Public Disclosure Authorized IFC Mobile Money Scoping Country Report: Lebanon Alaa Abbassi, Andrew Lake, Cherine El Sayed Public Disclosure Authorized May, 2012 Public Disclosure Authorized Public Disclosure Authorized Lebanon Summary Overall readiness rating 4 (Moderately high readiness for Bank Centric Mobile Money deployment in high income segments) 3 (Medium readiness for the mid market, those unable to afford smart phones) Current mobile money solution The banks have begun implementing mobile money – both mobile payments and mobile banking. This is being done by the banks on their own and in conjunction with Mobile payments suppliers within Lebanon. Population 4.14 mil * Mobile Penetration 68% 2010 (High) ** Banked Population 2.5 mil (60%) (Moderately high) *** Remittance % of GDP Outbound $3,737 mil (9.7%) *** Inbound $7,558 mil (19.6%) *** Percent under poverty line 28% * Economically Active population 1,48 mil (36%) * Adult Literacy 87.4% * Main banks Bank Audi, Blom Bank, Byblos Bank, Fransabank, Bankmed, BLF MobileIFC Opportunities Network Operators MTC Touch 1,724,854 (54%) Alfa 1,482,819 (46%) Ease of doing business Ranked 104 in the world, better than Pakistan, worse than Seychelles **** Sources: * https://www.cia.gov/library/publications/the-world-factbook/geos/le.html ** TRA annual report 2010 *** http://elibrary-data.imf.org/DataReport.aspx?c=2529608&d=33060&e=161939 **** http://doingbusiness.org/rankings • Macro-economic Overview • Regulations • Financial Sector • Telecom Sector • Distribution Channel • Mobile Financial Services Landscape Macro-Economic Overview Key Country Statistics Insights • Population: 4.14 mil • Lebanon is a small country, both in terms of population size and geography. • Age distribution: 23% (0 – 14 years) 68% (15 - 64 years) 9% (>65 years) • It has a sophisticated banking industry which serves 60% of the population (2.48 mil • Urban/rural split: 87% urban people, through 900 branches). • GDP (PPP): $61.61 bil • The longest trip for any person in Lebanon to • GDP per capita (PPP): $15 600 reach a bank branch is approximately 1 hour. • Literacy rate: 87.4% • There is a need to extend the availability to basic banking services to the remaining 400 • Banking penetration: 60% 000 un-banked individuals. • Mobile phone penetration: 68% • Given the geography of Lebanon, this could • Remittance (% of GDP): be achieved by a mixture of agency banking, • Outbound : 9.7% if that were deemed suitable by the BdL, or by the banks leveraging their existing • Inbound: 19.6% infrastructure to reach the remaining un- served people. Sources: https://www.cia.gov/library/publications/the-world-factbook/geos/le.html Macro-Economic Overview/ Key Country Statistics Table 1 2007 2008 2009 2010 Table 3 2008 2009 2010 Total population 3.6m 3.8m 3.91m 4,14 m Total Number of Outlets Rural/ urban 13%/87% 13%/87% 13%/87% 13%/87% GDP (@official exch. rate) 25,765B 30,079B 34,924B 39,006B Banks 65 65 67 GDP growth (annual %) 7.5% 9.27% 8.5% 7.0% MFIs 5 5 5 GDP/capita (@off exch. Rate) 6,240 7,040 7,870 8,880 Branches 862 885 912 Literacy % of populations 90% n/a n/a 87.4% Agents Services, value added (% of GDP) 70% 73% Not found Not found ATM 1140 1207 1285 Agriculture, value added (% of POS terminals 13332 17693 19708 GDP) 6.0% 5.0% Not found Not found Leasing 2 2 2 Industry, value added (% of GDP) 24.0% 22.0% Not found Not found Insurance companies +/- 47 +50 +50 Remittances (% of GDP) 13.59% 11.1% Not found Not found Poor households (% national Table 4 2008 2009 2010 poverty line) 28.8% 28.8% 28.8% 28.8% Modern banking applications Table 2 2007 2008 2009 2010 Banks with Core Banking System Total loans in million ( foreign banks exclusive) Not found Not found Not found 30.5B 37.3B 42.2B 59.0B US$ Payment transactions per day (Cheques) +275,000 +315,000 +325,000 Loan growth (%) - 22.6% 13.3% 23.1% Banks equipped with ATM and Loans as % of GDP 73% POS Total deposits million - Number of ATMs 1140 1207 1285 US$ 77.0B 83.0B 101B 113.6B - Number of POSs 13332 17693 19708 Deposit growth (%) 15% 23% 12.2% Banks that issue payment cards Deposits as % of GDP 298.9% 275.9% 289.2% 291.2% - Number of cards (million) 1,56m 1.63m 1.71m Loans as % of deposits 39.61% 44.94% 41.78% 51.94% Banks with Internet Banking <20% 20% to 25% >26.5% Mobile penetration % of population 65.9% Table 5 2007 2008 2009 Y2010 Switches 2 3 3 3 Cash of Total Deposits 94.67B 115.80B 129.57B Clearing Houses # of Loans per 1000 people - 520 873 (branches) 1 (6) 1(6) 1(6) 1(6) # of Deposits per 1000 people - 1372 1450 Credit Bureaus # of Banks per 10,000 people 0.16 0.16 0.17 Commercial/Public 0(1) 0(1) 0(1) 0(1) # of Branches per 10,000 people 1.6 1.8 2 Rating Agencies Stock Exchange 1 1 1 1 Sources: www.cia.gov , www.abl.org.lb , www.worldbank.org , www.cas.gov.lb , www.undp.org , www.econ.worldbank.org , www.menafin.com • Macro-economic Overview • Regulations • Financial Sector • Telecom Sector • Distribution Channel • Mobile Financial Services Landscape Regulatory Bodies Roles & Responsibilities Implications . Maintain economic stability and preserve the soundness and integrity of the banking . BdL is tasked to develop and oversee the Central Bank and financial systems. implementation of all electronic payment Banque du Liban . Regulating and developing all payment streams systems (including ATMs and POS), money . In discussions with the banks, many of them transfer and clearing and settlement indicated a desire that the BdL take central systems of all payment methods and financial instruments. control over the rule set for payments . BdL has wide discretionary authority to instruments and that it oversee the creation regulate and set regulations of electronic and management of a level playing field in payment systems the electronic payments arena. BdL is authorized to develop and regulate . BdL has the necessary legal framework in payment products through regulations and which to perform this role instructions without the need of adopting new laws. Direct intervention in the telecommunications space by the government has made it . Ensures telecom services reach all areas unlikely that the MNOs will directly compete Telecom of the country in or drive development of the Mobile Money Authority . Monitors technical and economic efficiency arena for all telecommunications services . Government approval required before MNO . This has made Bank led models the de facto can launch new services. standard in Lebanon, and has reduced the . The government directly owns and likelihood that non regulated assets, such as exercises board level control over both the telco sales channels will be leverageable Mobile Operators by Mobile Money operators Source: Legislative Environment for Mobile Money in Lebanon: A Abbassi 2012 Regulatory Framework & Requirements Current Regulations Implications . BdL would allow mobile money as long as it is Mobile Money . Lebanon has no law or regulation governing issued by a licensed bank. This is based on Issuers mobile money issuance by nonbanks. the current legal framework which allows only banks to accept deposits from the public . As a general principle, financial services . If a bank was permitted to outsource some may only be conducted by entities basic or limited banking services, especially in Deposit Taking regulated by the BdL and each such entity the case of low value transactions, it is may only offer the financial services that fall probable that such entity or person would be within the scope of its license. subject to the restrictions applicable to those employed by a bank. BdL showed interest in learning from practical . There is no specific regulation that governs examples by knowing what is applied in other Retail Agents for agents of financial institutions or countries with successful mobile banking AML / KYC outsourcing financial services services, and the concept of proportionality on AML rules on small and low value transactions. Source: Legislative Environment for Mobile Money in Lebanon: A Abbassi 2012 Regulatory Framework & Requirements Current Regulations Implications Financial institutions are required to, among KYC/AML other things: Requirements . Verify the identity of their permanent clients and that of the beneficial owner, if any; . These requirements are valuable in the . Apply "know your customer" procedures to normal course of events for mid to upper transient clients when the value of the operation market customers exceeds US$ 10,000; . It is proposed that, if Lebanese banks chose . Keep copies of all operation related to embark upon servicing the currently documents, as well as identity documents for at unbanked population, it considered risk least five years after the completion of the tailoring these requirements for this new operation or closing of account; and, market. Identify any indications of money laundering operations and set out the basis for diligently uncovering suspicious transactions MNOs and their agents are required, before selling a new line, to ask for and get a copy of the national ID (for Lebanese) or the passport (for non- Lebanese). Source: Legislative Environment for Mobile Money in Lebanon: A Abbassi 2012 Additional Regulatory Considerations Current Regulations Implications . Consumer Protection Law provides protection Customer to individuals and legal entities, addresses Protection fraud, abusive practices and loan disclosure rules by banks and other institutions. Given that BdL would only allow a bank-led model, ultimate responsibility for customer protection and data security would eventually . Banks and financial institutions are subject to reside with the bank. the provisions of the Banking Law and Central Data Privacy Bank directives, which include strict rules for the protection of data privacy and banking secrecy.