Thursday, February 22, 2024

BoB gives banks leeway on e-money operations as it mulls future regulation

Bank of Botswana (BoB) said it is giving commercial banks the leeway to use innovation in a bid to reach out its customers and large proportion of the unbanked communities, but warned future regulation on electronic banking will be needed for consumer protection and to ensure integrity.

At the moment, there is no regulation governing the ever growing e-money operations, but to protect depositors, the banks are governed by the Central Bank’s rules.

The system used locally is the bank led model, which allows commercial banks to reach out as many unbanked population as possible through the use of mobile phones and computers.

BoB Deputy Governor, Moses Pelaelo, revealed that currently, there is a ‘grey area’ aimed at ‘allowing technology to penetrate’.

“It is indeed true there is no specific legislation. It is a new business in Botswana,” Pelaelo said.

Comparably, in markets like Zambia and Kenya, e-money operations are regulated, but for the Botswana case, Bank of Botswana leverages on the supervision of banks under the Banking Act to guard against money laundering.

Mobile and online banking offering by the banks has grown over the years as banks try to reach out more and more people in the very competitive environment that have seen financial houses embracing technology to stay relevant.

The technological innovation has allowed the banking industry to be more competitive with competing banks always claiming to be the first to introduce a product.

The new trend where consumers can do banking over the tip of their hands is riding on the success of mobile phone companies that are willing do business with banks.

For a long time, FNBB has been a leader in internet and cellphone banking with its competitors moving in the same direction.

“(At the moment), it is an agreement between the bank (s) and mobile phone companies,” he said.
By international standards, recommended financial access in Botswana remains at a relatively low level.

A Finscope study of 2009 found out that a significant proportion of adults in Botswana do not have bank accounts.

According to Bank of Botswana annual report for 2011, however comparative data indicate that the overall level of financial access in Botswana has been increasing and it is higher than in many African countries.

“Nevertheless there is clearly considerable scope for further improvement through, among others, harnessing opportunities in microfinance arrangements, e- money operations and development finance,” the annual report stated.

“In turn, initiatives in these areas need to be accompanied by development of appropriate regulatory and supervisory frameworks that would safeguard financial stability and facilitate complementarity with other developments in the financial sector”.

Bank of Botswana said development finance institutions (DFIs), Microfinance institutions (MFIs) and electronic money (e-money) have the potential to contribute to financial inclusion as they are less biased towards entities and individuals that already have an advantage in accessing financial services.


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