Resilient and Inclusive Financial Services Delivery During COVID-19
Thursday, Dec 16, 2021

Resilient and Inclusive Financial Services Delivery During COVID-19

Toronto Centre Webinar: Resilient and Inclusive Financial Services Delivery During COVID-19

Opening Remarks:
José Morell-Ducós
Portfolio Manager, Financial Inclusion, Comic Relief

Petronella Chigara-Dhitima
Program Leader, Toronto Centre

Mutumboi Mundia
Director, Market Supervision and Development, Securities and Exchange Commission (SEC) of Zambia

Momoh L Sesay
Assistant Director and Head of Financial Sector Development Unit (FSDU), Bank of Sierra Leone

Valence Kimenyi
Director of Financial Sector Development and Inclusion Department, National Bank of Rwanda

Concluding Remarks:
Phang Hong Lim
Senior Director, Supervisory Guidance, Toronto Centre

Chuin Hwei Ng
Program Director, Toronto Centre

December 15, 2021 

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Speaker 1: You're listening to a Toronto Centre Podcast. Welcome. The goal of TC Podcasts is to spread the knowledge and accumulated experience of global leaders, experts, and world-renowned specialists in financial supervision and regulation. In each episode, we'll delve into some of today's most pressing issues as it relates to financial supervision and regulation, the financial crisis, climate change, financial inclusion, FinTech, and much more. Enjoy this episode.

Chuin Hwei: Well, hello, everyone, and a warm welcome. My name is Chuin Hwei Ng. I'm Program Director with Toronto Centre. And I have the pleasure of moderating today's webinar.

Now, introducing the Toronto Centre since our founding in 1998, Toronto Centre has trained more than 15,000 financial supervisors from 190 jurisdictions to build more stable, resilient and inclusive financial systems. And our mission is generously supported by Global Affairs Canada, Swedish International Development Agency, the IMF, Comic Relief, Jersey Overseas Aid, and the USAID.

Now, the research that we are presenting today, resilient and inclusive financial services delivery during COVID-19, is a topic that is definitely very close to our hearts. This topic is about maintaining financial stability and promoting financial inclusion, even in the face of the global disruption caused by COVID-19. Now, this research report was published in November. It's hot off the press. It's freely accessible on the Toronto Centre website, and we really encourage you to download the publication.

And making this research possible is the generous funding and support by Comic Relief and Jersey Overseas Aid under their program Branching Out: Financial Inclusion at the Margins. And this program is to promote financial inclusion in Rwanda, Sierra Leone, and Zambia.

So, you will see that in addition to the Toronto Centre team on this panel, Petronella here and Phang Hong, we are honored to have distinguished guests from our funders, as well as from our partner financial supervisory agencies in Rwanda, Sierra Leone, and Zambia. And you have the full biographies of all our speakers today.

So let me give the floor first to José Morell-Ducós, Portfolio Manager, Financial Inclusion, at Comic Relief, to open this webinar with his remarks before I introduce the panelists. José, over to you, please.

José: Thank you very much, Chuin Hwei. It is very exciting for us at Comic Relief and Jersey Overseas Aid to participate in the launch of this report. The Toronto Centre has been a partner of ours under the banner of our Branching Out: Financial Inclusion at the Margins program since 2019. During this time, they have trained over 460 officials and other staff from three Zambian agencies in supervision, gender awareness, and environment sensitive financial sector systems and processes in Zambia, setting the stage for increased financial inclusion and policy environments that are conducive to greater investment, as well as clear and robust standards in financial supervision.

The successes reached by their program were part of the inspiration for funding research in this area. Last year, as the pandemic made its way through Sub-Saharan Africa, Comic Relief and Jersey Overseas Aid, like many other funders, were faced with some very serious questions. How do investors, practitioners, and supervisory bodies survive a pandemic? What are the practical actions they can take to make systems more resilient? What are the most successful strategies? How do we ensure that the communities we aim to reach remain strong during and after a major protracted crisis?

This report is part of a growing body of knowledge that seeks to tackle those questions. Seeing a learning opportunity in the pandemic's natural experiment conditions, the team at Toronto Centre has conducted an in-depth study of the impact of the pandemic in Rwanda, Sierra Leone, and Zambia on the delivery of financial services. It is our hope that the resulting recommendations will feed into better, more informed, and more appropriate programming, that they can be used as a practical map towards resilience and preparation, and that they form part of an ever-growing roadmap towards the strengthening of approaches towards financial inclusion.

We are thankful to the Toronto Centre research team, to all the participants of the surveys, and to the many partners who have made this report possible. And we look forward, as I'm sure you all do in the audience, to hearing from the authors about the insights of the report and what this might mean for the future of financial inclusion. Thank you again.

Chuin Hwei: And thank you, José, for your remarks. And we are indeed grateful at the Toronto Centre for the support and funding by Comic Relief and Jersey Overseas Aid of our work in Zambia, Rwanda, Malawi, Ethiopia, and Nepal, just to name a few examples. And we look forward to your continued support to build capacity for financial supervisors over the globe.

So let me now introduce the panelists. First, we have Petronella Dhitima, Toronto Centre Program Leader, who will present the highlights of the report. And you will see that the link to the report has been dropped into the chat. Then, we will call on Ms. Mutumboi Mundia, Director, Market Supervision and Development, Securities and Exchange Commission of Zambia. We also have with us Momoh Lansana Sesay, Assistant Director and Head of the Financial Sector Development Unit, Bank of Sierra Leone. And we have Valence Kimenyi, Director of Financial Sector Development and Inclusion Department at the National Bank of Rwanda.

So let us start with Petronella, who will give us the highlights of the research before we call on the other panelists. So over to you, Petronella.

Petronella: Thank you very much, Chuin Hwei, for the introduction. And good day to all participants, and welcome to the Resilient and Inclusive Financial Services Delivery During COVID-19 report of the study. It's a long title. And as has already been alluded to, this research was done in Sierra Leone, Rwanda, and Zambia. So, what I'm presenting this afternoon, and my colleague Cacey will actually be sharing the slides, I'm going to present the highlights of what we found out.

I'll start off by explaining a little bit what made this research different in terms of the objectives of the study. And a lot has been researched about COVID. We can move on to slide three. A lot has been talked about and researched and studied about COVID. But in this study, we had three layers of exploration. The first layer was to say, "How did financial service providers," in the report you find, we refer to them as FSPs, "How did the financial service providers, how did they respond to COVID-19? What changes did they make to their operations, to their outreach? What changes did they make?"

And then we looked at how, if they made any changes, how did those changes impact the financially excluded groups? So financially excluded groups, we are talking about women, we're talking about young people, the youth, we're talking about rural households, all those people that we know were financially excluded. How were those people impacted by the changes that were made by the financial service providers?

And then lastly, we said, "Okay, if these changes were made by the financial service providers, they had an impact on the target market, on the target group. And what was the impact?" That's something that we look at. And then we lastly say, "Okay, what were the supervisory risks that were posed by these changes that were made?"

So, I think what made it different was the fact that it had all these layers put together. So, we can move on to the next slide. In terms of the survey, it was done in those three countries, which I've already mentioned, covered Sierra Leone, Rwanda, and Zambia. And the respondents are listed over there, just to show the mix, but just to say that we actually had financial service providers providing all financial services from insurance savings, all banking services, microfinance institutions. And then we looked at supervisors, and we also spoke to associations, so associations of smallholder farmers, associations of microfinance, clients, the actual consumers, looking at how consumers were responding.

We can move on to the next slide. Now, I'm going into the findings. What were the key findings? And it's a bit tough summarize a long report in 10 slides, so I encourage everybody to then refer to the actual report. As you can see from this graphic, we were trying to compare what was happening before COVID and during COVID and which channels, which delivery channels were being used, especially to reach the last mile. How do we reach the final consumer?

And as you can see, face-to-face [delivery] reduced, which is obvious. But what we found is interesting was that between agents and mobile banking, especially mobile banking. And this is not new. I think there's lots of studies that prove that digital really went up because people were trying to move from the face-to-face, and they were trying to find alternative channels. I'll explain why the agents, it looks like they declined, but it's not necessarily that they declined. In some of the countries, there was a sharp increase.

So, this is where you put all three countries together. So, the big point to take away out of this is that mobile banking increased across the three countries, maybe different versions or in different percentages of increase. But as you can see here, 20% and 32%, 20% of the respondents, people we spoke to, they were using digital before COVID, but it increased to 32%, which is almost a 12-percentage point increase. Pretty significant.

Now, I'm going to move on to the next slide and look at the changes or the differences between the countries. This looks very busy, but it's just trying to show the three countries across the board. So, if you look at the first country, Rwanda, just going by alphabetic order, if you look Rwanda, you'll find that, yes, face-to-face did decline very significantly and agents almost reduced. According to the people that we spoke to, there was less usage, even though they were trying to make sure that a lot of customers moved to agents, to be served by agents. But what increased significantly for Rwanda was the mobile banking. You can see it increased from 17% to 36%. From 17% to 36%, that's almost doubling up. So, there was a very significant shift to mobile banking in Rwanda. And I will explain later why there was such a big shift in Rwanda.

Then when we move to Zambia, you'll find that the face-to-face did decline, but there was a sharp increase in agency banking. Why? Partly because even before COVID, you can see that 42% of the respondents we spoke to, they were already using agents before COVID, compared to Rwanda, which was 35% of their respondents. So already, they were pushing agency banking. And there was one big bank in the report, we talk about this, that was really pushing smaller banks or smaller units, almost like little, little mini banks in the villages and in the peri-urban areas. And because of that, there was actually a big increase in agents, the use of agents. And this use of agents also is referred to in other agents as well, even in terms of insurance and other things.

But as you can see also, almost a 10-percentage point increase for mobile banking in. This is in Zambia.

Now, the last country that I'll refer you to is when we look at Sierra Leone. When you look at Sierra Leone, there was a decline, but not as significant in the face-to-face, not as significant as the other two countries. And I will explain again why there wasn't that significant increase. And agent banking almost declined slightly, but there was also an increase in mobile banking.

But as you can see, mobile banking is still low. This is to do also with the infrastructure in Sierra Leone, the whole infrastructure around mobile banking. That's the stage at which the country was at before COVID. And then during COVID, it increased, but it couldn't increase exponentially as in other countries because of the digital infrastructure in the country.

There were a number of changes that were made just looking across, and I'll give a few examples of what are some of the changes that were done. So, for example, in Rwanda, in terms of the digital, what were some of the changes that were done? Just facilitating the withdrawals and deposits through digital and making sure that the digital money is really expanded. There were a lot of efforts that were taken even by the government to push for cashless banking. And that's partly why there was that increase.

For Zambia, there was a very interesting issue in Zambia, an example that they gave of what they were doing digitally. In terms of client services, making sure that clients can actually sign things, scan them, and send to the bank, things maybe that were not as predominant before COVID, or withdrawing their insurance premiums or maturities or investments, making investment decisions and sending instructions over the phone. There was a lot of discussion during the study about what was happening around that. But I'm just giving you some of the examples of how customer service changed because of digital.

Now, as we move to the next slide, I'll move on to what created these country differences. What is it that shaped the country differences? So, the first thing I will highlight is that for Rwanda, because of efforts by the government to go cashless, because of that, there was a lot of movement towards digital. So, the movement was much stronger than in other countries, because there was already this drive to go cashless. And it was really heightened during COVID.

For Sierra Leone, as I've already said, is that, because of the infrastructure in Sierra Leone, because also of the regulatory environment, they were just passing some of the regulations around digital banking. And because of that, the uptake to digital was slower.

In Zambia, there was a higher reliance on the use of agents to limit the face-to-face delivery or to localize the face-to-face delivery, because then if people are in the same locality, hopefully they're not importing the virus from elsewhere.

Now, in terms of the financial service providers, what shaped their change, their shift? Some of them shifted very fast, some slowly - part of it was to do with the national infrastructure. I've already talked about what was happening in Sierra Leone. But the other issue also was to do with the strategic investments. Where was the institution strategically positioned, even before COVID? In some of the institutions, they clearly stated that, "Actually, we were already on these platforms. We were already driving these platforms. And the pandemic simply accelerated the use of the platforms," or it made the customers do the switch, but the infrastructure was already there in the institutions.

The third element that shaped the way the FSPs responded was the support by the financial supervisors. So, depending on how supportive the supervisors were, depending on the regulatory environment, that's what shaped the way the financial service providers were able to quickly change.

Now, so I've talked a bit about the changes. I think the key takeaway is that there was a big shift to digital, and this is not news. We've been seeing it in the different countries, even where we live and work. And you would think theoretically, if financial service providers have gone digital, then it means they can reach the financially excluded even in an easier fashion. You would expect them to be able to just reach the smallholder farmers, to reach everyone. Literally, it should be easy because the costs of delivery, they should be lower theoretically, making it easier.

But practically, what we found out during the study was that, because of the low digital and financial literacy among the low digital and financial literacy among the financially-excluded groups, the financial inclusion aspect did not necessarily jump or leap simply because we have shifted to digital, because the fact that people don't actually understand digital made some of these groups even a bit skeptical. Some women in Rwanda were like, "What? You mean to say I get money from the phone?" They can't put together a phone and money. How do these two things talk to each other? How can that even happen?

So, the low levels of digital and financial literacy made it a bit difficult. A lot of efforts have been undertaken in different countries. And the report does give examples and snippets in text boxes. You'll see that we refer to some of the examples that were innovative as to how do we deliver digital and financial literacy among the financially excluded, to make sure that we also don't exclude them even more.

The issues around poor infrastructure. So, even in Rwanda, issues to do with poor infrastructure, connectivity issues. In Zambia, people were talking about, "Well, I can do internet banking, and I can use it. But the downtime is so high that it affects my transactions. So, as a result, I end up just not using internet banking because of the downtime." So, the cost of data for people who could... They said, "Oh, we've put all our forms..." Or some of the financial service providers, they were saying, "We have put all our forms on WhatsApp. We have put all our forms on the internet." But the customers were like, "Well? But it's costly to download these things, to go online and try to log in online." For those that were financially or digitally literate, they were saying, "But the cost of data is high." And it's true in most of the countries. Cost of data is still high.

And then, obviously, the issues around cultural perceptions. Cultural perceptions are still an issue, particularly for rural and for women. So those are the key issues that then made it not as... I mean, people shifted, but the shift wasn't as significant as we had expected or as we all hoped because digital is now coming into play. So, we thought everybody's going to shift into digital.

Now we can move on to the next slide. Now, I'm shifting to the third layer, which is what were the perceptions of the supervisors and the financial service providers on the risk profile? How did the risk profile change? What changed? And we kind of like look at how these changes were different between the different stakeholders.

So, let me start off with what looks the same. As you can see from this web chart...I'll explain a little bit on the web chart. The green, the outer layer, which is this green line, the green line outward, these are the scores or the percentages of the supervisors. So, 75% of the supervisors who were interviewed, who responded to the survey, they thought that the consumer protection risk had really gone up. That was the highest for them, from a ranking perspective.

And then, when you look at the blue line inside, this blue line inside is actually now the financial service providers. So, the financial service providers are the inside, the blue line. So, one thing to take note of is that there are differences between the way the financial service providers and the supervisors perceived risks. But what was heartening or, at least, comforting was that, when you look at the three risks, strategic risk or profitability we put those two together, cyber security, and credit risk. These are the three that were ranked. These were ranked by the financial service providers as the highest in the order of strategic, followed by credit risk, and then followed by cybersecurity. And it's heartening to see that, even, also, when the supervisors were looking at this and ranking this, those three still ranked high.

It's only the way they were ranked, in that the supervisors did not rank them the highest. For the supervisors, what was the highest was the consumer protection risk and the anti-money laundering... not asset liability... anti-money laundering risks, and the know-your-customer. Thinking about supervisors and the way the authorities would think about this would make sense because they're looking at this from an industry perspective. They're looking at this from the consumer perspective to say, "How well-protected are the consumers?" So, they wouldn't, necessarily, rank these the highest for them.

Whereas, for the institutions, they were looking mostly internally and saying, "How exposed are we?" And these three were the ones that they were highly exposed. So, this way, they... I would say, the differences. But it's heartening to see that even though there is a slight difference, the perceptions, in general, are the same. The only areas where there are differences is the anti-money laundering and the consumer protection. But, as you can see, 27% of the respondents for the financial service providers, they still thought anti-money laundering was an issue in terms of the risk profile.

So, this is something that we needed to flag out. And now the issue was, okay, now, if this is the risk profile, what do we do about this? So, we are moving on, now, to what were our conclusions and recommendations that we posed for the supervisors. So, what is it that the supervisors can do? The first one is, because of what I already spoke about earlier on, the digital literacy and financial literacy. So, working with other stakeholders and making sure that there is a key focus on literacy and how we can promote that, and making sure that the supervisory expectations are really clarified to the financial service providers. What is the risk-based know-your-customer regulations? What changes when I'm now doing everything on the phone? When I'm now sending signatures and allowing signatures to come on the phone, what should change, and what is the supervisor expecting? And just making sure that that's really elaborated.

And strengthening the consumer protection networks. In fact, the three countries were already doing something about the consumer protection frameworks, either reviewing, re-casting, because the consumer protection that was there before, when not as many people were on digital, they were slightly different. So, there's need, now, to almost upgrade those frameworks.

And then, establishing their regulatory sandboxes. All three countries already have set regulatory sandboxes, all three countries, Zambia, Rwanda, and Sierra Leone. And I believe that this is useful. This is essential to make sure that we can allow for the financial service providers to innovate in that safe space.

And then, lastly, creating regulatory environments that will stimulate appropriate kind of innovations around this, just really for needs for women or small-holder farmers. Something that really promotes creation of products that are designed specifically for those groups.

So, these are recommendations focusing on financial inclusion. What can we do? Because, sometimes, we found that, even for financial service providers, they would probably have products, and they say those products are for women, but maybe they're not really resolving the traditional barriers that women face. And so, we're saying, creating environments that encourage and promote appropriate product innovation.

So, as we conclude, I would like to focus on the recommendations for financial stability. That's the last slide. Yes. So, three recommendations because, for the supervisors, yes, they're looking at financial inclusion. But they're also looking at the financial stability of the whole sector in every country. So, three things that we highlighted. Increasing the communication and making sure that there is a lot more sharing of information and dialogue between the financial service providers and the supervisors, especially on the risks and how the emerging risks are being managed, and kind of almost doing a risk assessment and sharing this across the sector, especially during COVID, to see how the risk profile is changing in each country. We found that, in one country where this had been done, there was kind of a closer overlap and a closer alignment in terms of how risks were being perceived.

Secondly... I've already alluded to this... setting out the supervisory expectations in terms of the rules and the best practices, especially when it comes to non-face-to-face delivery. So, what are the regulations and what is it that we should do, in making sure that we manage the risk profile. Lastly, enhancing the information-gathering, so making sure that the collection of information is useful and is enhanced and the supervisors are trying to close the feedback loop at two levels, to make sure that, even at the level of the financial service providers, they're getting the feedback. And, at the level of the general public, to make sure that there is effective supervision of these current delivery channels. So really, making sure that we are collecting the feedback and using that feedback as part of what we can use to enhance and to strengthen the regulatory environment.

So, these were our key findings. And I would like to say a big thank you to Comic Relief for their support and to most of you who participated in the study and made it a success. Thank you. Over to you, Chuin Hwei.

Chuin Hwei: Well, thank you very much, Petronella, for sharing the highlights of the publication. So, we have limited time today to go through everything in the report. There is a lot more in the publication itself, and we encourage

everyone to look. Now, it's our pleasure to invite other financial supervisors on our panel to give their remarks. We have really benefited from consultations with the supervisors represented here, through an internal webinar, and also testing our conclusions with them before we put the final report together.

So, if we could go in this order to get Mutumboi's remarks, followed by Momoh, followed by Valence, that'll be great. And I would just like to invite Mutumboi first. I'd just like to add that Mutumboi and the Securities and Exchange Commission of Zambia have been partnering with Toronto Centre in a long-term engagement to implement risk-based supervision. And that engagement is also generously funded by Jersey Overseas Aid. So over to you, Mutumboi.

Mutumboi: Thank you, Chuin Hwei. Can you hear me clearly?

Chuin Hwei: Yes, we can.

Mutumboi: Excellent. So maybe I can just start by thanking the Toronto Centre for being an all-weather partner. And then you just mentioned, in terms of our long-term engagement, I would like to really take this opportunity to thank the Comic Relief and the Jersey Overseas Aid for their generous support towards this specific and many other supports that we have received. But this one for its noble cause of wanting to tackle financial exclusion and continuously seeking ways of how we can help the financial service providers, the regulators, and governments to promote affordable and appropriate financial products and services, especially to the vulnerable groups, one of which I belong to, being women, and, of course, others and many more.

It's an excellent report that we have received very well, as Zambia. And thank you for selecting us and maybe, also suffices to thank the other two jurisdictions. So, for Zambia, we were officially visited by COVID sometime in March 2020, and we immediately went into lockdowns. The stock market was affected. Businesses, generally, were affected. And, of course, the side developments that happened everywhere else in the globe happened to us, too. We lost lives. Regulators, like ourselves, went into a panic mode. We took several measures, issued setting guidance notes and guidelines to just assist the market players in terms of what sort of protocols we felt would be useful. And basically, we were all relying on both national and global health protocols of social distancing, working from home. And indeed, as has been highlighted in the findings, what turned out, very naturally, is technology was liberated by not only the financial services providers, but we ourselves, as regulators, had to embrace technology quickly, quickly.

So, personally, I was one of those women that had two online banking platforms with two separate banks. I never used them before COVID, and that's because I had my own reservations. I just didn't want to. I felt like using these platforms automatically just opened you to some level of risk. And I just didn't want to go there, not withstanding the fact that I work in the financial markets.

But that changed, almost overnight. And I can confirm that we are best friends. So, I would like to confirm the findings of this study and that I am actually a testament to what pertained on the front of the proliferation of technology and online digitization as far as Zambia is concerned. And it's correct that, on the front of Zambia, there was a lot of work in progress by the time COVID hit. I did note, in the reports, there was recognition of the work by the UNCDF, and they were working in partnership with the likes of the Central Bank and the ICT regulator in Zambia, basically just enhancing mobile money and putting in place the necessary frameworks, regulatory frameworks, and infrastructure, addressing some of the infrastructure challenges that would support that.

And most of that work was done prior to 2020. So, we were found ready, and I think the report highlights why there were differences in terms of the trends that we're seeing. And it's true. It did depend on what was pertaining in most of the jurisdictions. And it's also very, very true that our, it wasn't surprising that the agents went up, contrary to the other two jurisdictions. And that's because COVID found us at a point when, indeed, one of our big banks that also filters into the rural areas had just launched a very aggressive strategy for an agents’ model. And so, that really came in handy. And you did exercise, it did exercise a lot of social distances. So, it was different from walking into the bank. I think the report makes very good observations on that front.

Coming back to ourselves as the Commission, we had been chewing even prior to March, on the thought process of alternative financing, for totally different reasons, and mostly for reasons of wanting to ensure that the SMEs have access to capital. So, in 2019, we were already on this journey of contemplating the issue of putting in place a regulatory sandbox. So, we were lucky enough, early, before the COVID lockdowns, we had gone into a partnership. But just before, we had started our discussions with the UNCDF. And so, sometime last year, we partnered with them to develop the regulatory sandbox, which was launched this year in March.

So, we have signaled, in a very big way, as the regulator for capital markets, our embracing of innovation. And I think, as we were developing the framework, the COVID situation created an impetus of how we shouldn't relent. So, we're happy. We do have new products in the sandbox, basically, the peer-to-peer lending platforms. We do have a crowdfunding platform and an online trading and investment advisory platform, which is all innovation that are leveraging on technology.

Then, Chuin Hwei did mention that we have a long-term arrangement. So, again, COVID found us right in the middle of our development of the risk-based supervision framework. And on hindsight, it was good because we're then able to factor in some of the things that we're seeing on the ground, on the back of this crisis. And again, the report is very much on point in terms of the risks that we basically even worried about, and we shall forever worry about going forward.

For us, for example, the strategic risk became very imminent because even as we're doing the pilot around that time, we're able to see just how the pilot candidates were really shot on that front. And basically, what that did, it gave us the opportunity to tweak our model and emphasize certain things that we experienced during that process. Also, just the aspects of how do you do an inspection when there's a lockdown? How do you ensure that services, products have still been offered even into the vulnerable places? We learnt a lot of “new normal”. We made some mistakes. Hopefully, we've corrected those.

And maybe just in terms of summing up, we also learnt that it's very important, with the new sort of risks that have also presented such as your cyber crime, cyber security, and crime risks, your data protection, several other ICT-related risks, we have realized that it can’t be business as usual in terms of how we regulate. We need supervisory technology, regulatory technology, to basically help us automate some of those processes so that we don't have to be caught unawares. We were caught unawares with the lack of tools and needed to think very quickly. We have a little bit more clarity of what sort of tools we need, even just for the risk-based supervision framework that we've developed now with the Toronto Centre. We do realize that we need to be able to use that even in times when you do have a lockdown, not that we are really anticipating that this becomes another event.

I think maybe just in finally wrapping up, the report for us is a very useful pointer to just several things that we need to be mindful of and specifically data collection. I think it's part of the three points that Petronella, I think, raised. It's very important for us to be able to desegregate this data in a way that we can process this information for not just risk management. We would like to also be able to process this information for purposes of having the right policies that will foster a better recovery of our economies, and also make sure that we're not leaving anyone behind in terms of how to provide and ensure that in terms of ensuring that everyone is financially included.

So once again, I just want to thank the Toronto Centre. Your report has found us at a very good time, as I've said, with risk-based supervision being launched. Also, in the bigger scheme of things as Zambia, we are just about to launch a capital markets master plan. And so, again, we learned so much in terms of some of the findings that are in this report that we will do well to factor in as we implement our master plan, which is intended to ensure financial inclusion in Zambia. Thank you.

Chuin Hwei: Well, thank you, Mutumboi, for your insights, and also giving us a look into what is to come in Zambia. We are really looking forward to the fruits of the labor there. Next, let me invite Momoh to give his perspective from Sierra Leone. Momoh, please.

Momoh: Thank you very much for the presentation. I'm completely happy that our face-to-face interaction did not reduce drastically because we are not harried by the COVID. That was a very good observation. I thank you very much, Petronella, for your presentation. Let me also take this opportunity to thank the Toronto Centre research, particularly Chuin Hwei and Cacey. We have been getting in constant discussions again. Let me also recognize the presence of the Director of Jersey Overseas Aid. Good afternoon, sir. You are welcome. I am completely gratified to partake in this panel discussion. And on that note, I say, greetings to you from Sierra Leone, the land of diamond and gold.

My tasks here is really to give you recent developments that have taken place in the financial inclusion space and the policies that have been initiated, particularly after the TC research. However, I will have to start with developments in the regulatory space because I believe strongly that if financial inclusion is the first one, then the regulatory environment must be very conducive. And therefore, I would like to apprise you of the development we have done in the regulatory space.

In the first place, we have the Other Financial Services Act 2001. It's very, very old. We are amending that. This act is a parent act for the regulation of non-bank financial institutions, including mobile money, FinTech, financial institutions, micro financial institutions, and the rest. So therefore, we are saying that if we're going to enhance FinTech to operate, mobile monies to operate, let us create a plain level ground and a very conducive atmosphere. That one is ongoing.

Additionally, we are also reviewing the Payment System Act. The Payment System Act 2009 is a bit old. Considering the dynamics in the sector, we think it is very important to update this one, review it so that we can meet the ever-increasing challenges that come from the operators. That's very distinctive. Do you agree with me that the operators are always ahead of regulators? But we try as much as we could as regulators to ensure that we minimize the margin between the thought of the operators and the regulators.

In that direction, we have also developed the e-money guidelines. It is very close to being rolled out. Before now, we used to have only the Mobile Money Guidelines, and that one was very much restricted to the operations of mobile money. But as I can tell you now, in Sierra Leone, the digital operation is now becoming assimilated by all players. There are now about 14 commercial banks, and more than 10 of them are now going digital. When mobile money started, the banks stopped it. They considered the mobile money operations operators as competitors. But today they consider them as complements. So, they are also going very high.

There is also the development of the agent network guidelines. That one has been on anyway. Possible, one of the most important reasons that actually did not allow the mobile money operator to spread very fast in Sierra Leone was lack of agents. As a result of that, there was a liquidity problem. If you get cash, you get virtual cash, you want to cash out, and they tell you, "No, we don't have cash." If you must buy virtual cash, then there must be the assurance and the confidence that when you want to cash out, it is available. We have done that one and that one, we have rolled out to the market. As I'm talking to you now, service providers, particularly commercial banks, microfinance institutions, are now partnering with agents and sending their partnership applicants for approval.

Also, we are working very closely with some consultants to develop the money remittances guidelines. The recorded mobile money prohibited remittance transaction. It only allowed inwards but not outward. But now this space is becoming expanded. We think that is a very important step we must take.

We have almost completed the development and finalization of the USSD regulation. Initially, the USSD regulation facility was only given to mobile money operators. Then, the commercial banks started grumbling that mobile money operators are monopolizing the use of USSD. So, even all their products, they are only being used within their phones and where internet facilities. But we have developed that thought we have not yet rolled it out, but we have started giving facilities, together with NatCom, the National Telecommunication Commission. That is the body responsible for regulated MMEs. The Bank of Sierra Leone has signed an MOU so we are working together. We have developed, we almost completed the development of the USSD regulation just to create a plain level ground.

We are not only interested in the service providers, but we are also highly interested in the consumers. Because when you talk about stability, you want the consumers also to have confidence in the system. We have completed, with the help of UNCDF, the consumer protection guideline. These guidelines will address, among very many things, consumer complaints, and address those and ensure that there is transparency and fairness in treating consumers.

Equally so, I would like to highlight some developments in the payment system. Because here in the Bank of Sierra Leone, the national inclusion, there it is a multi-dimensional concept. It cuts across very many departments in the bank and units. We have an electronic phone transfer project which is almost completed. This project, we automate all government payments. As I'm talking to you now, before our government payments, we are doing manually. When we get requests from Accountant General's office, from ministry and departments, all the payments to government workers and contractors, they are done manually. But very shortly, we have gone too far into that and now we automate it. The service goes digital.

And we have the instant payment service project, which the Bank of Sierra Leone has done concurrently with the Pan-African Payment System and Settlement. This project is for the West African Monitory Zone, the WAMZ zone, for Sierra Leone, Guinea, the Gambia, Ghana, and Liberia. We have gone too far, we've implemented each. Well, once it is completed, transaction among members would be very easy. For instance, a customer in Sierra Leone, we pay a customer in Ghana in Leone. That is with Leone. Then, a customer in Ghana will receive the payment in Cedis. So, all these barriers, we want this to be reduced.

And, we have now completed the automation of treasury single accounts. That is an account import where all MDEs, their accounts, pass through. We have institutions that collect revenue and pay into the Bank of Sierra Leone, TZE, treasury zero account. At least, we do it manual, but automation is almost complete now, so that everything will have to be done automatically. So that when a decision to deposit the funds to revenue into that account, there's always a percentage that that decision will have to get. That one, everything will have to be done automated. It's about 10% and the 90% now remains with the government of Sierra Leone.

This one is a bit a long-awaited project, but I'm happy to announce that we will launch it, if not in the first quarter of 2022, it will be in the second quarter of 2022. That is the development of the National Switch. It's a problem to us in Sierra Leone as I speak now. All service providers do not speak the same language; meaning, that you want to transfer accounts from Orange money to official money, it's not possible. Banks to mobile money, is not possible. But with the development, with the procurement of the national switch, all transactions will be routed through the switch. It will be very, very simple. In fact, that will increase digitalization and the number of, I think, the proportion of access to finance.

What is also very interesting about this project in the installation of the switch is that there are other components like the installation of point of sales. Because we only did not ask the vendor to provide us the switch, but we also want POS particularly to the rural communities, as we really intend to ensure that financial inclusion, which is the last mile.

We have also gone too, far with the government of Sierra Leone to embark on digitization of government payments. The African Development Bank is working clause, is founding this project, and we have gone too far with it. We believe that we have tried severally to ensure that the object of digitalization is really enhanced. But because we have not got the government buying in, it has been improving at a snail pace. So now, we want the government to start the ball rolling. I will believe that the government being the largest or the greatest player in the sector, when once the government takes the lead, everybody will follow the bandwagon. We have started with the G2P payment and then the P2G payment. We can now go G2B payment and B2G payment. That one is almost, very nearly to the conclusion.

In addition to that, we have been working closely with FinTech and with UNCDF, in the development of FinTech in Sierra Leone. What we did was to organize what we call FinTech competition challenge. We did the first one. We had applications. The purpose, the aim of this was actually to identify FinTech companies in Sierra Leone and to assist them to develop. With UNCDF, we launched the first competition. We had so many applications and two winners came up. We gave them some capital as a starting capital. What we did was when they developed their products to a level, we now asked them to enter the Bank of Sierra Leone Sandbox, but that have come to that one. This last year, we did also the second FinTech Challenge and we also got the winners, but we were a bit held back by the COVID. But very shortly, they entered the box.

The Bank of Sierra Leone also developed the Sandbox over three years ago. It is only that the development has been very slow. I think that was why, in fact, Petronella did not pick it up, but we are on. I mean, we have been applauded for that. We are one of the first around the West African zone to do that. The first cohort, we have got two guidelines. They have graduated and we're going to give them license. The second generation of the Sandbox, we have got 12 applications. We have allowed them to do presentations. We have evaluated them all and they are going to, they will start, they are going to enter the box very shortly. But we made a bit more modifications on the first one. On the first cohort, we allowed them to operate on a cohort basis. There were problems because some will enter together and other, they were not strong enough to continue with the same timeframe. This time around, we are going to allow players, a participant, to enter the box based on ongoing basis.

Chuin Hwei: Thank you for that fascinating look. Sorry to just jump in. I think you have really given us a good sense of the regulatory infrastructure that's really coming into place to support financial innovation and financial inclusion. I'm just wondering whether we could go to Valence and then we can maybe pick up some other points as well.

Momoh: Okay, thank you.

Valence: Well, thank you very much.

Chuin Hwei: Thank you. Thank you very much. Thank you, Momoh. Thank you. Go ahead.

Valence: I want to start my remarks by appreciating this work done by the Toronto Centre Research team, but also to appreciate the Comic Relief and the Jersey Overseas Aid for financing this study. It's a very good study because it helps us as policy makers to understand the lessons that we can pick from this COVID-19 crisis. As you, as we get out of this crisis, like other crisis have been, one of the questions that policy makers around the world, including invoking countries that would be asking, is what lessons do we learn from this crisis? And really, this study helps us to get ingredients or answers to that question. How can we build better? How can we build a resilient financial sector that is inclusive so that will prepare for future crisis like this? I know we are not yet out of COVID. You've heard about coming the new variant. But before that, just to give you an update about Rwanda's COVID-19 situations, of course, we were affected by COVID-19 and it affected, the first case was registered in March 2020 like our colleagues in Zambia. We lost around 1,341 people. The government implemented around two total lockdowns in the country and partial lockdowns to restrict the movements and the spread of the virus.

At the onset of the virus, one of the measures taken by the Central Bank, and other government agencies, was to encourage people to adopt contactless transactions and asking financial service providers to invoke the digital services that they had in order to engage their customers because we knew that these would be carriers. Physical meetings would offer room for the spread of the virus. And that paid off because, as we speak, we've seen really with increased vaccination rates, I think the vaccination rates in Rwanda is around over 60%, which is a good thing. With increased vaccination rates and the other measures taken by government, we've seen improvements and the infection rates have really gone down. Fatality rates have gone down, and economic activities have resumed. And good to note that, businesses have resumed Xoom payment, including small businesses, SMEs, have resume Xoom payment. That's the message that we get from financial service providers.

One of the measures taken by the Central Bank in March last year was to advise financial service providers to be flexible with their clients. I mean, to provide them payment moratorium and to be flexible because the pandemic had depressed their incomes. So, we are happy to note that as COVID-19 had kind of reduced, we see improvement in business performance. We see improvement in the servicing of loans, including small businesses have started servicing their loans. So, there's good improvement.

But let me go back to this study. This study is very important, and it really brings out a key finding that COVID-19 offered one silver lining, which is actually accelerating digital financial services. Everything about COVID-19 was very bad. But on that one, I think I appreciate that really. It pushed us to run where we are working. In Rwanda, we had a cashless agenda. The country had dreamed of doing away with cash and adopting digital financial services, digital payments. We are doing something, but with COVID-19, we had to run.

So, they start the points, but in Rwanda really, mobile money was a game changer, was the main factor that drove the non-face-to-face transactions. That speaks to the situation even before COVID-19. The server audit in 2019 showed us that 62% of adult Rwandans had a mobile money wallet. They were able to use mobile money transactions. Out of that 30%, they're using only that mobile money for their financial management. Only that. Not working with microfinance or banks. Only mobile money. So, when the COVID-19 strikes us, people had already started knowing mobile money. Knowing that they can keep money on their wallets, send money on their wallet. One thing that really, we saw increasing accelerating was using that mobile money wallet to transact, to buy goods. Initially before COVID, they would keep money on their wallets, send money to each other, but see, from a small extent be able to transact and buy things from merchants using their mobile money wallet.

Now, when COVID-19 came, when governments guided people and advised people to use contactless transactions, then people start started using mobile money to transact. One of the measures put in place by government was really to work with payment service providers and to ask them to waive some fees on these digital payments for a period of 90 days. They are very cooperative, the payment service providers. With the costs being zero and with the citizens already knowing mobile money, then it was so easy to switch from physical cash to mobile money. That was very important.

Now, there have been new developments after the study who are concerned that after COVID-19 is kind of decelerating, people would go back to their old ways of physical transactions, lining up in banks to withdraw their money. And then, we are concerned that once the payment service providers reinstate the fees, then people would be concerned and go back to the old ways. But guess what? That's not what we are seeing. We are seeing a behavior change. We are seeing people embracing the advantages of digital payment services. And we are seeing the momentum increasing instead of reducing.

Now, in September, the payment service providers introduced the fees now, and we are seeing that people are not so much sensitive to it. But early in October, the Central Bank also introduced a new policy. As you know, non-bank e-wallet mobile money providers, that's mobile MNOs, they are obliged to keep their trust accounts in financial service in banks and the banks who are paying interest on their trust account. To recoup that money, they're paying on the trust account, they would charge on the push and pull transactions. When you pull your money from the bank account, your mobile wallet, then they charge you. But then the Central Bank said, the banks can't stop paying interest on trust accounts; at the same time, stop charging on the pull and push transactions.

By that policy, the person doesn't need to line up in a bank. All you need is to sit in your home in your sitting room, use your mobile wallet, get money from your bank, pull it to your wallet and transact. That has been a game changer and has really fascinated people to use. Now, very many people with the mobile wallet, really, they don't see any reason as why they should line up in a bank. Of course, there's an issue of awareness and they don't see, the recommendation on digital awareness really is reasonable in Rwanda. It is. We've been doing conducting digital financial literacy campaigns for the last three years.

I don't know whether, Petronella, you had this information. We are running the fourth one next year in January. And the information we are giving to our people is to equip them with knowledge on the digital financial products and services out there, and awareness around the issues on online fraud, digital footprint, and cautioning them not over borrow. We don't want an over-indebted population. So, we are cautioning them about not to over-borrow. We are teaching them about their security features, how to secure their PIN account, how to safeguard their personal information, how to avoid spam and phishing techniques, all those things.

Another thing we are doing regarding consumer protection late this year, I think towards around September, the government passed a law on financial consumer protection. After that passing of that law, the Central Bank established a full department in charge of market conduct and consumer protection. That department really is developing tools to get consumer complaints direct from the consumers of digital financial services. This really shows how much we are preparing ourselves to protect our citizens as they embark on these digital financial services.

Now, on the Sandbox, similar to our colleagues in Sierra Leone, I don't know whether you had an idea on what you were doing with the Sandbox. This year, the Central Bank passed regulation on the regulatory Sandbox. As I speak, we are establishing an operational framework for the regulatory Sandbox. Our aim really is to work with innovators, the FinTech’s, people coming with ideas on how we can use technology to help us meet our goals in terms of improving efficiencies of financial services, in terms of taking financial inclusion to the excluded.

You alluded to a very important point on the potential of digital financial services helping to accelerate financial inclusion. Now, you mentioned about the preconditions, and I agree with you. Unless if we establish the preconditions, then digital financial services will not help us to achieve the inclusion we want. Yes, we need financial education to entrust people to have trust in these digital financial services. We need to equip people with the infrastructure, the technology, the phones. The women don't have access to phones and technology as their male counterparts.

All those things, I agree with you, and I appreciate the recommendations of the reports. Now, another thing, and the two points to come to my conclusion, that we are doing to promote financial inclusion, and really, is that we are running an electronic data house. That's a RegTech, a kind of system that helps the Central Bank to get information in the real-time manner from regulated financials service providers. Now, this helped us. It's not yet perfect. A system has been developed and we're at the stage of data cleaning. But ultimately, this system will be helping us to fit information from financial service providers without going to their premises. And it will be real-time. This will ensure us getting the quality data that is not subject to manual intervention, but also getting data in real time and being able to do effective supervision and being able to do the right thing.

Now, the last point. We have a key project that we are running, and I hear the colleague from Sierra Leone on the same project. We are implementing a switch, a retail interoperability switch. It's a switch that is going to enable interoperability between different payment service providers. With that switch in place, a person with a mobile wallet with a certain MNO company, will be able to transact with another person having a mobile wallet with another telecom company. He'll be able to transact from one mobile wallet in telecom company, with a person having an account in a bank, a person having an account in a microfinance. It's a suite that is going sit in between those payment platforms provided by different institutions and enable people to transact and send money from whichever platform they're working with to another person using another platform.

That's a project that is underway. The infrastructure is being established. The scheme rules are being fine-tuned by our different players. And that's very key. Last, the Central Bank this year is updating its RTGS to enable 24/7 transactions. Initially, I think our RTGS would enable transactions to run up to, I think, 6:00 PM. But what we want now is to enable interbank transactions to happen 24/7. As I speak, that project is running. With those projects, we think, together with financial literacy, working with the people to educate them what's there for them and the benefits of digital payment services, we think we'll be more prepared when COVID-19 comes again, maybe 50 years. But I hope it doesn't come back. So, thank you very much.

Chuin Hwei: Thank you very much, Valence. I apologize, we're a little bit over time, but I think we've been virtually rewarded with a look into the many upcoming initiatives in the three countries. So, thank you again to our panelists. Bringing this webinar to a close, I would like to invite Phang Hong Lim, Senior Director at Toronto Centre in charge of Supervisory Guidance, who is overseeing this research project to give a short closing remark. Thank you. Phang Hong?

Phang Hong: Thank you, Chuin Hwei, for moderating such an interesting session. We heard lot from all the three panelists, as well as Petronella providing the initial base, and José for setting the stage for this webinar in the first place. It is my honor to provide brief closing remarks.

The COVID-19 pandemic has brought about disruptions about public health, financial services, and financial inclusion. As you have heard from the webinar, the present research examined the impact of the pandemic on financial services delivery in Rwanda, Sierra Leone, and Zambia, and implications for financial sector risks and financial inclusion.

We see financial stability and financial inclusion as two sides of the same coin. According to IMF, good supervision is key to the synergy between the two. The speakers provided thoughtful comments that reinforce this. And on, behalf of Toronto Centre, I would like to thank them. We particularly appreciate that Mutumboi commented that the report is very much on point and provides a good pointer to certain things for supervisors to be mindful of. Momoh reaffirmed, regulation inclusion goes together, and Sierra Leone's continuing commitment to digitalization. Valence note this research helps policy makers to understand crisis better and provide guidance for supervisor authorities, especially bringing out the key finding that COVID-19 accelerated digitalization. And then updated the good news that people are more accepting of using more digital services, which is a game changer for Sub-Saharan Africa.

We are very grateful for the support of the regulatory and supervisory authorities in Rwanda, Sierra Leone, and Zambia, which greatly inform the research report on their policy and supervisory work done to face the disruption caused by the pandemic. The involvement of the financial sector players in the survey also provided valuable insights into the steps they had taken to continue to serve their potentially excluded customers.

Once again, Toronto Centre is grateful to Comic Relief and Jersey Overseas Aid for making this research possible under their program, Branching Out: Financial Inclusion at the Margins to promote financial inclusion to Rwanda, Sierra Leone, and Zambia. We look forward to our continuing and ongoing collaboration with these countries, as well as with Comic Relief and Jersey Overseas Aid. Thank you everyone for tuning into this webinar. I hope you enjoyed it. Goodbye.

Chuin Hwei: Thank you very much, Phang Hong. Thank you to our excellent speakers once again, and a good day to all of you.