Instruction No. 001/2024-DSP of 1 October 2024 on the Operation of Madagascar's Instant Payment System

INSTRUCTION NO. 001/2024-DSP OF 1 OCTOBER 2024 RELATIVE TO THE OPERATION OF MADAGASCAR'S INSTANT PAYMENT SYSTEM

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SUMMARY

CHAPTER 1 - GENERAL PROVISIONS .................................................................................................... 3 Article 1: Purpose ........................................................................................................................................................ 3 Article 2: Terminology ........................................................................................................................................... 4 Article 3: Ownership of the IPS ...................................................................................................................................... 4 Article 4: Transmission of Payment Orders ..................................................................................................... 5 Article 5: IPS Participants ................................................................................................................................. 5 Article 6: IPS Connection Deadline ................................................................................................................ 5 Article 7: Participation Statuses ........................................................................................................................... 6 Article 8: IPS Participation Fees .................................................................................................................. 7 Article 9: Suspension .............................................................................................................................................. 7 Article 10: Exclusion ............................................................................................................................................... 7 Article 11: CBM Responsibilities ............................................................................................................................. 7 Article 12: Information Exchange ...................................................................................................................... 7 Article 13: General Principles on Transactions ................................................................................................ 7

CHAPTER 2 - SPECIFIC PROVISIONS ON THE CLEARING AND SETTLEMENT OF IPS TRANSACTIONS ............................................................................. 8 Article 14: Participant's Reconciliation Account in the IPS ............................................................................. 8 Article 15: Participant's Reserve Account in the RTGS ............................................................................. 8 Article 16: Principles of Net Balance Settlement ................................................................................................ 8 Article 17: Settlement Date for Participants' Transactions in the RTGS ...................................................... 9 Article 18: Deadline for Making Funds Available in the Final Beneficiary's Account ........................................ 9

CHAPTER 3 - MISCELLANEOUS PROVISIONS ....................................................................................................... 9 Article 19: IPS Access by Final Clients and Standardization of Flows ........................................................... 9 Article 20: Fraud Management System ................................................................................................... 10 Article 21: Dispute Management System ...................................................................................................... 10 Article 22: Complaint and Incident Management System .................................................................. 10 Article 23: Principle on User Management at the Participant Level ...................................................... 10

CHAPTER 4 - TRANSITIONAL PROVISIONS ............................................................................................. 10 Article 24: Scope of Application ............................................................................................................................ 10 Article 25: On the IPS Connection Deadline ................................................................................................... 10

CHAPTER 5 - FINAL PROVISIONS ......................................................................................................... 11 Article 26: Sanctions ............................................................................................................................................... 11 Article 27: Annexes ................................................................................................................................................. 11 Article 28: Entry into Force .................................................................................................................................. 11 Article 29: Repeals ........................................................................................................................................... 11

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[Logo: CENTRAL BANK OF MADAGASCAR]

INSTRUCTION NO. 001/2024-DSP ON THE OPERATION OF MADAGASCAR'S INSTANT PAYMENT SYSTEM

The Governor of the Central Bank of Madagascar,

Having regard to Law No. 2016-004 of 29 July 2016, supplemented by Law No. 2016-057 of 2 February 2017 establishing the statutes of the Central Bank of Madagascar;

Having regard to Law No. 2020-011 of 2 July 2020 on Banking Law;

Having regard to Law No. 2017-026 of 7 December 2017 on Microfinance;

Having regard to Law No. 2016-056 of 2 February 2017 on Electronic Money and Electronic Money Institutions;

Having regard to Law No. 2014-024 of 10 December 2014 on Electronic Transactions;

Having regard to Decree No. 2023-11 of 4 January 2023 repealing the provisions of Decree No. 2019-2069 of 6 November 2019 and appointing the Governor of the Central Bank of Madagascar;

Having regard to Instruction No. 002-DSP/22 of 16 June 2022 on the operation of the Automated Clearing and Settlement System;

DECIDES

CHAPTER 1 - GENERAL PROVISIONS

Article 1: Purpose

This Instruction sets forth the operating conditions of the Instant Payment System, abbreviated as "IPS", established and managed by the Central Bank of Madagascar, hereinafter "CBM".

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Article 2: Terminology

• Instant payments: These are fast or immediate payments that enable transactions between providers, where the transmission of the payment message and the availability of final funds to the final beneficiary occur in real-time or near real-time, within a few seconds, with continuous 24/7/365 availability.

• National payment switch: A set of devices and infrastructures established at the level of a country's National Payment System to facilitate interoperability between the various digital payment methods offered by different payment service providers. The IPS is a component of the national payment switch.

• Participant: An IPS Participant is an actor in the financial ecosystem, registered in the national payment switch system according to the rules defined by the CBM, who participates in and handles the flows of various transactions passing through the IPS platform.

• Interoperability: The possibility offered to Participants and their clients to send and receive transactions to and from different actors in the financial ecosystem.

• Interoperable transactions: Transactions carried out between clients of two different Participants, functioning regardless of the network on which each party is registered, or the provider or institution they use.

• P2P payment: An electronic money transfer mode conducted from one natural or legal person to another, via a channel made available by a Participant.

• Instant payment scheme: The set of rules, procedures, and technical devices governing the execution of IPS transactions. By extension, it also refers to all parties involved in the IPS payment processes (manager/operator and Participants).

Article 3: Ownership of the IPS

The IPS is a service provided by the CBM to the Participants defined in Article 5.

In this regard, the system and central infrastructures enabling its operation belong to the CBM, which ensures its regular operation, unless otherwise provided.

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IPS interfacing devices must comply with the security standards imposed by the CBM. New connections or interfacing with the system must receive prior homologation from the CBM.

Article 4: Transmission of Payment Orders

Payment orders are transmitted by Participants directly to the IPS via electronic means, through interfacing between their information systems and the IPS platform. In case of data disputes, the concerned Participants are required to produce evidence recorded in an electronic register complying with the relevant regulations.

Article 5: IPS Participants

Eligible Participants for the system are:

• Institutions that have obtained approval from the Banking and Financial Supervision Commission, hereinafter "BSFC", for providing banking services linked to a transaction account:

  • credit institutions authorized to receive public deposits: banks, deposit and credit microfinance institutions;
  • other banking service providers: electronic money institutions;

• any other institution that has obtained prior approval from the CBM to be an IPS Participant.

Membership in the IPS is mandatory for all institutions that have obtained approval from the BSFC for providing banking services.

Specifically regarding deposit and credit microfinance institutions, IPS membership is mandatory for any microfinance institution meeting both of the following cumulative criteria:

• having a total balance sheet of at least 100 billion Ariary;
• having at least 100,000 customer accounts opened in its books.

Participation in the IPS is formalized by a standard convention signed bilaterally between the Participant and the CBM.

Article 6: IPS Connection Deadline

Institutions that obtained their approval after the entry into force of this Instruction, namely banks, electronic money institutions (EMIs), and microfinance institutions (MFIs) for which membership is mandatory, have a period of 6 months, starting from the date of obtaining their final approvals from the BSFC

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from the BSFC to finalize and obtain CBM homologation for technical connection to the IPS.

The Participant then has a period of two months from the date of official receipt of its technical homologation to proceed with effective production deployment.

Article 7: Participation Statuses

The Participants mentioned in Article 5 may operate under different statuses:

• The Direct Participant acts either for its own account or for the account of others, and must have a settlement account open with the CBM's RTGS. Consequently, it assumes technical and financial responsibility, vis-à-vis all Participants, for its exchanges and settlements it has committed to execute on the RTGS system defined by Instruction No. 001/22-DSP of 16 June 2022 on the operation of the Automated Clearing and Settlement System. It manages its liquidity level in the IPS and may request an increase or decrease in the liquidity of its indirect Participant(s) upon their instruction.

• The Indirect Participant does not have a settlement account with the CBM's RTGS but must rely on a Direct Participant to settle its transactions. It bears full technical and financial responsibility for its exchanges on the platform. It can consult its liquidity level in the IPS and request its affiliated Direct Participant to increase or decrease it if deemed necessary.

Direct and Indirect Participants are Financial Participants. Financial Participants manage liquidity in the IPS, enabling them to send and receive financial transactions.

Certain Institutions may also be configured as Non-Financial Participants in the IPS for routing and reconciliation purposes. These Non-Financial Participants hold neither a settlement account at the RTGS level nor a reconciliation account as defined in Article 15, and have no liquidity to manage at the IPS level.

Each Participant must choose a participation status and communicate it to the CBM. However, direct participation in the IPS strictly requires participation in the RTGS.

Each Participant must comply with the functional and technical specifications as well as the provisions set forth in the IPS "Instant Payment Scheme Rules" document and submit to preliminary tests prior to admission. The "Instant Payment Scheme Rules" document contains the details of the IPS operating rules.

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Article 8: IPS Participation Fees

Fees are collected by the CBM for IPS participation.

Applicable tariffs, pricing methods, and payment procedures are set by the CBM. The CBM reserves the right to modify these tariffs and is required to inform Participants by any means leaving a written trace at least three months before the effective date.

Article 9: Suspension

IPS participation is unlimited in time. However, a Participant may be suspended from the system. Suspension is a participation state that temporarily prevents certain operations from being performed.

Article 10: Exclusion

IPS participation is unlimited in time. However, a Participant may be excluded from the system. Exclusion is a participation state that permanently prevents operations from being performed.

Article 11: CBM Responsibilities

The CBM is the manager and operator of the IPS. However, it may, at any time, delegate this role to an existing or newly created entity.

Article 12: Information Exchange

All information to be exchanged between the CBM and Participants during an IPS cycle is described in the "Instant Payment Scheme Rules" document.

No other information may be demanded.

Participants may not request the CBM to retransmit information or send a paper copy unless they prove a malfunction in the transmission process, provided the malfunction does not originate from their own interface with the system.

Article 13: General Principles on Transactions

• Since instant payment is a 24/7/365 transaction processing method enabling immediate crediting of the beneficiary's account and immediate fund availability, the IPS operates continuously, independent of RTGS opening hours.

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• The types of transactions supported by the IPS are evolving and determined by the CBM.

CHAPTER 2 - SPECIFIC PROVISIONS ON THE CLEARING AND SETTLEMENT OF IPS TRANSACTIONS

Article 14: Participant's Reconciliation Account in the IPS

The reconciliation account is an account managed at the IPS level where transactions are automatically cleared by the system.

In its exchanges, a financial Participant, direct or indirect, has its own reconciliation account to maintain its current and available balance for issuing or receiving transactions.

Each Participant is responsible for managing liquidity in its reconciliation account, under the conditions set forth in Article 7 above.

Article 15: Participant's Reserve Account in the RTGS

The reserve account is a sub-account of the RTGS settlement account dedicated to settling IPS transactions.

An IPS reserve account is created under the RTGS settlement account of each Direct Participant. If one or more Indirect Participants are affiliated with it, distinct IPS reserve accounts are also created under that same settlement account.

Balance management in the reserve account is the responsibility of the Participant.

Article 16: Principles of Net Balance Settlement

Multilateral net balances of Participants, including net positions and interchange fees, are calculated by the IPS after the cut-off time of an exchange cycle and communicated to Participants. They are transmitted by the IPS to the RTGS no later than the dump time in the latter.

Participants give the CBM an irrevocable mandate to automatically debit or credit their IPS reserve accounts with the amount of debtor or creditor balances generated by a clearing cycle's operations.

The CBM will attempt to debit during the settlement period.

Clearing balances can only be settled if all Participants have sufficient provision.

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Otherwise, if at least one balance cannot be settled immediately, all balances are held pending until the liquidity of the defaulting Participant(s) allows for settlement.

Article 17: Settlement Date for Participants' Transactions in the RTGS

The CBM defines fixed hours during the day when transactions passing through the IPS will be settled between Participants, by debiting or crediting the IPS reserve account defined at the RTGS level.

The CBM reserves the right to modify these provisions at any time and to inform Participants by any means leaving a written trace.

Article 18: Deadline for Making Funds Available in the Final Beneficiary's Account

For clarification, funds are considered made available to a beneficiary client when they have been credited to their account and they can begin to use them according to their needs or preferences. The fund availability deadline therefore corresponds to the period between the receiving Participant's receipt of the transaction success notification at the IPS level and the moment the final beneficiary can begin using them.

For instant payments, settlement of balances between Participants will be deferred after each exchange cycle ends, but the deadline for making funds available in the final beneficiary's account must not exceed 30 seconds after the receiving Participant receives the transaction. The concept of value date is removed for all operations. The sending Participant must inform its Client in real-time of the operation's outcome (success or failure).

The receiving Participant must obligatorily send a real-time notification message to its Client to inform them of the operation's success.

CHAPTER 3 - MISCELLANEOUS PROVISIONS

Article 19: IPS Access by Final Clients and Standardization of Flows

IPS Participants must provide instant payment services, without requiring special subscription, to all their clients, by making adequate communication channels (USSD code, web and/or mobile application, internet portal...) available to them, enabling secure access to IPS services.

The CBM may propose/recommend customer journey workflows for all Participants to adopt for a specific use case or type of operation, with the aim of standardization.

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The CBM has the prerogative to define and impose standards regarding message formats and flows between Participants' systems and the IPS system, as well as their versions, to standardize exchanges between Participants' systems.

Article 20: Fraud Management System

The IPS includes a supplementary central fraud management device. However, Participants remain primarily responsible for implementing verification and control measures at their level regarding fraud and AML/CFT of their clients' transactions, in accordance with applicable legal and regulatory provisions based on their legal status.

Article 21: Dispute Management System

A dispute arises following a Participant's contestation of a transaction or its elements, involving another Participant. The IPS includes a device allowing Participants to submit and process dispute cases between the concerned Participants.

Article 22: Complaint and Incident Management System

Participants may submit complaints, such as technical or operational malfunctions, via any medium leaving a written trace and through means to be provided by the CBM.

Received complaints will be processed by the CBM based on its assessment of their nature or criticality.

Article 23: Principle on User Management at the Participant Level

The CBM defines the portals made available to Participants. Authenticated users of each Participant, direct and indirect, can access a well-defined set of data according to the profile assigned by the CBM.

CHAPTER 4 - TRANSITIONAL PROVISIONS

Article 24: Scope of Application

Transitional provisions apply to institutions already active on the date of entry into force of this Instruction.

Article 25: On the IPS Connection Deadline

To account for constraints related to Participants' system technological levels, the deadlines for finalizing and obtaining CBM homologation

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from the CBM for technical connection to the IPS platform are set as follows:

Participant Category	Deadline for Obtaining Homologation
Banks	31 January 2025
Electronic Money Institutions	31 January 2025
Microfinance Institutions meeting the criteria mentioned in Article 5	31 July 2025

The Participant then has a period of 2 months from the date of official receipt of its technical homologation to proceed with effective production deployment.

However, the above dates may be modified by the CBM depending on the progress of the system implementation work.

CHAPTER 5 - FINAL PROVISIONS

Article 26: Sanctions

The violation of one or more of the provisions of this Instruction...