrations to be aligned to a national registry or some form of public e-KYC system. This will allow for self-onboarding and securing funds of the deceased once they are reported as such. GSM registrations should be in line with mobile money registrations, thus there is need for a massive data clean up, where if the two are not in the same name the account should be suspended. Those with mobile money will be allowed to use whatever is in the account but no credits should be allowed.

    ii.           Creation of money on the platforms (overdrafts and fraudulent /fictitious credits) which is not backed by balances in the Mobile Money Trust Accounts.

    Money creation can be a big dent on any economy, whilst the central bank is implementing contractionary monetary growth stance aimed at fostering price stability, money creation negates all these initiatives. There is need for APIs that auto credits employer accounts at the bank without having to go through the mobile money operator. Thus, when funds are transferred for the sake of bulk payments, the mobile money wallet (number) to be credited should be treated as the account number thus settlement happens instantly without human intervention. Unfortunately, this is suspended for now but maybe a solution for mobile money operators if they want to convince the central bank.

      iii.           System infrastructure inadequacies and weak Anti Money Laundering controls;

    A case for supervisory technology (suptech) according to Financial Stability Institute, “suptech applications, particularly in the area of data analytics, are seen as capable of turning risk and compliance monitoring from a backward-looking into a predictive and proactive process”

     iv.           Failure to comply with, including wilful disregard for, regulatory directives;

    A case for regulatory technology (regtech). “Regtech is the management of regulatory processes within the financial industry through technology. The main functions of regtech include regulatory monitoring, reporting, and compliance.”

    v.           Connivance between mobile money operator employees and customers to delay or illegally bypass account freeze orders.

    A case for strong internal controls within the mobile money operator businesses. These will also be supported by suptech in a way.

    vi.           Failure to deduct or remit statutory taxes;

    This has the effect of reducing domestics resource mobilization efforts in any country. Of course, I’m not a fan of the 2% tax because of its impact on the poor but it is regulatory it must be collected.

     vii.           Rampant abuse of agent, super-agent and bulk payment wallets for purposes of trading on the foreign exchange parallel market.

    Another case for suptech, it will help identify red flags in usage and proactive action can be taken

    47.       Recommendations on individuals

    Mobile money operators shall, with immediate effect, close all multiple wallets, and allow just one wallet per individual.

    I wrote an article on financial inclusion illusion sometime back found here

    I still wonder what is going to be the impact of this exercise on those statistics given the double counting that has been happening.

    As mentioned above we need an e-KYC module that manages such regulatory orders. This means the limit is not on the account but on the individual. It therefore means if one has 10 accounts on the same mobile money platform one’s limit remains $5000, one can use 500 on each account but as an individual one won’t exceed the limit.

    I know people who do not want to mix business and personal thus they had two accounts for that purpose. I know women who were receiving grants from NGOs who had a second accounts so they can hide and safeguard the money from their “drinking” husbands. I can only imagine what’s going to happen when the husband discovers money was coming in all along when the wife had indicated she was removed from the list. I know of women who used their husbands second accounts because they do not have documentation for them to be registered.

    With an e-KYC module, if you have an account on each of the mobile money operators your limit remains $5000 as an individual because the limit is attached to your ID number. The current state of affairs means the limit is per mobile money account and not per individual. What about the fictitious accounts mentioned above, what about accounts registered in deceased persons?

    Recommendation Merchants

    Merchants shall not be allowed to make payments from their wallets. E-value held in merchant wallets shall be liquidated to the merchant’s bank account.

    My thoughts are with the rural merchant who has never had a bank account, are they not going to be forced to go back to cash. Most merchants where already using the merchant to merchant to replenish stocks with wholesalers. I know a merchant who would just call the wholesaler for an order and wholesalers loads the merchandise on the bus and merchant pays using merchant to merchant function. This was a sustainable model. The use of data and suptech may help study the behaviour of merchants.

    Recommendation Agents

    Agents’ mobile money wallets are therefore abolished, with immediate effect.

    Wallet funding is now mainly through bank to wallet and P2P transfers. Maybe it’s a necessary evil given what we are trying to achieve in the short run. There may be need for review.

    Since banks will be processing of bulk payments there is need for bank systems to be integrated with all mobile money operators such that social grants can be posted direct into mobile money wallets.

    What about remittances

    Now that exchange rates are converging what will happen to individuals who receive remittances on mobile money accounts and may opt to liquidate on the platform. Will the $5000 limit still apply. Assuming you are in deep rural and you have received a remittance for a family emergency. If someone is receiving US$300 for funeral expenses with the current exchange rate and the limit it may take them three days to use all the money sent.

    Food for thought