Promoting Financial Inclusion through Digital Financial Services – Jordan Ready to Take Off

Paul Newall discussed with Khurram Sikander, who has been leading key digital inclusion initiatives in the country.

Enclude has been involved in multiple projects in Jordan recently, including a project working with the Central Bank of Jordan (CBJ) to promote financial inclusion through mobile financial services (MFS). What is the state of financial inclusion in the country and what is the vision for MFS?

There is a very low rate of financial inclusion in Jordan with only 24.6% of the adult population banked, leaving an entire 75% of the population un(der)banked. On top of that the Jordanian population is also expanding rapidly due to the influx of refugees who have limited access to financial services – further increasing the underserved population.

Recognizing the importance of financial inclusion to broader inclusive economic growth, the CBJ saw an opportunity to leverage MFS to reach these unbanked segments. Specifically, the CBJ took a proactive and forward-looking step by establishing regulations that enable both banks and non-banks to offer MFS, and by spearheading the development and roll-out of JoMoPay, the country’s mobile payment platform.

In establishing and operating the platform itself, the CBJ was able to set rules of the game and ensure a level playing field in Jordan. For example, JoMoPay is fully interoperable among providers – both banks and payment service providers (PSPs). This means that a bank, mobile network operator, or a wallet issuer (or a consortium of these providers) can offer MFS by applying for a PSP license with the CBJ. JoMoPay is also integrated with other national payment systems, including JoNet, the interoperable ATM and point of sale (POS) switch, and eFawateercom, the centralized bill presentment and payment platform. These integrations promote usage of various channels and instruments (mobile, ATM, agent, and card) to access mobile wallet accounts.

Ultimately, the CBJ’s vision for JoMoPay is to build a mobile money ecosystem that brings unbanked segments into the formal financial system, thereby benefiting the Jordanian economy and society as a whole.

How has the market responded to the initiatives promoted by the CBJ?

Since the launch of JoMoPay in 2014, four PSPs have received licenses and two PSPs have received provisional licenses. The four licensed PSPs include Al Hulool, which is a consortium of the telco Umniah, Emerging Markets Payments Group, and four commercial banks; Zain Cash, which is affiliated with the telco Zain; Aya Jo; and Dinarak. The market has been relatively slow to fully launch their services and expand market awareness of their products and services – this is the case for several reasons, including a focus on the technical and operational aspects of their services over the development of marketing and distribution strategies. It seems the market is waiting for one of the PSPs to make the first move.

That said, there is substantial market potential, particularly as the PSPs now focus on expanding their agent networks and targeting key sectors / segments. The foundation for MFS in Jordan is strong and the industry is well-positioned to scale.

Recognizing the CBJ’s vision for financial inclusion and MFS, how did our work fit into their broader strategy?

Two key pillars of the CBJ’s Vision and Strategic Framework 2013-2016 were to enhance oversight of the payment system department and to modernize the retail payment system while promoting financial inclusion. Additionally, the CBJ has been in the process of developing and rolling out a financial inclusion strategy and formalizing commitments to the Maya Declaration – both of which view digital financial services as a core enabler to achieve their targets.

Our work with the CBJ contributed directly to supporting achievement of these strategies and commitments. Specifically, with support of the European Investment Bank (EIB), our mandate was to enhance the oversight capacity of the CBJ’s payment system department (PSD), particularly as it relates to MFS. When the project was first designed, the CBJ had only recently gained authority to oversee the payment system. The PSD – led by Executive Manager Ms. Maha Bahou – was therefore eager for support to build the capacity of the team in areas including the legal and regulatory framework, risk management, and data collection for digital retail payments.

What were some of the key project outcomes and how did we approach them?


The Enclude team facilitates a risk management workshop with key industry stakeholders

A key characteristic of our approach was engagement with stakeholders across the payments ecosystem throughout the project. Although the CBJ was our main client, a strong understanding of market realities and the opportunities an
d challenges facing stakeholders was critical to delivering recommendations that were fully tailored to the Jordanian market.

At the end of the program, we produced a number of deliverables that we were happy to see were not just sitting on a shelf, but rather, were being used by the CBJ. For instance, on the legal and regulatory framework, our recommendat ions were incorporated into the CBJ’s bylaw and into the memorandum of understanding between the Telecommunications Regulatory Commission and the CBJ.

We also delivered a risk management framework and implementation plan for JoMoPay, with inputs from industry stakeholders, which is designed as a live tool for the CBJ to enhance readiness to mitigate and respond to risks as they rise. We developed a data collection methodology for the CBJ, including templates for the CBJ to collect data from the industry on indicators related to the access, usage, and quality of digital financial services. We also facilitated study visits between the CBJ and De Nederlandsche Bank (DNB), the central bank of the Netherlands; Finansinspektionen, Sweden’s financial supervisory authority; Riksbank, the central bank of Sweden.

What are some of our key takeaways from the project, and how will they inform our work and the broader industry moving forward?

A key takeaway from the project is an understanding of the role that regulators have in pushing the industry along and ensuring that the journey towards cash-lite is one of engagement and consultation with the industry. The CBJ has taken action to create a DFS ecosystem that is fully interoperable from day one – allowing providers equal and fair access to platforms and the customer, regardless of size.

In our work, we have often seen regulators struggle with the financial ‘integrity vs. inclusion’ debate. Particularly in a market like Jordan, which is in a region characterized by social, political, and economic instability, ensuring financial integrity is an utmost concern. However, the CBJ has been able to strike a good balance, understanding the importance of financial inclusion for inclusive growth and pushing the market where it needs to go when it was too slow to take up the reigns. Jo
rdan has all the right ingredients for DFS to take off. There is also another exciting project we are implementing that focuses on the digitization and inclusion of refugees and host communities in Jordan but that will have to wait for another blog.


Financial Regulations for Improving Financial Inclusion

 Written by Rebecca Marx, Victoria Rau, and Paul Newall

Banking Beyond Branches has published many blogs highlighting how digital financial services (DFS) can expand financial inclusion, including through refugee populations, budget smartphones, and remittances. We also called attention to government policies toward financial inclusion as a key trend in 2016 and our prediction has been complemented by the Center for Global Development’s latest release: Financial Regulations for Improving Financial Inclusion.

A key focus for the report is examining the complexities in the ex-ante vs. ex-post debate on regulations – akin to tightrope walking for regulators. As we see in markets such as Nigeria and India, ex-ante policies may often inhibit the industry with too many regulations from the get-go. Ex-post regulation, on the other hand, may be too late to respond to issues. The key to this debate, some argue, is to allow the market to get out ahead, but keep it “within shouting distance”, as phrased by Marisa Lago, US Department of Treasury. In particular, the question of interoperability is of central concern – should the market evolve to interoperability naturally (presuming it does), or should it be mandated? Regulators want to ensure that the market will advance through competitive market mechanisms, but “maintain the capacity to be interoperable”.

Balancing proactive ex-ante regulation with reactive ex-post regulation and maintaining a level competitive landscape feature strongly in the report. The recommendations are intentionally agnostic to the technologies and players involved in providing financial services. They state that banks introducing additional mobile channels should still be scrutinized as banks, while digital services providers entering the market should be scrutinized more or less depending on the types of services they intend to provide, i.e. adopting a ‘service’ risk-based approach to regulation.

If it is anticipated that greater financial inclusion will be achieved by “disruptive” technologies in payments and financial services, as we would argue on this blog, then trying to regulate the payments industry as it advances is going to be a key question moving forward. A technology or innovation that truly disrupts does not announce its arrival with enough lead-time for regulators to anticipate the potential consequences or develop the appropriate regulatory framework. Innovative ways of paying for goods and services and storing or transferring money can just show up and are often out of “shouting distance” quite quickly. They disrupt the status quo and challenge existing rules, but who knows if they will gain enough traction to stay.

To analyze the role of ex-ante vs. ex-post regulations, and how central banks respond to disruptive technology, we need not look further than Kenya (whose former Central Bank Governor was a key contributor to this report). While lauded as the predominant mobile money case study, Kenya has had its own regulatory questions to answer. In 2014, the Communication Authority of Kenya (CAK) required Safaricom to allow its mobile money agent to host services from other operators but market competitor Airtel pushed regulators to go even further.  Airtel, asserting that mobile cash transfers from M-Pesa to Airtel Money are twice as expensive as transactions between Safaricom customers, wants to see regulators monitoring interoperability costs in order to reduce barriers to entering the market for other operators.

In July 2015, the government introduced new regulations that, if passed, would lead to the break-up of Safaricom in an effort to protect against monopolies. Fred Matiang’I, the cabinet secretary at the Ministry of Information said, “Telecommunications firms need to be regulated to ensure some players are not strangled”. If the regulation is passed it could force Safaricom to separate M-Pesa from its mobile phone services and infrastructure business, to the glee of Airtel.  In September 2015, Airtel chief executive Mr. Youssefi said, “Airtel is likely to exit Kenya if the market structure is not addressed in terms of dominance”.

While the discussion of M-Pesa’s dominance of the Kenyan market has certainly been elevated, reaction from Kenya’s authorities has been slow. The CAK said it would need at least one-and-a-half years to conduct a study to determine the thresholds of abuse and dominance in the telecommunications industry, and only after that study can anti-competitive practices in the market be addressed. Time will tell if regulatory action will be taken while providers are still “within shouting distance”.

From the above example, we are able to see some of the pros and cons of ex-post regulation. While Safaricom was able to develop themselves into the leading mobile payments players, rivals have felt that the playing field was not level – something ex-ante regulations might have mandated. The report attempts to provide regulators, such as Kenya’s, a framework to address these challenges and chart their path.

How might we best assist refugees? The mobile phone

Written by Paul Newall

The world is facing one of the greatest humanitarian crises since World War II. The United Nation’s Syria Regional Refugee Response estimates there are 4.39 million registered Syrian refugees globally – with the total number being much higher[1] – and that is not even including the refugees from other countries, such as Iraq, Afghanistan, Libya, and Eritrea. While there have been many instances of mass migration in human history, there is one key difference to today’s crisis, and it’s a trend that may provide an avenue to reaching, connecting, and serving those in-need: the mobile phone.

A recent article stated “we can call the huge numbers of refugees arriving in Europe in 2015 the first digitally-driven mass-migration.”[2] To highlight this point, Wael, a Syrian migrant, told Agence France Presse “our phones and power banks are more important for our journey than anything, even more important than food.”[3] According to one study, 86% of Syrian youth in refugee camps have access to a smartphone, and agencies have made it relatively easy to get SIM cards once inside.[4] In Jordan’s Za’atri Syrian Refugee Camp, for example, researchers found that 89% of respondents owned a mobile handset and 85% owned at least one SIM card.[5]


An aerial view of Za’atri refugee camp in Jordan (Photo credit)

At a time when ignorance and fear about the refugees is at an all-time high (Hello, Mr. Trump and Mr. Cruz), the mobile phone can prove the tool to reach these populations and provide a useful lens through which we can better understand them. Through mobile phones, governments/donors can connect to those in-need, allocate cash-transfers, provide health and re-settlement information, and break down any language barrier. We can understand their social circles, their needs, their concerns, and their journey to where they are now.

The above use cases are possible if we find solutions to current questions or concerns (including Anti-Money Laundering /Combating the Financing to Terrorism, fraud, etc.). Using industry best practices, as well as leveraging recent technological innovations, we can move towards the financial inclusion of refugees while maintaining the integrity of the financial ecosystem.

There have been reports of border crossing agents removing mobile phones from refugees upon arrival to their country – it’s hard to imagine a more shortsighted action. We are in a moment when the immediate needs and concerns are so pressing – donors and governments must prioritize utilizing the one common connector between us all: the mobile phone. Responses can be better targeted using the data from the refugees’ mobile phone. Such a targeted, data-driven approach was not available in mass migrations of the past; we must make sure we make the most of this opportunity.

Following this article, we will explore elements such as security, efficiency, technology and inclusion with a series of articles that highlight solutions that could yield big results in assisting refugees.





[5] Maitland, Carleen and Ying, Zu, A Social Informatics Analysis of Refugee Mobile Phone Use: A Case Study of Za’atari Syrian Refugee Camp

The challenges ahead for mobile financial services in Myanmar

Screen Shot 2016-01-13 at 1.00.08 PM

Written by Sachin Bansal

Myanmar has been receiving lot of attention recently. As a result of its increased openness with the global community, there have been many articles written on the country, its people, and many are looking at Myanmar to take great strides in the coming years. As a result of the increased dialogue with international players, there has been significant foreign investment in various sectors of the economy. The country is now moving towards a market-oriented economy, a change that is helping the government-driven economy to be more efficient and competitive. As an example of the increased competitiveness, entry of new players in the telecommunications space has brought down the cost of SIM cards from as high as $2,000o to $1.25 today, making it more accessible to the population. This fall in price has resulted in increased mobile penetration in Myanmar, 54.6% as of March 2015. The Ericsson Mobility Report of November 2015 states that 87 million new mobile subscribers were added globally in the Q3 2015, of which Myanmar contributed 5 million – ranked fourth globally of the fastest growing markets.

The Central Bank of Myanmar is eager to leverage this now omnipresent tool to expand financial services to the un(der)banked citizens of Myanmar. In July 2015, it issued draft Mobile Financial Services (MFS) regulations and the final regulation is expected soon. In spite of all the efforts being made by the government, central Bank, financial institutions and telecom companies, the journey to launch MFS will not be easy in Myanmar. There are several challenges facing uptake and usage:

Lack of trust in the banking system: 

There is a very high level of mistrust with the banking system in Myanmar and most people still do not have bank accounts. The lack of trust is so ingrained that several big institutions pay their staff in cash, as the employees are not willing to accept a bank transfer. This lack of trust in banks can mainly be attributed to the 2003 Myanmar banking crisis but there have also been several recent rumours of banks failing, leading to people withdrawing all their money from the banking system. The MFS players will have to work very hard to overcome this challenge to change people’s perception.

Low level of perceived risk for carrying cash:

People in Myanmar do not perceive carrying large amount of cash on their person as a huge risk, unlike in other countries. This lack of risk is evident in the country as you can see money changers sitting on the roadside of Yangon streets, with minimal security arrangements, counting large US Dollar bills out in the open. As the perceived risk of carrying cash is low, people may be unwilling to pay fees/charges to store their money in MFS wallets for just safety reasons.

Low pricing of existing formal channels of money transfer:

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Money Transfer Charges of Myanmar Post

Most successful MFS offerings have person-to-person money transfer (P2P) as their core product offering as it is cheaper than transferring money through a bank. In Myanmar, however, the money transfer service offered by many formal institutions has a very low transfer fee. The Myanmar Post Office, for instance, has an extensive presence throughout the country and offer money transfer service in 335 of their branches. The fee is lower compared to other countries at 0.05% to 0.5% of the amount remitted plus fees. Indian Post Office by comparison charges 5% on low-ticket money order service. Establishing a business case to compete with such low pricing is going to be a challenge for MFS players in the near future. However, there is limited geographical coverage of such formal services available to the citizens and customers may be willing to pay for convenient services if the price was appropriate.

Prevalence of Hundi system (informal remittance channel)

There are several informal channels , such as the Hundi system, that also offer money transfer services to citizens of Myanmar.  The Hundi system has been used and trusted for several decades. As per The Economist, people migrating outside the country perceive the traditional hundi system to be cheaper, quicker and safer than anything the banks can offer. The new MFS offering will have to beat the advantages offered by such informal systems.

To launch successful MFS operations in Myanmar, the providers will have to work on an innovative business model and develop customer-centric products that learn a lot from the informal offerings. Pricing will also play an important role as customers may be willing to pay for accessibility and convenience.


Mobile Money in Uganda

Written by Paul Newall

Discussion between Khurram Sikander (KS) and Paul Newall (PN)

The recent ruling in Uganda to declare mobile money illegal has surprised many and caused quite a commotion in the digital financial services (DFS) space – and much conversation in the Enclude offices. I talked with Khurram Sikander, Enclude’s Global Group Lead for Digital Payments, to discuss some of the major topics and gain his insights on the matter.

PN: The recent ruling in Uganda has thrown into uncertainty one of Sub Saharan Africa’s most promising mobile money environments. What are your initial takeaways?

KS: I do not believe that the views shared by Member of Parliament Katunu and Justice Madrama are entirely correct. While the regulations in Uganda could be more clearly articulated and could include a more comprehensive set of guidelines, they do mandate that mobile money operators (referring to non-bank providers such as MNOs) partner with financial institutions to apply for a license. It is then the responsibility of the financial institution to carry out due diligence on the mobile money operator, including proof of financial position; and review of the operator’s business plan, risk management proposal, technology system, and AML/CFT measures. Once approval from the Bank of Uganda (BoU) is obtained, mobile money is treated as a financial institutions business regulated under the Financial Intelligence Authority.

PN: There does seem to be some recurring confusion with how the money is reconciled between the two parties in this relationship. This confusion has led the MP and Justice to consider MTN a financial institution. Can you expand upon that – once transferred, how is the money reconciled between the bank and the telco?

KS: The regulations clearly state that the mobile money operators have to hold, in an escrow account in their partner financial institution, the equivalent value of the mobile money / wallet they sell to their customers. The parties are expected to reconcile the balances of the escrow account and the mobile money accounts to ensure the net effect is always zero. Negligence in this area is where the fraud often takes place.

PN: This all seems like a misunderstanding of the regulations. Keeping in mind how successful Uganda’s mobile money market has been, why do you think the MP and Justice took it upon themselves to declare it illegal?

KS: It seems that there is a fundamental lack of clarity from those reviewing the regulations. In any case, I do not see the government suspending a $6 billion per year business (as of 2014) and a large source of tax income anytime soon, and in fact, the BoU has responded to the situation by issuing a statement confirming that mobile money is lawful and secure.