Mobile money and branchless banking regulations affecting cash-in, cash-out networks in low- and middle-income countries

Abstract

Background: We examined recent trends in mobile money and branchless banking regulations related to cash-in, cash-out (CICO) networks (physical access points allowing users to exchange physical cash and electronic money) in low- and middle-income countries, and reviewed evidence on the impacts of CICO regulations on markets and financial inclusion. Methods: Regulation and literature searches began in August 2017 and concluded in June 2018. For the regulatory search we compiled an original database of regulations targeting CICO networks in Bangladesh, India, Indonesia, Kenya, Nigeria, Pakistan, Tanzania, and Uganda. To review evidence of impacts of regulations we conducted additional global searches on Scopus, Google Scholar, and Google using keywords for specific regulatory approaches (e.g., regulation of CICO agents) or hypothesized impacts (e.g., financial inclusion). Results: The resulting database of CICO regulations in the eight focus countries includes 127 regulatory documents, which we coded for four groups of regulations, namely: Business Channel Requirements; Agent Requirements; Regulations on Caps, Fees and Charges; and Customer Identification Requirements. Early CICO regulations focused on agent selection rules, limits on fees, and know-your-customer requirements. More recent waves of regulation have expanded or restricted services CICO agents provide, and also imposed reporting requirements on service providers in an effort to prevent fraud or enhance financial inclusion. Our search for evidence of impacts of CICO regulations resulted in a sample of 90 documents published since 2005, of which only 31 provided evidence on CICO regulation impacts, with most limited in scope—suggesting rigorous policy analysis remains lacking in this quickly expanding sector. Conclusions: Many low- and middle-income countries have introduced regulations that may affect CICO networks, with regulatory approaches differing across geographies and over time. While anecdotal reports of regulatory impacts exist, we found limited evidence of impacts of regulations on CICO networks or on CICO-related financial inclusion.

The Impact of Digital Technology and Business Regulations on Financial Inclusion and Socio-Economic Development in Low-Income Countries

“…Then in 2015, Divanbeigi and Ramalho (2015) examined the relationship between the regulatory changes and economic significant values and found out a link between business regulations and business creation and growth. Reynolds et al (2018) furthermore evaluated the effect of regulations of digital financial services, particularly that was related to cash-in, cash-out (CICO) networks, on markets and financial inclusion, and noticed a confined impact. They have ascribed the low impact to the low financial infrastructure that still exist largely in low-income countries as marked by the low numbers of bank branches.…”

“…Reynolds et al (2018) furthermore evaluated the effect of regulations of digital financial services, particularly that was related to cash-in, cash-out (CICO) networks, on markets and financial inclusion, and noticed a confined impact. They have ascribed the low impact to the low financial infrastructure that still exist largely in low-income countries as marked by the low numbers of bank branches.…”

Curb Your Enthusiasm: The Fintech Hype Meets Reality in the Remittances Market

“…74SeeReynolds et al (2018).75 76 See Suárez (2016) and Mobile Money Policy and Regulatory Handbook (GSMA, 2018). 77 See…”