Digital Public Infrastructure for Financial Inclusion: Digital ID and eKYC in the SADC Region

The Southern African Development Community (SADC) region experiences relatively high levels of intra-regional migration, either voluntary or related to displacements. It comprises 15 countries with varying levels of economic development, domestic labour-market absorption rates, and political and civil stability, all of which have a direct bearing on migratory patterns. As a regional economic structure, the SADC Secretariat aims to promote sustainable and equitable economic growth through policies that engender regional integration.

One of the policy instruments recognising the reality of intra-regional migration is the SADC Draft Protocol on the Free Movement of Persons, which is intended to allow citizens of any SADC state to freely enter, work and reside in another SADC state. The region has not fully ratified this instrument, but there are some bilateral and multilateral arrangements between certain countries that are beginning to fulfil the promise of the initiative.

As the largest economy in the SADC region, South Africa receives the largest number of regional migrants. This makes South Africa, to the rest of SADC, the largest regional payments corridor in Africa for remittances and cross-border payments. Key features of this remittance corridor include the following:

• Increase in formal access by volumes from 4.7 million in 2016 to 15.6 million transactions in 2024.
• Increase in formal access by value from USD 0.36 billion in 2016 to USD 1.09 billion in 2024.
• Weighted average price of sending USD55 dropped from 9.6% in 2021 to 4.7% in 2024.
• Zimbabwe, Lesotho, Malawi and Mozambique corridors make up 90% of the remittance volumes as the majority of migrants to South Africa are from these countries.
• The total SADC migrant population in South Africa is just under four million, with 89% being irregular migrants and mostly in the low-income bracket.
• There are limited digital first-mile services. As agent networks facilitate over 80% of South Africa's outbound remittances, there are significant cash-handling implications.
• An existing SADC Real-Time Gross Settlement (RTGS) system, operational since 2013, and the Transactions Cleared on Immediate Basis (TCIB) system, launched in 2021, serves as a regional instant payment system (IPS).

The irregularity in migration implies that ID verification requires cross-border data sharing between service providers and digitalised foundational population registries. These registries serve as the true source of ID data. Such regional data sharing will foster financial integrity in the regional payments system, reduce compliance costs with customer due diligence (CDD) requirements, expand access to financial services for migrants, and reduce remittance costs.

The expansion of access to formal remittances is one of the strategic priorities of the SADC Secretariat’s Strategy on Financial Inclusion and SMEs Access to Finance 2023–2028. The SADC Committee for Central Bank Governors Payment System Subcommittee (CCBG PSS) is critical to the implementation of the regional financial inclusion strategy. The CCBG PSS has also adopted aspects of the G20 Roadmap on Enhancing Cross-border Payments to address barriers to access, speed, transparency and cost. One of the focus areas is fostering financial integrity, with the following objectives:

1. Improved AML/CFT compliance
2. Development of a SADC-wide electronic Know Your Customer (eKYC) and identity and information sharing framework
3. Establishment of a regional, integrated eKYC registry for SADC member states

FinMark Trust leads the implementation of the second and third objectives. The principles that inform this are based on the Financial Action Task Force (FATF) guidance on the risk-based approach to combat money laundering, terrorism financing and proliferation financing.

The readiness of digital national identity/population registry systems, including passport issuers, to enable digital integration is a critical factor in the SADC eKYC process. The national identity document is one of the credentials that a regional KYC registry or a regional KYC data exchange mechanism uses to ensure that migrants have access to cross-border payments, remittances and financial services in their host countries. This eKYC mechanism aims to ...

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