Mobile money has a lot of potential and some writers have argued that its potential has not yet been appreciated. Services of mobile money are deployed in different countries around Africa. Noteworthy factors that push the adoption of mobile money services include, but not limited to, the fact that it is less costly to use mobile money services and even more importantly, it is convenient and faster to mobile services. Services of mobile money are used for low-value transactions and are deployed in both urban and rural areas. In recent times, the use and adoption of mobile phones (cellular phones) happened at the very high rate. Lesotho is no exception. Mobile money services are found in both urban and rural areas and most people in Lesotho have access to cell phones and mobile money services.
The term mobile money has been defined by many different writers across the globe. The definitions given by these different writers boil down to the fact that mobile money or a mobile money service is where financial services and financial products, which are ordinarily accessed through formal financial institutions like banks, are conveniently accessed simply though the use of a mobile phone. Jack and Suri are examples of writers who have defined mobile money. They say it is a tool that allows individuals to make financial transactions using mobile phone technology. On the other hand, Solin and Zerzan define a mobile money service as using the mobile phone in order to have access to financial services. In terms of the definition given by these writers, it is a service where mobile phones are used by customers to complete a financial event. Another writer named Donovan defines mobile money service as the provision of a financial service through a mobile phone.
A definition of mobile money service given by these different writers is more or less the same, and it simply shows that financial inclusion could be achieved simply by using a mobile phone. The term “Financial inclusion”, on the other hand, can simply be defined as a situation where everyone has access to financial services, as well as ensuring that all people have access to appropriate financial products and services at an affordable cost and in a manner that is most fair and transparent to people.
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Financial exclusion is an opposite of what financial inclusion is, and it is said to be a source of risk for the financial system. As a result of being risky to the financial sector, the Global Standard Setting Bodies (SSBs) are supporting the goals and objectives financial inclusion, because financial inclusion strengthens the objectives of financial stability, integrity and consumer protection, among other things. One writer named Castri argues that mobile money is capable of contributing to all these objectives of financial inclusion by driving economic and social growth through a cash-lite economy and digital path ways to financial inclusion. Kersop and Du Toit argue that one of the many things that hinder the progress of reducing poverty is when many people in the society are excluded from the financial systems.
Arguments in favour of mobile money include the fact that it can be used to achieve an increased financial inclusion since it enables the storage of monetary value on a mobile phone. Thereafter the monetary value stored on a mobile phone will then be used for various purposes such as purchases, payments, as well as sending the same value to other mobile phones and mobile money users.
The above background shows that mobile money can be used as a tool for financial inclusion as it can improve access to formal financial services in developing countries. While it is true that mobile money services contribute to financial inclusion, one cannot ignore the fact that mobile phones are used by almost everyone, including possibly, criminals. As such, mobile money services are capable of being targeted by criminals in the same way that other formal financial institutions are targeted today. It is therefore highly possible that mobile money services, however good they are, can be abused by criminals to perpetuate crimes of money laundering.
Efforts are put in place by governments, international bodies and regional bodies to ensure that mobile money services are effectively regulated to protect them from being abused by criminals for purposes of money laundering and the financing of terrorist activities. These efforts include legislation, guidelines as well as amendments to the existing laws to name a few. These new laws are solely intended to reduce and prevent the risk of mobile money services being used by criminals who may use them for money laundering and terrorist financing. The new legislation may sometimes be harsh or non-enabling to the extent that it makes it harder for mobile money services to operate smoothly.
This problem happens in many countries. Mwega has the following to say about this issue of tightening regulation at the expense of financial and economic growth: In the wake of the global financial crisis…many countries are prioritizing stability by strengthening financial regulation. Although important, this might be at the expense of inclusive growth, especially in poor countries. Without effective regulation, financial systems can become unstable, triggering crises that can devastate the real economy as evidenced by the recent GFC that began in 2007…Given the primary purpose of finance is to facilitate productive economic activity, the aim of regulation is to maintain financial stability and to promote economic growth. This is a delicate balancing act, as too great a focus on stability could stifle growth, while a dash for growth is likely to sow the seeds of future crises.
Non-enabling regulations are not good because it is said that: Effective financial markets require regulations that bring certainty, foster competition, sustain innovation, and promote ethical and responsible business conduct that upholds the rights of customers.
Against the above background, the aim of this research is to look at how mobile money services and money laundering should be regulated to determine what legislation needs to be pro-actively introduced in Lesotho that may make it simple or smooth for mobile money services to operate to ensure financial inclusion for the unbanked. This aim will be achieved by looking deeper into the laws regulating financial institutions in other African countries. The research will look at how mobile money operators are licensed in those countries; how mobile money services are regulated to ensure that the crime of money laundering is not committed. The research will also look at how mobile money, specifically in those countries, is used to attain financial inclusion. The proposed research aims to show that with good regulation pertaining to mobile money and mobile money services, the crime of money laundering can be controlled, reduced or even totally prevented.
The proposed research will look at how mobile money services are currently licensed and regulated in Lesotho as well as the current Anti Money Laundering legislation in the country. The proposed research will further show the importance of mobile money and how mobile money may be used to attain financial inclusion in the context of Lesotho. The proposed research will also determine whether indeed in the context of Lesotho, mobile money is not the right tool to prevent financial exclusion as opposed to other cashless payment systems. Additionally, the proposed research aims to look at money laundering laws, financial institutions laws as well as the laws regulating mobile money services. The research will also definitely look even how mobile network operators are regulated.
