Banking Industry Compliance Challenges in Haiti: Lessons from a Catastrophe
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The Caribbean sub-region has been slower to experience economic growth compared to Latin America, with natural disasters and low commodity prices pushing countries to seek financial reforms. In an effort to overcome poverty, Haiti has implemented financial inclusion policies and regulations for innovative digital financial services.
Unique Challenges in Regulating Digital Financial Services
Haiti’s banking law previously stated that only licensed and supervised banks were authorized to take deposits from the public, posing a challenge for policymakers when mobile money services emerged. The country’s experience with digital financial services is unique, providing a window into the challenges and lessons of regulating in an emergency.
The Haiti Mobile Money Initiative
In 2010, the Bill & Melinda Gates Foundation and USAID launched the Haiti Mobile Money Initiative, which aimed to speed up cash delivery to earthquake victims and help them handle cash safely. Despite the lack of regulation, policymakers opted for a bank-led model instead of a telco one, recognizing the importance of financial inclusion.
Guidelines on Distance Banking
The new Guidelines on Distance Banking ensured full compliance, safety, and trust for consumers by allowing only regulated financial institutions to offer services. The regulator ensured that financial institutions were responsible for this service, and agents, super agents, POS terminals, ATMs, mobile phones, and bank cards were recognized as valid distribution channels.
Product Architecture and Customer Protection
To deepen penetration of mobile money, financial institutions were allowed to use third-party providers to offer services. A product architecture was established, setting thresholds for transaction amounts and listing permitted transactions. Maximum balances per individual were set at about USD 220, with other limits imposed based on the type of wallet and application.
Know-your-customer rules were implemented by agents, who are responsible for identifying new customers and must be trained by financial institutions. Consumer protection requirements include:
- Disclosure of fees and tariffs
- Identification of authorized agents
- Provision of SMS or transaction receipts
- A complaint system
- Consumer education
Lessons Learned from Haiti’s Experience
Haiti’s humanitarian emergency pushed government and NGOs to become early adopters of donor-to-person payments and social program payments. Despite the initial crisis, people continued to use mobile banking products.
Interoperable Mobile Wallet Service
In 2013, Banque Nationale de Crédit (BNC) launched Lajan Cash, an interoperable mobile wallet service.
Conclusion
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Haiti’s experience highlights the huge potential of digital financial services policies in the region. It also represents optimism and opportunity in the midst of a tragedy. However, Haiti still faces challenges, including:
- An informal economy
- Lack of proper infrastructure limiting agent network expansion
- Security concerns limiting capacity and willingness of agents to accept higher numbers of deposits
Policymakers played a pivotal role in Haiti, not only guaranteeing humanitarian assistance but also creating a path to development by adopting policies that address the country’s challenges. Effective policies guaranteed consumer rights and facilitated innovation, creating a favorable ecosystem for delivering financial services to the Haitian people.
A Paradigm for Other Countries
Haiti’s experience is one of a kind: policy was reformed in no time, with high levels of mobile financial service usage today. This paradigm can be looked at by other AFI members when humanitarian issues collide with financial policy unexpectedly.