Digital financial inclusion supports social distancing and helps keep economies working, which is more important than ever in the time of COVID-19.

At the UNCDF Policy Accelerator, we have seen firsthand how specific regulatory and policy reforms can foster digital financial inclusion. Through quick action, some countries are making long-needed regulatory and policy reforms and propel themselves, under duress, to the rank of the most advanced countries in terms of financial inclusion. (Read more in our previous post on financial inclusion and COVID-19.)

How countries have responded so far

But how, specifically, have countries responded so far? What can countries who do want to make changes do? Some Central Banks are already taking effective measures:

• Central Banks are relaxing Know Your Customer requirements to foster mobile money account opening by a wider group of customers. For example, since April 1, the Central Bank of West African States allows mobile money providers to identify customers remotely. It also allows the use of data previously gathered when opening their mobile phone account, for bank identification. The same is true in Ghana, where the Bank of Ghana has streamlined identification procedures to open mobile money accounts. Same in Egypt, where the Central Bank has instructed banks to open mobile money accounts based on previous SIM-registration KYC.

• Central banks are requesting free transactions to foster usage of mobile payments. The Bank of Ghana also has requested free transactions below $18, and to promote the use of digital currency in the absence of cash. In Kenya, where the penetration of mobile accounts is highest, mobile money is considered to be a health tool. The Central Bank of Kenya, for example, asked Safaricom, the country's leader in mobile money, to encourage the use of mobile payments. In response, Safaricom has eliminated person-to-person transaction costs (P2P) of less than 1,000 Kenyan schillings (USD 10) for three months (until June 30). In the Democratic Republic of Congo (DRC), the Central Bank of Congo announced the abolition of fees on transactions in electronic money and variable fees on transactions below USD 1,460, until the end of December 2020.

• Central banks are also raising transaction ceilings on mobile money accounts for people to receive/send emergency funds. For instance, the Central Bank of Kenya has also approved the increase of MPesa transaction limits from 70 000 Kshs (USD 665) à 150 000 Kshs (USD 1425). In the DRC, the Central Bank is raising the limit of daily electronic money transaction amounts to USD 2,500 from USD 500.

• Central banks can support bill payment through mobile money to allow people to pay their utilities and taxes. In the DRC, the BCC is also promoting the use of electronic and cashless money by businesses and utilities to settle invoices and pay taxes.

Next steps for Central banks

If they wanted, Central banks could do even more to make mobile money schemes even more convenient for customers and unleash financial inclusion. They could, for example, make sure that mobile money agent networks have enough liquidity for customers to deposit or withdraw cash when needed, by creating a fund to lend to super-agents. They could also promote real-time digital merchant payments through contactless payments such as QR codes.

All these reforms that were put in place in the urgency of the situation, could potentially have long-lasting impact if they reach the most vulnerable, in particular women. In fact, according to a report by UN Women across every sphere, the impacts of COVID-19 are exacerbated for women and girls. Understanding how these reforms impact the most vulnerable, and women in particular, will be essential. Some countries are already putting in place data systems to measure the impact of the policy reform taken in response to COVID.

There will be a before and after COVID. This crisis can be an opportunity to create a more inclusive banking system. Central Banks can be instrumental in helping further financial inclusion of vulnerable populations by taking steps that are appropriate to the context of their own countries and aligned with best practice. It is an opportunity to deliver faster on a country's financial inclusion strategy, and to expand further the reach of digital finance to people who stand to benefit the most.

Authors

Naomi Bourne

Ahmed Dermish

Alexis Ditkowsky