Strengthening Payment Systems in Madagascar

Project Development Objective (PDO)

This project aims to support Central Bank of Madagascar to strengthen the legal/regulatory framework for payment systems, establish the payment oversight function, and strengthen financial consumer protection framework, thereby enhancing the contribution of payment systems to financial inclusion through provision of responsible financial products and services. 


Central Bank of Madagascar has been modernizing payment systems. Automated payment systems (RTGS and ACH) were introduced in 2011 and a draft law on payment systems is in preparation. However, FSAP undertaken in 2016 identified shortcomings that remain to be addressed for the stability and the development of Madagascar financial infrastructure. Although the draft law is currently being prepared, it needs to cover more than just automated systems. There is no National Payment Systems strategy to guide the development of payment and securities settlement systems and payment services in Madagascar. And currently the Central Bank provides limited oversight function. There is no dedicated team for the oversight of payment systems, instruments and services. In addition, consumer protection framework is weak. Transparency and comparability of financial services are barely existent in Madagascar. They are particularly relevant in the context of efforts to advance financial access, as they naturally target first-time customers, who by definition lack experience and often have limited financial literacy. Additionally, consumers have little confidence in the system and do not have mechanism to obtain recourse. Users of electronic retail payments are often uncertain about how to address service problems, whom to contact, how to report unauthorized transactions or errors, and how these issues will be resolved. Redress mechanisms play an important role in preventing customer abuse and motivate PSPs to address operational weaknesses.

Activities / Output

The expected activities include the following:

1.  Reviewing and update the legal and regulatory framework for payments; 

2.  Designing a NPS strategy with recommendations for the overall development of large-value systems and retail payments; 

3.  Developing the oversight function of the Central Bank and; and 

4.  Developing an adequate consumer protection framework for store of value and transactional products 

Expected Outcomes

The expected outcomes of the project are: 

1.  Strengthened legal/regulatory framework in line with international standards that cover beyond automated systems; 

2.  Actions by Government, Business, and Payment Service Providers, including the Post, catalyzed, harmonized, and implemented to enhance usage of electronic payment mechanisms; 

3.  Enhanced capacity of BCM staff on NPS oversight; and 

4.  Increased disclosure and transparency of financial services and products, and redress mechanism(s) established, increased trust in the formal financial system and understating of products.