Financial Crime World

MFS Sector in Vanuatu: Challenges and Opportunities

Overview

The mobile financial services (MFS) sector in Vanuatu operates in a gray area, lacking a regulatory framework to guide its operations. This has led to exorbitant fees, confusion among consumers, and challenges for everyday people.

Challenges

High Fees and Confusion

  • MFS providers charge various fees through different mechanisms:
    • Percentage-based fees on transferred amounts
    • Fixed rates depending on transaction slabs
  • Consumers are confused about the fees they pay

Lack of Regulatory Framework

  • No regulatory framework guides MFS operations
  • Providers request government-issued ID cards for every transaction, regardless of amount
  • This poses a significant challenge for everyday people without such identification

Consumer Data Protection and Grievance Addressing Systems

  • Consumer data protection is unclear under current practices
  • Grievance addressing systems are based on mobile network operators’ own policies and procedures
  • Financial transactions require a standard and regulated system to ensure consumer confidence

Siloed MFS Ecosystems

Lack of Interoperability

  • MFS providers and conventional financial institutions lack interoperability
  • It is not possible to send money from an MFS provider to any bank, even between DFS providers
  • This siloed ecosystem disincentivizes the use of MFS by consumers and businesses

Weak Agent Network

Challenges in Establishing a Strong Network

  • Little popularity and utility among the population make it difficult to establish a strong agent network
  • Lack of viable business models for MFS agents leads to disinterest and engagement in other businesses

Way Forward

Developments Underway

  • United Nations Capital Development Fund (UNCDF) has developed a policy paper to address challenges in the MFS ecosystem
  • Reserve Bank of Vanuatu (RBV) is working with UNCDF to develop:
    • Regulatory framework
    • Operations guidelines
    • Consumer protection policies
  • RBV has introduced a national payment system to connect all banks and transfer funds securely in real-time

Conclusion

The MFS sector has the potential to contribute positively to financial inclusion and achieving the Sustainable Development Goals (SDGs). With encouraging developments underway, it is hoped that the MFS sector in Vanuatu will start making a positive impact for the remote unbanked population.