Members highlight crucial COVID-19 policy responses

From liquidity injections to loan repayment moratoriums, financial regulators in the AFI network are implementing pro-active and immediate policy changes designed to support individuals and businesses most exposed to the negative effects of coronavirus.

Focusing on digital financial services and interventions targeting small businesses, poor and other vulnerable populations, AFI’s first ever network-wide webinar on 6 April outlined several specific policy and regulatory interventions.

AFI Executive Director Dr. Alfred Hannig delivered the opening remarks during which he thanked the more than 180 participants who joined the event 56 member institutions, including Central Bank of Seychelles Governor Caroline Abel, and her deputy, Jennifer Sullivan.

Dr. Hannig emphasized that financial inclusion was “one of the very few solutions at hand” able to immediately address the issues facing hard-hit economies across the network. The ongoing movement restrictions presented opportunities for digital finance, he said.

“We see the role of technology as extremely important, especially with social distancing but also because we feel that many crisis responses can be brought underway through digital channels,” Dr. Hannig explained.

He cautioned, however, that such developments would need to be scrutinized within the context of AFI’s consumer protection and financial education frameworks to “not only mitigate the risks of this crisis but also the risks of technology, especially when digital platforms are increasingly being used.”

Other AFI workstreams, he emphasized, could also be incorporated into new responses.

“We can now even systematically build in policy solutions that are in line with the UN Sustainable Development Goals, such as gender inclusive finance and inclusive green finance.”

The video conferencing event – AFI’s largest virtual gathering so far – also saw representatives from Bank of Ghana, Bank of Zambia and Central Bank of Nigeria deliver in-depth presentations outlining their institution’s latest responses to the economic slowdown and ongoing challenges.

As chair of AFI’s Small and Medium Enterprise Finance Working Group (SMEFWG), Bank of Zambia Assistant Director Mankolo Beyani focused on small businesses, noting that they were particularly vulnerable to economic shock.

Nationwide lockdowns, she explained, meant disruptions to supply chains and sales that could potentially trigger a wave of closures. While she noted that SMEs need targeted support, she added that they must also focus on women as most SMEs in Zambia were female-led.

“Help for women could be about restructuring their facilities and agreeing reasonable repayment periods,” she noted.

Beyani added that the crisis highlighted the need for greater diversification as having fewer trading partners and/or tradable goods exposed economies to heightened risks, such as currency depreciation. She also added the need to invest in digital banking, particularly by microfinance institutions (MFIs).

“MFIs have not invested enough in technology. This is a wake-up call and where regulators and supervisory authorities must press hard,” she said while acknowledging that the fast-paced nature of current events meant that regulatory approaches should also be flexible.

“When you have to modify, then modify. We don’t know how long this crisis will be, so we have to be very, very cautious.”

In terms of direct responses, Bank of Ghana Head of Payment Systems Dr. Settor Amediku said that the central bank had joined forces with various stakeholders to remove the costs linked to digital transactions worth up to roughly USD20. In addition, a moratorium of between three and six months has been issued on digital micro credit. These measures, he said, have had a significant impact on money transfers.

“Transaction volumes have gone up by about 45 percent as per the new policy measures introduced,” he said. “The majority of people are now accessing digital credit as a result of the central bank’s policy interventions.”

Central Bank of Nigeria Head Digital Financial Services Stephen Ambore also spoke about a recent jump in the volume of “instant transactions” but noted that Nigeria still faced low rates for both mobile money penetration (3.3 percent) and awareness (18 percent).

He used his presentation to draw attention to some of the measures being implemented by the central bank, including the launch of a NGN50 billion (USD128 million) targeted credit facility aimed at supporting households and SMEs. Furthermore, it had approved a one-year moratorium on all principal debt repayments and lowered the interest rate on central bank intervention loans for agriculture and commerce.

Looking ahead, Ambore emphasized the importance of local agents in spreading awareness and achieving greater access to digital products.

“It is time we start bringing the issue of appropriate business continuity planning for people that provide financial services at the base of the economic pyramid. And it is time to start looking at agents as an integral part of the payments system and financial system infrastructure,” he said.

Ambore also reiterated the importance of partnering with private sector players to accelerate the development of digital products and services, a point echoed by Luxembourg Professor Douglas Arner from The University of Hong Kong who said that engagement should not be limited solely to traditional financial actors. Telecommunications, global money providers, financial technology firms and other relevant stakeholders, he said, should also be involved.

“Unless you have these systems already built, then you don’t have much choice,” he said.
Professor Dirk Zetzsche from University of Luxembourg also warned against the temptation to tackle this crisis in silos.

“This is all about humankind and humankind needs to align its resources and we need to avoid local egotism to get through this crisis,” he said. “This is a chance to cooperate and collaborate, to exchange knowledge and find a common path towards the solution.”

The webinar was moderated by AFI Senior Policy Manager for Digital Financial Services Ghiyazuddin Mohammad. It provided a platform for participating institutions to discuss their policy and regulatory interventions, while acknowledging that the spread of COVID-19 has reached a critical stage pushing the global economy to a point of virtual shutdown.

Participants observed a minute of silence for those impacted by the outbreak, as well as for emergency and essential service workers, which was led by AFI Head of Policy Programs and Regional Initiatives Eliki Boletawa.