Ghana Launches World’s First Digital Finance Policy Amid Covid-19
Ghana has launched a digital financial services (DFS) policy, which the government hopes will help provide support for the various measures it is taking to make good use of the DFS in it’s Covid-19 response. According to report, as part of the policy, the government has removed fees for low-value remittances, relaxed transaction and wallet size limits for mobile money, made know-your-customer (KYC) transferable from SIM registrations to allow for remote mobile money account openings, and zero-rated all interoperable transactions made through the interbank switch. These initiatives, it stated, were agreed in consultation between providers and the central bank, which will mean that the long-term viability of digital finance should hopefully be preserved. While the policy has been years in the making, the country has also committed to allowing beneficiaries of its largest social benefit transfer program (LEAP) to receive their payments via mobile money. These efforts are in line with what is happening in other African countries where a cash-lite economy is seen as a key tool to surviving COVID-19 and any future pandemics.
For instance, the Central Bank of Kenya has raised mobile money transaction limits, and National Bank of Rwanda has gotten financial service providers to agree to waive merchant fees for digital payments. Ghana has not been spared by the COVID-19 pandemic. The economy has taken a significant hit, with GDP growth projections for 2020 being revised down from 6.8 to 2.6 per cent. And response measures combined with a loss of revenue are expected to cost the government $1.6 billion. Not surprisingly for a country where roughly 19 million adults have 14.5 million active mobile money accounts, Ghana’s efforts to shore up the economy include measures aimed at promoting the use of digital financial services (DFS). According to the report, “Ghana hopes that its new DFS policy will amplify the effectiveness of DFS-related COVID-19 measures. Developed with technical support from CGAP and funding from the Swiss State Secretariat for Economic Affairs (SECO), the policy establishes a four-year (2020-2023) blueprint for achieving short- and medium-term progress in six areas: Improving governance of the DFS ecosystem; supporting FinTech; creating an enabling regulatory framework; actively building the capacity of authorities to supervise the space; supporting the development of market infrastructure for DFS and driving the expansion of digital payment use cases, ”
The policy details 43 actions to be taken by the public or private sector within these areas. If some are implemented immediately, it would directly impact how effectively DFS can be deployed to support the COVID-19 response. For example, the policy details how Ghana’s existing biometric ID and Ghana Post GPS digital addressing system could be connected to allow for remote account opening. Prior to the pandemic, financial accounts could only be opened in person. Recently, as mentioned above, the government has allowed the use of SIM card registrations to open a mobile money account with the same provider. According to Buddy Buruku, a Financial Sector Specialist and a digital financial services (DFS) adviser based in Ghana, the policy also calls for actions to support FinTech innovation that could lead to a more enabling environment for remittances, e-commerce and contactless merchant and utility payments.
Finally, action areas around increasing digital government-to-person (G2P) and person-to-government (P2G) payments could strengthen the government’s ability to collect much-needed revenue from citizens while minimizing leakages in disbursements. Considering the expected contraction of the economy due to the pandemic, any digitization efforts that maximize government resources will be critical. Ghana’s DFS policy was borne out of a need to specify how DFS could be deployed to support Ghana’s financial inclusion goals, as detailed in the country’s National Financial Inclusion and Development Strategy (NFIDS). While it was not developed in response to COVID-19, it is a forward-looking DFS policy that should help to ensure government and citizens have the digital financial tools they need to cope with a new era of social distancing and economic uncertainty.
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