VZCZCXRO0224
PP RUEHDBU RUEHPW RUEHSL
DE RUEHBUL #0127/01 0160513
ZNR UUUUU ZZH
P 160513Z JAN 10
FM AMEMBASSY KABUL
TO RUEHC/SECSTATE WASHDC PRIORITY 4737
RUEATRS/DEPT OF TREASURY WASHINGTON DC PRIORITY 0965
INFO RUCNAFG/AFGHANISTAN COLLECTIVE

UNCLAS SECTION 01 OF 02 KABUL 000127 
 
SENSITIVE 
SIPDIS 
 
TREASURY FOR LMCDONALD, MNUGENT, JCASAL 
 
E.O. 12958: N/A 
TAGS: EFIN EAID ECON PGOV PREL AF
SUBJECT: AFGHAN CENTRAL BANK GOVERNOR REITERATES SUPPORT FOR 
 
EXANDING MOBILE BANKING 
 
REF: A. KABUL 0125 
     ¶B. 09 KABUL 3863 
 
¶1. (SBU) Summary: On January 7, Coordinating Director for 
Development and Economic Affairs (CDDEA) E. Anthony Wayne and 
Treasury Attache met with Da Afghanistan Bank Governor Abdul Qadeer 
Fitrat to discuss the M-Paisa pilot project, which uses mobile 
banking technology to pay Afghan National Police salaries in Wardak 
province.  Governor Fitrat noted that the Central Bank's Financial 
Supervision Department had recently completed a positive review of 
the project and that he was ready to sign off on a countrywide 
expansion of the project.  Later in the week, the Treasury Attache 
spoke with Kabul Bank on their initiative to use pre-paid cards to 
pay Afghan Government officials.  Treasury Attache considers the 
pre-paid card initiative a potentially valuable alternative to 
mobile banking, and one which deserves more research. End Summary. 
 
CENTRAL BANK REPORT ON M-MONEY PILOT LARGELY POSITIVE 
- - - - - - - - - - - - - - - - - - - - - - - - - - - 
 
¶2. (SBU) Governor Fitrat reported that the Central Bank's Financial 
Supervision Department had successfully completed its review of the 
M-Money pilot project in Wardak Province (Jelrez District).  Under 
the M-Money project, telecommunications provider Roshan and the 
Ministry of Interior (MOI) have teamed up to issue Afghan National 
Police salaries through M-Paisa, Afghanistan's first mobile money 
transfer system.  Through this system, the MOI can issue salaries to 
ANP officers using SMS communication.  ANP officers can then collect 
their salaries through certified mobile banking agents. 
 
¶3. (SBU) The report found that ANP officers participating in the 
program were largely pleased with the pilot's results, consistent 
with earlier updates from CSTC-A representatives and MOI officials. 
The only negative incident reported was the case of an ANP commander 
in Wardak province who sought a cut of his subordinates' salaries 
from an M-Paisa agent in November (reftel B). The agent refused to 
disburse salaries to the commander and Minister of Interior Atmar 
suspended the commander and asked the Major Crimes Task Force to 
investigate.  Governor Fitrat expressed satisfaction with how the 
incident was resolved. 
 
¶4. (SBU) Governor Fitrat said he would soon sign a document agreeing 
to support the expansion of the M-Money project to other provinces 
and the indefinite extension of the mobile money pilot in Wardak 
province.  In addition, he discussed expanding the project to 
additional ministries (e.g. Ministry of Energy and Water for payment 
of electricity bills; Ministry of Education for payment of teacher 
salaries). 
 
MINISTRY OF FINANCE HAS LINGERING 
CONCERNS ABOUT MOBILE BANKING 
- - - - - - - - - - - - - - - - - 
 
¶5. (SBU) Although the M-Money pilot in Wardak has been successful to 
date, the Ministry of Finance's Treasury Department (which has legal 
responsibility for salary funds until they reach the recipient) has 
expressed concerns, stating that there has not been sufficient 
critical assessment of the pilot's outcomes and risks.  CSTC-A 
representatives have told EmbOffs that MOF has given only weak 
support to the pilot project in Wardak and may oppose its expansion. 
 They believe MOF's stance partially reflects an ongoing turf battle 
with MOI. (Note: This is a particularly important issue that will be 
looked into further as part of Ambassador Holbrooke's trip to Kabul 
later this week.) 
 
KABUL BANK PUSHES PRE-PAID CARDS AS ALTERNATIVE 
- - - - - - - - - - - - - - - - - - - - - - - - 
 
¶6. (SBU) Update:  On January 10, the Treasury Attach met with a 
senior official at Kabul Bank to discuss the bank's plan to use 
pre-paid cards to pay Afghan government salaries.  Kabul Bank is 
currently conducting preliminary discussions with the U.S. Military 
on using pre-paid cards to pay Afghan National Security Forces 
(ANSF) salaries.  This is the first time the idea has been 
communicated to EmbOffs.  Treasury believes the idea has merit and 
should be considered a potential alternative or supplement to the 
M-Paisa program.  The cards could also be used to provide 
micro-grants and loans - in both rural and urban areas.  The 
pre-paid card concept has strengths and weaknesses relative to 
mobile banking.  Pre-paid card advantages include the ability to use 
cards globally and at any ATM or Point of Sale (POS) machine (the 
Kabul Bank official stated POS machines cost about $300, can easily 
be distributed all over the country, and do not require a landline). 
 In addition, the official told Treasury that Kabul Bank would 
supply funds for the cards rather than requiring the U.S. Military 
to pay up-front. The key disadvantage to pre-paid cards relative to 
mobile banking is that cards cannot provide 24 x 7 facilities for 
person-to-person funds transfers or balance info.  Treasury will 
 
KABUL 00000127  002 OF 002 
 
 
work with other USG agencies to further research the viability of 
Kabul Bank's prepaid card plan. 
 
¶7. (SBU) Update: The final version of the Money Service Provider 
(MSP) regulation (encompassing electronic/mobile money institutions) 
was recently released by the Central Bank.  (Note: This regulation 
is available at the following URL: http://www.centralbank.gov.af/ 
laws-and-regulations.php.)  Despite substantial suggestions during 
the comment phase from Roshan and other interested parties, two 
concerns remain in the regulation as released: 
 
- Agent Liability: M-Paisa/mobile money providers are completely 
liable for any acts/omissions of the agents (in the field), which 
creates a large opportunity for fraud. 
 
- Agent Liquidity: M-Paisa/mobile money providers are responsible to 
ensure the liquidity (cash on hand) of the agents, which also 
creates a large opportunity for fraud/collusion. 
 
COMMENT 
- - - - 
 
¶8. (SBU) Governor Fitrat's continued support of mobile money is key 
to achieving strategic objectives at both the national and local 
levels.  While there are concerns about mobile money, its potential 
makes it an important initiative to follow and support where 
appropriate.  The Kabul Bank prepaid card concept is also of 
possible interest, however, more analysis on the specifics are 
required.  Post will continue to track developments, coordinate with 
military in this key area and make recommendations on the various 
payment methods available. 
 
EIKENBERRY