Regulatory reform: A conversation with the Bank of Ghana on the journey towards the new Guidelines for E-Money Issuers

On 6th July 2015, the Bank of Ghana published new and progressive Guidelines for E-Money Issuers in Ghanaeffectively replacing the 2008 Guidelines for Branchless Banking. The new regulatory framework dramatically changes the landscape for e-money issuance and mobile money business in Ghana by providing a proportionate, risk-based approach to regulating the industry while allowing mobile operators to participate fully through wholly-owned subsidiaries.

The GSMA recently caught up with Mrs. Elly Ohene-Adu, Head of the Banking Department at the Bank of Ghana, under whose watch the new regulatory framework for e-money issuers was launched. Mrs. Ohene-Adu shared insights into the journey taken by the Bank of Ghana in reforming the regulatory framework and discussed the key highlights of the new regulatory framework.

GSMA: Please tell us about the circumstances that led the Bank of Ghana to issue new guidelines for e-Money Issuers. Why was it necessary to replace the 2008 Guidelines for Branchless Banking with new Guidelines for E-Money Issuers?

Mrs. Ohene-Adu: In 2008, knowledge about mobile money, its benefits, potential impact, and associated inherent risks was low. Mobile money was viewed, at best, as a channel for use by only banks and deposit-taking financial institutions to reach unbanked segments of the population while MNOs were seen as agents making their platforms available to banks to use. It was therefore mandated that banks alone should lead the process, own the customers as well as the agents. At the same time, Bank of Ghana envisaged that the system would be more efficient if it was interoperable and interconnected. To achieve this, a “many-to-many” model was mandated where a group of banks were to partner with a group of MNOs and agents were required to be shared.

These decisions turned out to have unintended negative consequences. The fact of the matter was that banks did not see the business case in extending services to the bottom of the pyramid. They were content with doing business with large institutional customers and those who had regular incomes. Most banks were uninterested partners desiring only to keep the “float” accounts created by MNOs and the few innovative banks were reluctant to share their developments with other banks in the partnership for fear of the free-rider phenomenon.

Under these conditions, MNOs were forced to take the initiative to on-board customers, contract agents, invest in new developments and generally, own the whole process. This, of course, was not in line with the existing Guidelines and the MNOs operated under constant fear of being penalised. They therefore could not commit enough resources to the development of the sector. In the event, Ghana lagged behind other countries like Kenya, Tanzania and Uganda in financial inclusion. CGAP played a key role in bringing these numbers to our attention. When the Bank reviewed the comparative data from other countries, we realised it was time to call for a revision of the Guidelines.

GSMA: Admittedly this was a major achievement for the Bank of Ghana. How did the Bank go about winning the support of the industry and other relevant stakeholders?

Mrs. Ohene-Adu: An initial workshop was held by CGAP to highlight the tensions and issues that stagnated progress within the sector. That was an eye-opener which caused us to see the value in partnering with all stakeholders to achieve consensus and arrive at desired ends that suited everyone. We met often with representatives from banks, MNOs, third-party operators, the Telco regulator, the Ministry of Finance and other related bodies. MNOs were happy that for the first time, they could approach the central bank directly and in their own capacity. This fostered an intimate and open relationship that culminated in frank discussions and a general ownership of all decisions arrived at.           

GSMA: What would you say are the key highlights of the new regulatory framework and what outcome would you expect to see over time in the evolution of the industry?

Msr. Ohene-Adu: The key highlights would be i) the abolition of the many-to-many requirement thereby freeing operators from tight and unmanageable relationships; ii) allowing MNOs to set up subsidiaries that would engage in the business of e-money supervised directly by the Bank of Ghana and allowing market-led solutions to interoperability; iii) the set-up of a three-tiered account structure and related transaction limits satisfying a risk-based approach to KYC and allowing individuals with little or no ID to be included in the formal financial sector; iv) security, compliance and consumer protection provisions that afford consumers safeguards against abuse; and v) the requirement on float-holding banks to pay interest on the float, and on electronic money issuers to pay not less than 80% of this interest to account holders while keeping the rest for themselves.

These provisions put MNOs squarely in the driving seat to do what they know best to do, innovate. Already, we have seen many new products being rolled out. The risk-based KYC provisions allow operators to on-board customers who otherwise would have been left out of the financial system. We expect this to deepen financial inclusion and afford Ghanaians the opportunity to access financial products and enhance their coping mechanisms for better economic wellbeing.

GSMA: The new guidelines are definitely an excellent model for the regulation of e-Money Issuers as they provide for the sustainable development of mobile money schemes in Ghana. For instance, e-Money Issuers are required to pass on not less than 80% of the interest accrued on the pooled e-money float account and allows the e-Money Issuer to retain the rest. What motivated the Bank of Ghana to take this approach?     

Mrs. Ohene-Adu: The reason for this approach is simple. The Guidelines were crafted to create incentives for all participants in the ecosystem. MNOs had for years been the drivers of mobile money in Ghana investing significant resources into the sector. They complained of not breaking even and not making significant progress in spite of the investments. This was a way to incentivise them to invest and innovate more to enable the authorities to reach the desired goal of full financial inclusion. 

GSMA: The guidelines were only issued on 6th July 2015; is there a transition period permitted for existing mobile money providers to comply with the new Guideline?

Mrs. Ohene-Adu: Existing mobile money providers are permitted to apply for a license within six months of the coming into force of the new Guidelines.

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