As NDIC in­sured mobile money users

Daily Trust - - BUSINESS -

Nige­ria launched a Na­tional Financial In­clu­sion Strat­egy (NFIS) on 23rd Oc­to­ber, 2012 aimed at re­duc­ing fi­nan­cially ex­cluded adult Nige­ri­ans from 79.6% to 20.0% by the year 2020.

In a bid to achieve this fit, the Cen­tral Bank of Nige­ria (CBN) rolled- out a Reg­u­la­tory Frame­work for Mobile Pay­ments Ser­vices in Nige­ria, aimed at revo­lu­tion­iz­ing the Nige­rian pay­ment sys­tem in tune with global de­vel­op­ments as well as fa­cil­i­tat­ing financial in­clu­sion in the coun­try.

The de­vel­op­ment has led to the li­cens­ing of 24 Mobile Money Op­er­a­tors (MMOs) by the CBN. Even of those li­censes are bank led, in or words op­er­ated by de­posit money banks while 14 are non- bank led.

The ques­tion of whether mobile money schemes qual­ify for de­posit in­sur­ance has con­tin­ued to ag­i­tate the minds of prospec­tive sub­scribers of mobile money. The ar­gu­ment by a num­ber of prospec­tive sub­scribers have al­ways been that, since such funds are not in the strict le­gal sense ‘de­posits’ and the ben­e­fi­cial own­ers of the funds do not have cus­tomer/banker re­la­tion­ships with the in­sti­tu­tions in which the trust fund has been placed in re­spect of their en­ti­tle­ment un­der the mobile money scheme, it fol­lows there­fore that each mobile money cus­tomer’s en­ti­tle­ment can­not be con­sid­ered a pro­tected de­posit.

Th­ese ques­tions which es­sen­tially in­still doubt on the se­cu­rity of mobile money trans­fer ser­vices ba­si­cally hinges on the fear that mobile money ac­count holder may not be en­ti­tled to de­posit in­sur­ance cov­er­age in the event of bank fail­ure.

Dr J. A. Afo­labi, the Di­rec­tor of Re­search at the Nige­rian De­posit In­sur­ance Cor­po­ra­tion (NDIC) said NDIC, as a de­posit in­surer, has been ef­fec­tively re­spond­ing to all emerg­ing is­sues in the global financial sys­tem, par­tic­u­larly financial lit­er­acy, con­sumer pro­tec­tion, financial in­clu­sion, sus­tain­able bank­ing and ex­ten­sion of de­posit in­sur­ance cov­er­age to de­pos­i­tors of non-in­ter­est banks.

He said in or­der to en­gen­der con­fi­dence of the pub­lic in sub­scrib­ing the prod­ucts of the Mobile Money Op­er­a­tors(MMOs), the NDIC has ex­tended de­posit in­sur­ance to the in­di­vid­ual sub­scribers of the MMOs in the form of pass-through de­posit in­sur­ance.

Afo­labi pointed out that de­posit in­sur­ance is vi­tal to the mobile pay­ment sys­tem be­cause sub­scribers need as­sur­ance that their de­posits are safe and avail­able at all times and there­fore es­sen­tial for mobile pay­ment and in­vari­ably financial in­clu­sion.

The NDIC seems to have bor­rowed from the US Fed­eral De­posit In­sur­ance Cor­po­ra­tion (FDIC) “Pass Through” model for om­nibus cus­to­dial ac­counts hold­ing pooled funds un­der­ly­ing stored value cards.

The US Fed­eral De­posit In­sur­ance Act [iii] reads with the Fed­eral De­posit In­sur­ance Cor­po­ra­tion (FDIC) Reg­u­la­tions [iv] rec­og­nizes de­posit own­er­ship in fidu­ciary re­la­tion­ships and cus­to­dial ac­counts.

The FDIC has taken the view that the funds un­der­ly­ing stored value cards or other non­tra­di­tional ac­cess mech­a­nisms are “de­posits” to the ex­tent that the funds have been placed at an FDIC-in­sured de­pos­i­tory in­sti­tu­tion [v].

The re­quire­ments for “Pass Through” are [vi]: (1) The cus­to­dial re­la­tion­ship must be dis­closed in the ac­count records of the in­sured de­pos­i­tory in­sti­tu­tion. (2) The iden­ti­ties and in­ter­ests of the ac­tual own­ers must be dis­closed in the records of the de­pos­i­tory in­sti­tu­tion or records main­tained by the cus­to­dian or other party and (3) The de­posits ac­tu­ally must be owned (un­der the con­tract be­tween the par­ties or any ap­pli­ca­ble law) by the named own­ers and not by the cus­to­dian.

When the FDIC’s re­quire­ments are sat­is­fied, the in­sur­ance cov­er­age ‘‘passes through’’ the cus­to­dian, i.e., from the nom­i­nal ac­count holder, to each of the ac­tual own­ers of the de­posit [vii].

The modus operandi of the NDIC de­posit in­sur­ance cov­er­age for the Mobile pay­ment sys­tem is that the pro­vi­sion of the Pass-Through De­posit In­sur­ance cov­er­age is lim­ited to the sub­scribers of funds domi­ciled in Mobile Money op­er­a­tors Trust (pool) ac­count in the De­posit Money Banks.

Ac­cord­ing to the NDIC, the par­tic­i­pant of the Pass-through De­posit In­sur­ance Scheme are; the De­posit In­surer, Mobile Money op­er­a­tors, De­posit Money Banks, mobile Money Agents and cus­tomers

Afo­labi noted that sub­scribers of Mobile Money op­er­a­tors will be in­sured up to the max­i­mum cov­er­age level as ap­pli­ca­ble to De­posit money Banks in line with the NDIC Act

Mobile pay­ment sys­tem es­pe­cially in de­vel­op­ing economies is rapidly in­volv­ing and mak­ing tremen­dous im­pact in the econ­omy and lives of its cit­i­zenry.

In the Nige­rian con­text, a to­tal num­ber of over 98 thou­sand agents have en­rolled which sim­ply trans­late into 98 thou­sand jobs cre­ated. To­day there are 24 mil­lion sub­scribers ( far less than the over 120 mil­lion mobile lines) gen­er­at­ing a trans­ac­tion value of N815 bil­lion.

Ac­cord­ing to ‘Dipo Fa­tokun, Di­rec­tor of Bank­ing and Pay­ment Sys­tems in the CBN, ‘The po­ten­tials for mobile money to stim­u­late financial in­clu­sion by en­hanc­ing eco­nomic op­por­tu­nity and boost­ing pro­duc­tiv­ity in var­i­ous sec­tor is huge.

She ar­gued that the re­li­a­bil­ity of mobile pay­ment op­er­a­tors is fur­ther given cre­dence by the World Health Or­ga­ni­za­tion ( WHO) which is cur­rently us­ing mobile money to pay field health work­ers on im­mu­niza­tion.

Save the Chil­dren in Nige­ria, an in­ter­na­tional body charged with chil­dren de­vel­op­ment grant pro­gramme is also us­ing mobile money to dis­trib­ute funds.

With this in ret­ro­spec­tion, it is safe to say that each mobile money ac­count holder is en­ti­tled to de­posit in­sur­ance cov­er­age in the event of bank fail­ure. De­posit in­sur­ance passed through from the trustee to the mobile money con­sumer by the NDIC, re­in­forces ex­ist­ing safe­guard­ing mea­sures and the over­all safety of the mobile money scheme.



Man­ag­ing Di­rec­tor/CEO NDIC, Umaru Ibarahim

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