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State Bank guidelines for microfinance banks mobile operations

KARACHI (February 16 2003) : The State Bank on Saturday came out with detailed guidelines for mobile banking operations of microfinance banks and institutions to mitigate the risks involved in the activity and protect the interest of the stakeholders.

The State Bank issued a circular with guidelines applicable to all mobile banking operations.

Under the legal framework for microfinance institutions, the microfinance banks and institutions can undertake mobile banking operations to reduce cost and increase outreach of microfinance services.

“The operation, however, has inherent risks both for the microfinance banks/institutions and the general public/MFIs clients.

To mitigate the risks associated with this activity, the State Bank of Pakistan has prepared guidelines in consultation with the stakeholders,” said a circular issued by the SBP.

These guidelines will be applicable to mobile banking operations of microfinance banks and institutions, and will come into force with immediate effect.

The guidelines provide for opening of 'Service Centres' within a specified radius of the licensed branch, with prior permission in writing from SBP.

The details of 'Service Centres'/'Satellite Offices' opened, if any, prior to issuance of this circular, will be reported to SBP within one week of issuance of this circular for regularisation, the circular said.

GUIDELINES FOR MOBILE BANKING OPERATIONS OF MICROFINANCE BANKS/INSTITUTIONS

AREAS TO BE SERVED: Areas/Locations within District/City Government limits in which the bank has a licensed branch or areas/location within a radius of 50 kilometres of the licensed branch could be covered through mobile banking.

The MFBs shall design the mobile banking operations in a way which ensures cost effectiveness and financial viability of the operation.

In addition to provision of banking services through mobile teams/vans, the MFBs, with prior permission in writing from SBP, may also open small outlets/service centres within the above-defined area of the licensed branch to provide a local contact point to the clients.

The service centres shall have minimum infrastructure manned by 2-3 bank staff and shall inter alia be mandated to a) create awareness in the area about bank's products b) form community organisations/groups and c) provide loans to the clients.

The Service Centres shall not offer savings/deposit mobilisation services and will not maintain overnight record or cash.

The record shall be maintained at the licensed branch under which the service centre would operate.

For the purpose of extending savings services, the service centre may notify the date and time, once or twice in a week, at which the mobile van would be visiting the service centre so that the clients willing to avail savings services may deposit the savings etc with the mobile team.

The licence to open a branch in a particular area shall also mean permission to undertake mobile banking within the above-defined radius of the branch.

MOBILE BANKING STRATEGY & PLANS: The bank shall ensure standardisation while providing mobile banking services and shall prepare a bank-wide 'Mobile Banking Strategy' in consultation with its field staff highlighting its objectives, services to be offered, frequency of visits, insurance, security, control mechanisms, the operating cost and record keeping etc.

A copy of the complete strategy shall be submitted to SBP for information. The strategy shall be reviewed semi-annually in the light of field experiences and other developments in the sector.

The branch managers shall prepare quarterly mobile banking plan keeping in view the demographic statistics of the areas to be served and the overall mobile banking strategy of the bank.

He or she will assign areas to mobile teams, which will be rotated in the teams periodically. Each mobile team shall prepare weekly plans & schedule of its visits and get it approved by the branch/hub manager.

The manager shall ensure that the teams' plans/schedules are in line with the branch mobile banking plan and the bank's overall mobile banking strategy and shall ensure its strict compliance.

The branch and mobile team plan shall be available in the branch for review of internal/external audit teams and SBP inspection teams etc.

OPERATIONS: Mobile banking staff shall record the details of their field visits before leaving the bank.

Mobile staff shall take last day's closing account balances for next day's field visit and get it authenticated by the authorised officer/branch manager.

The bank shall issue identification cards to the mobile officers, which would be displayed/shown to the clients in case of need.

While opening deposit and loan accounts etc, due care shall be observed in identification of clients as prescribed under Prudential Regulations for MFBs/MFIs.

The Branch Manager or his/her designated officer other than the officer who opened the account shall randomly make physical/field verification of at least 25 percent of the deposit/loan accounts within one month of opening of accounts.

All cash deposits received shall be recorded on the passbook available with the depositors and, similarly, the collection against loan shall be acknowledged by proper receipts.

The clients shall be provided with 'Statement of Account' at regular intervals (quarterly/half yearly or some other period).<br>
SECURITY: An armed security guard shall accompany the bank officers visiting the Mobile sites.

The net cash collected shall either be deposited in the branch of a Correspondent Bank, having account of the bank or deposited in the branch on the same day.

The deposit slip and other documents used for recording various transactions during the day should also be submitted to the concerned branch on the same day.

The field visit shall be conducted in daylight, and the mobile officer will return to the branch by the evening the same day.

Adequate insurance cover shall be made available for cash-in-transit, vehicles, and staff.

The Mobile Banking Teams shall be provided with Mobile/Cellular phone facility and will be required to have all emergency numbers of law enforcement/security agencies, hospitals, fire stations etc, to be utilised in case of any emergency &/or untoward incident.

The schedule of visits of different mobile teams shall be kept secret by the branch manager and be divulged to the concerned mobile teams on fortnightly basis. As far as possible, different routes be used by the mobile team while visiting a place more than once in a fortnight.

AUDIT AND CONTROL: All officers on mobile duty to return to the Branch the same day by evening, and deposit the collected cash at the Branch duly acknowledged by a responsible officer.

All mobile banking transactions shall be reviewed by a duly authorised officer/Branch Manager and recorded in the branch ledgers etc on the same day.

The bank shall use standard printed vouchers to record mobile banking transactions.

It shall develop control mechanism, which should inter alia ensure safekeeping of the vouchers books, voucher books issue and utilisation record and safe keeping of counter folios.

No officer shall retain cash at home overnight.

Internal Audit Department shall develop appropriate mechanism/system to ensure compliance with the guidelines and also to minimise the risks inherent in the mobile banking operations.

The scope of Internal Audit and their periodic audit plans shall comprehensively cover the mobile banking activities records.

Branch Manager shall accompany the mobile teams occasionally and shall also do some independent verification of balances in loans and deposits with bank's records and record his/her observations.

The bank shall have an appropriate policy for rotation of mobile staff.

The mobile team shall maintain logbook etc having complete record of the vehicle running along with proper authorisation.

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