An investigation into the policy and regulatory challenges of digital financial services ICT infrastructure in Zambia

Abstract

Digital financial services (DFS) regulations including that of mobile money services have been discussed at length in Sub-Saharan region as the answer to financially including the poor and provide access to affordable financial services. DFS set up costs are cheaper than traditional Brick and Mortar banking services and Africa is thriving at these initiatives as it benefits the underserved. This research was aimed at exploring the challenges of the Policies and regulations of digital financial services on Zambia’s ICT infrastructure and brought out the inadequacies of the current Banking and ICT regulations. The research further unearthed the challenges of DFS ICT infrastructure and compared Zambia’s regulatory challenges with similar World Bank Findex ranked developing countries around the globe. The discussions focused on the merits and demerits of overlapping jurisdictions of the Banking and ICT regulations and how they allow for enabling ICT environment to improve the overall underlying financial landscape and the financial inclusion ecosystem for the unbanked. The research also looks at the challenges of some dispute cases due to unclear regulations on the use of shared USSD ICT infrastructure on which DFS operates. Based on the research results, the study concludes by showing the exponential growth in the volumes of transactions on mobile financial services. The results also compare the financial risks thresholds and the tiered bands of regulation which are directly proportional and leads to increase in financial inclusion and brings about the convergence of traditional financial services and mobile financial services (MFS). The study further provides recommendations on the need for a consolidated, enabling, interoperable and harmonized set of policies and regulation to avoid restrictive regulations and allow for innovation in this space for the successful implementation and growing usage of DFS in Zambia. Keywords: Digital Financial Services (DFS), Policies and Regulatory challenges, ICT Infrastructure, USSD, Mobile Financial Services (MFS), Mobile Money, Financial Inclusion