Central Bank of Yemen issues new mobile banking regulations

John Owens

A Yemeni money changer serves a customer at his small shop in Sanaa.

On 11 December 2014, the Central Bank of Yemen (CBY) issued new mobile banking regulations following an almost two-year process of reviews and discussions with the private sector and support from USAID, the World Bank, the Consultative Group to Assist the Poor (CGAP) and Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ). While there was much debate and a lot of international expertise that was brought to Yemen to develop this regulation, the central bank still wanted to learn from other central banks from around the world as well as address some lingering internal concerns. Mansour Rageh, who is the Deputy Manager for Islamic and Specialist Banks at the Central Bank of Yemen and the bank’s representative to the Alliance for Financial Inclusion’s (AFI) Digital Financial Services Working Group (DFSWG), recently visited the new AFI office in Kuala Lumpur to share his thoughts on the important role that AFI played in assisting the bank with finalizing these regulations. “This is where being part of AFI really made a difference for us as a central bank that is focused on balancing financial inclusion aims with safety, soundness and stability,” said Mr. Rageh. “We wanted to make sure that we were able to learn from others and were following best practices.”

“AFI really helped us out by supporting an online peer review followed by knowledge exchange visits to the Philippines and Bangladesh and then a lengthy face-to-face peer review with key leaders from some of the most experienced central banks in the world during AFI’s Digital Financial Services Working Group meeting in September 2014.” — Mansour Rageh, Deputy Manager for Islamic and Specialist Banks at the Central Bank of Yemen

The Central Bank of Yemen wanted to create an appropriate regulatory environment that would allow banks that understand appropriate AML/KYC compliance requirements and could offer a broader range of financial services rather than just mobile transfers or payments as well as to build on the advantages of mobile network operators which had an established agent networks, outreach into rural areas, and dramatically more clients at the base of the pyramid than the bank’s did. They also saw some of the mobile network operators have the experience and the technology that the banks did not have, which would allow banks to reach scale much more quickly. By allowing and providing the enabling environment for banks and mobile network operators to work together, CBY sees their new regulation as a tremendous opportunity to safely and soundly expand true banking services and deeper financial inclusion access much more rapidly than either player could provide on their own.

A Yemeni money exchange employee counts local currency at an exchange office in Sanaa in December 2014.

The two peer reviews with key heads of payment departments and other regulators involved in the supervision of mobile financial services from countries including Kenya, Tanzania, Bangladesh, Zambia and Panama provided the Central Bank of Yemen with some of the best independent advice based on honest and non-partial feedback from peers that work in this field and deal with this issues everyday.

According to Mr. Rageh, “This helped CBY redefine the terminology that we used in our regulations and helped us to ensure that we were following the best practices.” This also helped CBY to consider actual implementation issues especially in regard to overseeing partnerships between banks and mobile network operators based on the experiences from others country regulators who are actively supervising these partnerships and e-money in other countries around the world. Mr. Rageh stated: “After the peer review, we added some additional risk management requirements for e-money issuers as well as modified some of the consumer protection requirements.”

In closing, Mr. Rageh noted: “I would like to express CBY’s gratitude for AFI’s tremendous cooperation and support as we developed Mobile Banking Regulations with a real focus on enhancing financial inclusion in Yemen. The experiences gained from our knowledge exchange visits to AFI member central banks and the peer reviews were immeasurable. We look forward to continuously working with AFI as we work to address financial inclusion in Yemen.”

Watch: The evolution of financial inclusion in Yemen

ABOUT THE AUTHOR
John Owens is the Senior Policy Adviser, Digital Financial Services & Financial Inclusion Policies, at the Alliance for Financial Inclusion. Follow John on Twitter: @Jvowens.