A delegation from AFI participated in the Global Dialogue on Digital Financial Inclusion (GDDFI) in Sharm el-Sheikh, Egypt on 11 May 2016.

The event was organized by the Telecommunication Development Bureau (BDT) of the International Telecommunication Union (ITU), in collaboration with the Bill & Melinda Gates Foundation, AFI, the Government of Egypt, MasterCard and other partners.

Mr. Alfred Hannig, Executive Director at AFI, delivered opening remarks, while the AFI network also participated in the closing panel discussion on ITU’s path forward in regard to digital financial services (DFS).

“It’s important to emphasize the usefulness of inter-agency collaboration among regulatory authorities in order to drive digital financial inclusion more effectively,” said Mr. Hannig.

One particular notable outcome included a commitment from AFI to the following action points:

• Finalize a memorandum of understanding (MOU) with ITU as a formal basis for the collaboration between the two networks, which has already been drafted and exchanged between the two organizations;
• Invite ITU representatives and selected telco regulators to AFI Working Group Meetings;
• Explore opportunities for telco regulators to join AFI Maya Declaration Commitments of financial regulators;
• Invite ITU and selected regulators to the 2016 Global Policy Forum in Fiji and explore further opportunities to organize one joint session for telco and financial regulators.

Throughout the day, participants outlined important findings on many key issues faced by policymakers and regulators looking to promote uptake of digital financial services (DFS).

The “Digital Financial Services: State of Play” peaked attendees’ interest at the start with its focus on ensuring full digital financial inclusion is of the utmost importance in a world where more people have a mobile phone than a bank account, along with how reducing the digital divide and the financial divide could contribute to alleviating poverty by empowering the population at the base of the pyramid.

It was also noted that national payment systems laws and regulations for digital payments are important building blocks for successful digital financial services ecosystems. Both telco and financial regulators are key enablers to public and private partnerships, as they are critical for those partnerships to happen. Additionally, a consistent and tiered-risk-based approach to KYC and AML requirements is needed.

The event’s second session featured debate on “Prospects and Challenges: Setting it Right.” It was outlined that there are still major challenges and risks currently preventing the digital financial ecosystem from developing into a competitive and innovative manner to effectively reach the poor in many countries, and that cash remains dominant even in countries where mobile money has been successful.

Panelists highlights that the usage of MFS is still early. Ninety-four percent of mobile money transactions is still P2P, and connectivity issues can be a barrier.

Interestingly, Bangladesh expects to surpass all other countries in the world in terms of providing MFS within the next 18 months. The government is implementing the program called “Digital Bangladesh”, and MFS is one the top priorities of digitizing the country. Participants also pointed out the major question that needs to be addressed is how to customize the MFS model to the needs of the customers and their nature.

The definition of e-money and its differences with traditional money was discussed: Among other characteristics, e-money is not issued by a central bank, it is accepted by others different than the issuer, and it can be cashed out.

The afternoon’s final session covered “Shaping Collaborative Approaches to Promote Digital Financial Services.” The private sector and regulators have to decide which type of model they are going to implement, either telco-led or bank led, participants stated. It was also agreed that technology and infrastructure are elements that will support a framework that fosters financial inclusion, but such framework should be in place first before considering technology.

It was also noted that:

• In Sri Lanka, little by little, more banks, more institutions and more telcos are joining the ecosystem to do digital payments;
• Coordination among regulators is important so the digital financial system can have a converging regulatory system;
• Regulators have to realize they have to give up some of their authority in order to be able to truly coordinate and collaborate with the other sector regulator;
• In Egypt there are many opportunities to tap when it comes to DFS;
• Regulations from the financial sector and the telco sector are struggling to catch up with the innovations the markets are showing on DFS;
• Digital financial inclusion has become the cornerstone for financial inclusion Strategies in many countries.

AFI member institutions that sent representatives to the meeting included the Bank of Tanzania (BOT), the Central Bank of Egypt (CBE), and the Central Bank of Jordan (CBJ).

Watch: An interview with Mr. Hannig