As part of efforts to promote financial inclusion and enhance access to financial services for low income earners and the unbanked, the Central Bank of Nigeria (CBN) is proposing the establishment of Payment Service Banks (PSBs) in rural areas across the country. To this end, the CBN has released the draft guidelines for the regulation of the proposed banks.
PSBs are expected to leverage on mobile and digital services to enhance financial inclusion and stimulate economic activities at the grassroots through the provision of financial services. PSBs will also enable high-volume low-value transactions in remittance services, micro-savings and withdrawal services in a secured technology-driven environment.
Accordingly, PSBs are envisioned to facilitate high-volume low-value transactions in remittance services, micro-savings and withdrawal services in a secured technology-driven environment to further deepen financial inclusion and help in attaining the policy of 20% exclusion rate by 2020
The apex bank finally addressed the agitations of the Mobile Network Operators (MNOs) to be allowed to be fully participate in financial services as telecommunications companies (Telcos) are listed as one of the eligible promoters of PSBs. Others are retail chains (Supermarkets) and mobile money carriers.
A copy of the document was obtained on the CBN’s website yesterday. The new rural banks would not be allowed to grant any form of loans, advances and guarantees. By the guidelines, they are expected to have a minimum capital base of N5 billion with capital adequacy ratio of 10 per cent or as may be prescribed by the CBN from time to time.
The objective of the proposed institutions, it was gathered, is to enhance financial inclusion in rural areas by increasing access to deposit products, payment and remittance services to small businesses, low-income households and other entities through high-value transactions in a secured technology-driven environment.
In terms of structure, the payment service banks are expected to operate mostly in rural areas and unbanked location, with not less than 50 per cent physical points in such areas.
In addition, they are expected to establish ATMs in some areas; be at liberty to operate through banking agents; use other channels, including electronic platforms to reach-out to its customers and establish coordinating centres in clusters of outlets to superintend and control the activities of various access points and banking agents.
Also, the guidelines provide that these rural banks are expected to be technology-driven and are expected to conform to the best practices of data storage; security and integrity.
According to the central bank, activities they are expected to undertake include, “Maintain savings accounts and accept deposits from individuals and small businesses, which shall be covered by the deposit insurance scheme.
“They are to carry out payments and remittance (including inbound cross-border personal remittances) services through various channels within Nigeria; issue debit and pre-paid cards and operate electronic purse.”
These rural banks are also permitted to invest in federal government and CBN’s securities and carry out such other activities as may be prescribed by the central bank from time to time.
On the other hand, the central bank listed the non-permissible items the banks shall not carry out to include, “grant any form of loans, advances and guarantees; trade in foreign exchange market; undertake any other transaction, which is not prescribed in the CBN Regulation on the Scope of Banking and Ancillary Matters, No. 3, 2010.”
The banks are also required to use the words ‘Payment Service Banks,’ in their names to differentiate them from other financial institutions.
The guidelines also stipulate that they are expected to pay a non-refundable application fee of N500,000 in bank draft as well as a detailed business plan or feasibility report, among others.
“Not later than six months after obtaining an Approval-in-Principle, the promoters of a proposed Payment Service Bank shall submit application for the grant of a final licence to the CBN,” it stated.
The application is to be accompanied among other things, with a non-refundable licence fee of N2 million.