Abstract
The recent proliferation of mobile financial services in developing countries has increased access to financial services among underserved rural and low-income populations. Mobile credit is one emerging mobile financial service that allows consumers to quickly apply for and receive loans over mobile devices. Mobile credit services have achieved early success in Kenya and Tanzania, two mature markets for mobile financial services. While these new services have the potential to further promote financial inclusion, they also raise novel regulatory issues and do not fit neatly into pre-existing regulatory categories. This is due to the nature of mobile credit and the variety of entities and regulatory frameworks implicated in the business models found in these two markets. Policymakers and regulators will need to make choices about how to regulate mobile credit with respect to consumer protection, credit reporting and the use of mobile and mobile money services transactional data, a key input for credit evaluation decisions. These choices will need to take into account promotion of financial inclusion and protection of consumers while limiting disincentives for innovation and investment.
Highlights
The mobile credit phenomenon The recent proliferation of mobile financial services in developing countries has increased access to financial services among underserved rural and low-income populations
GSMA (2016a, p. 8), a global industry group of mobile network operators (MNOs), claims that mobile financial services have done more to extend the reach of financial services in the last decade, than traditional bricks and mortar banking has in the last century
Model 3: Bank utilising MNO channels A third model for mobile credit involves banks utilising mobile channels to offer mobile credit, without partnering with MNOs or other mobile money service providers
Summary
The mobile credit phenomenon The recent proliferation of mobile financial services in developing countries has increased access to financial services among underserved rural and low-income populations. Other issues that have arisen with respect to mobile money services include ensuring account balances are secure; avoiding any threat to the stability and integrity of the overall financial system; minimising fraud; terrorism financing and money laundering; promoting agent networks that are extensive, reliable and competitive; providing fair access over MNO-controlled telecommunications channels; protecting consumers; and promoting competition among providers without stifling investment. Regulators and policymakers will need to grapple with the hows and whos of regulating this new emerging phenomenon which transcends even the relatively new categories and approaches to mobile financial services developed over the last decade This will necessarily involve considering prudential regulation, to ensure the integrity and stability of the financial system; economic regulation, to address market failure; and consumer protection regulation, to ensure that consumers have sufficient information to make informed choices. In the Electronic Communications Sector article draws largely on the experiences of Kenya and Tanzania, two mature markets for mobile money services, where mobile credit products are beginning to flourish
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