Why we need a regulatory framework for mobile money

As Rwanda embraces a cashless economy, which is reflected in the ‘Smart Rwanda’ blueprint, the use of mobile money has continued to emerge as a paradigm shift from informal to formal financial services and to reduce predominant reliance on cash.

As Rwanda embraces a cashless economy, which is reflected in the ‘Smart Rwanda’ blueprint, the use of mobile money has continued to emerge as a paradigm shift from informal to formal financial services and to reduce predominant reliance on cash.

And today, nobody can ignore the marvelous advantages modern information technology has ushered into our daily life. Among the marvelous advantages is the innovation of mobile money which was unheard of just a decade ago.


Mobile money refers to the use of mobile phones to pay bills (e.g. water, electricity etc.), remit funds, deposit cash, and make withdrawals using e-money issued by banks and non-bank providers such as telecommunication companies.


For example, here in Rwanda operators like MTN, TIGO and AIRTEL provide these services mainly for payments or remittances.


Findings show that this service currently exists in over 80 developing countries and is growing rapidly, particularly in Africa, including Rwanda.

This service, of course, has enabled many people without access to financial services—known as the unbanked—to access an increasing range of financial services, from payments to savings and probably loans.

In Africa particularly, mobile money was first launched in Kenya in 2007, through the now renowned application called M-Pesa and has grown increasingly throughout many developing countries.

Nobody underrates its importance, especially to people from under-developed countries, especially those with no bank accounts.

In Rwanda, many people today have mobile phones and can be able to access mobile money services through their devices very easily without the need to open a bank account.

However, ICT evolution is not a panacea; it has inherent downsides where internet-related services can be abused by some people, thereby tramping upon the rights of other internet users.

Unfortunately, the National Bank of Rwanda regulates activities of banking institutions but doesn’t envisage mobile money services provided by telecommunication companies.

As a matter of reality, for example, a person may mistakenly send money via mobile money and goes to a wrong person, and suppose that money is immediately withdrawn, how can it be recovered and be transferred to the right recipient?

On this note, there’re two relevant examples to elucidate this point.

For example, in Uganda, May 2012, it emerged that employees of Telco MTN Uganda had stolen around $3.5 million from an account used to store cash which had been incorrectly sent through its mobile money service. Also, in Kenya, January 2014, Safaricom blacklisted 140,000 users after they defaulted on their M-Shwari loan.

Now, is there any regulatory process to recover that money? Are there conventional transfer fees for payments and remittances bound by banking institutions and telecommunication companies engaged in this business?

What role can law enforcement play in such fraudulent acts? All these questions unfortunately remain unresolved, hence creating a ripple effect.

While Rwanda takes the lead in embracing ‘Smart Rwanda’, which includes ‘cashless economy’ and mobile money as one of the enablers, a regulatory framework for mobile money platforms is paramount.

How can mobile service providers be regulated? Regulatory framework needs to respond to mobile money in two particular ways.

First, a regulatory framework needs to adopt an ‘enabling approach’ which promotes financial inclusion as opposed to financial exclusion. Thus, regulation is required for mobile money to develop more safely. At the same time, however, regulation should control those who may abuse this service.

The desire for mobile money-related regulatory and policy framework would help the regulators to work closely with government institutions (particularly those that relate to finance and development), regulator from other sector (particularly telecommunications), and the mobile money sector.

Second, there’s a need for coordinated efforts which contribute towards establishing an enabling legal and regulatory environment for mobile money services.

Financial transaction is a critical issue today because some people are inventing ways of taking advantage of a certain loophole in service provision. Indeed, as this sector continues to operate largely outside the regulatory protections of traditional banking services, mobile money services generate a variety of risks which need to be regulated.

As there’s a law regulating electronic messages, digital signatures and electronic transactions (for consumer protection), likewise regulation of mobile money is required. Such regulation is essentially required due to imminent shortcomings expounded above.

It’s important to stress that mobile money service is an important tool for poverty reduction because it offers a means of addressing the impasse that exists between banks and poor households.

In any event, banks are in no way responsible for make their services cumbersome, but, generally speaking, the perception of most people, such as unpaid workers, are reluctant to access formal financial services due to the inconvenience and high cost involved in accessing these services relative to the more informal alternatives they have traditionally used, as well as issues of mistrust of formal banking institutions.

No matter the advantage, it is equally imperative to have e-money regulations which contain a variety of rules and regulations designed to reduce risks associated with this sector.

The writer is an international law expert.

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