Bankable Frontier Weblog

As other posts in this weblog have shown, a number of countries have adopted basic bank accounts as a way to promote access to financial services. Examples of these accounts include South Africa’s Mzansi account, introduced voluntarily by the larger banks as a way to satisfy their Financial Charter obligations, and the UK’s basic bank account, offered in general without great enthusiasm by the UK’s high street banks. Mzansi acocunts have been opened by over 2 million people, of whom some 60% were previously unbanked (see report in Porteous 2007);While these offerings were voluntary (following some arm twisting by respective governments and regulators), certain European countries, like France, compel banks to offer bank accounts to all comers. The Mexican regulators are also reportedly considering establishing standards for basic bank accounts which are required in recent legislation.

Prof Ndungu, Governor of the CBK

In Kenya, at the recent launch of a  report on bank charges and fees, the Governor of the Central Bank, Prof Njuguna N’dungu, suggested “I believe there is scope in this regard through the Kenya Bankers’ Association for the development of a basic, competitive no frills account that can be offered by all banks. Such an account would have low or nil minimum balances as well as minimal charges if any…My challenge therefore is to the KBA to spearhead an initiative in this regard, to develop a uniquely Kenyan Mzalendo basic transactional account. The Central Bank stands ready to support this kind of innovation”. Some Kenyan banks reportedly have debit card products with low or no minimum balances, and (relatively) low transaction charges at ATMs (at least for on-us).

However, in order to incentivize banks to really want to issue basic accounts, the CBK might start looking to creating an exemption for basic bank accounts in the current AML-CFT regulations for banks. This has proven invaluable inter alia in South Africa in removing an undue obstacle. CBK could also explicitly allow banks to offer some services through agents, since non-bank agent networks for cash handling are rapidly proliferating as a result of the payment offerings of the mobile network operators Celtel and Safaricom reported elsewhere in this blog. For basic bank account offerings to be sustainable, they must make commercial sense to issuers; and changing inappropriate or unnecessary regulation can help improve (but not alone make) the case.