By Sami Zaptia.
London, 8 July 2016:
Libya’s private sector has reacted to the two recent Libya Herald articles on the Point of Sales (POS) market in Libya. The Libyan Audit Bureau had issued a statement revealing that just under 30,000 POS cards had been issued by 5 state banks between January and May 2016. In this period, the cards had been used to buy goods or services worth just under LD 5 millions , a mediocre figure for the Libyan market . The Audit Bureau had failed to report on the number of POS machines installed.
In response, Mohamed Hola, the Commercial Manager of Libya’s state-owned and only POS Libyan inter banks transactions processing company, Moamalat, further updated the statistics revealed by the Audit Bureau.
Meanwhile, Aladine Khmaira, General Manager of private sector Tadawul Financial Company confirmed that the POS statistics provided by both the Audit Bureau and Moamalat only reflect the activities of the state sector, failing to reflect the large private sector POS activity.
Moreover, Khmaira explained to Libya Herald that the key issue with POS activity was not the number of POS cards that can be distributed, but rather the capacity of the POS processing centre and the number of POS machines distributed, installed and actually operating at retail outlets throughout Libya.
Currently, Libya has only one centralized state-owned intra bank POS processing centre in Siyahia, Tripoli named Moamalat for Financial Services Company. It has changed its name recently as it used to be called Sarafa company when it was an exchange company. Moamalat was established in 1994, Khmaira explains, adding that it is still acting very much in a monopolistic fashion in its sector.
The Tadawul General Manager says that it is the presence of only one state-sector POS card processing centre that is acting as a bottleneck to the increased deployment of POS machines and extensive usage of plastic cards by Libyans. He revealed that the private sector is pushing to authorise at least one other processing company, adding that it would be better if there are at least three processing companies interchanging the services, but has met with the usual state-sector resistance. With the usual motto ” the Libyan is incapable ”
The only and major impediment to the wider use of POS cards is the limited number of POS machines installed at retailers, Khmaira added. He believes that the state sector is not aggressive enough in the rollout of POS machines and he believes they can never be, compared to what the private sector could do. Moamalat total POS deployment prior to the 2016 cash crisis and since its establishment in 1994, had only ever reached about 50 POS machines.
Khmaira explained that it takes on average one technician to service and maintain 20 POS machines and therefore 2,000 machines would need 100 technicians. No monopoly state or private sector monopoly will ever have the flexibility or capability to scale up quickly, he noted. Equally, POS machines need a whole back-office staff to train staff at retail outlets, service and maintain them and collect payments etc.
To underline his claim, Khmaira revealed that his privately-owned company, Tadawul, has alone over the last 8 months introduced its own POS cards for a group of petrol station operating companies, LTT prepayment and other prepaid cards in Libya. It has been able to install around 1,800 POS machines in 37 cities and villages across Libya , whilst other private sector companies have installed more than 250 machines.
This makes the total of POS machines installed by the private sector no less than 2,050, compared to only 438 installed by the state sector since the ”cash crisis rang the hell bell”, he added. Khmaira admitted that there were at least three other Libyan financial services companies, including one called Tafani, which had issued at least 250 POS machines.
Tadawul provides three POS services. It provides POS services at Rahila and Libya Oil petrol stations across Libya, mobile top up services for the Madar and Libyana local mobile networks as well as providing pre-paid Libyan dinar debit cards. The POS system that Tadawul is currently operating is an ‘’in house’’ top-up system where clients pay up front into the system for their employees to use. It is therefore not linked to a bank and does not have the ability to debit users directly from their bank accounts., Khmaira explained.
Tadawul’s POS and pre-paid mobile phone and debit card operation does 65,000 transactions per day and about LD 6 million per month, which equates to all the state-sector banks put together. In the east of Libya, 500 new POS machines will be installed after Eid, Khmaira revealed. Tadawul’s operations cover 37 different towns and cities all over Libya, he added.
All the processing is currently carried out in-house at Tadawul’s offices in Tripoli. The planned credit card operation will in the short term be processed in Germany until the CBL grants a licence for operations in Libya, stipulated to be within 8 months of start of operations.
Khmaira lamented the unwillingness of the state sector to cooperate with the private sector nor allow it to compete with it in setting up POS processing centres. He says that a market of Libya’s size should be doing hundreds of millions of dinars’ worth of turnover a month through POS cards, not the current LD 5 to 10 million. He also feels that there should be at least 100,000 POS machines installed which should rise to 300,000 as the Libyan market stabilizes.
He insists that the opening up of this sector for competition is imperative in the new post Qaddafi Libya where new opportunities and jobs can be created by the private sector rather than the continuation of the state sector. The state sector cannot create real jobs or wealth and is solely dependent on oil revenues, which for various reasons have collapsed in recent years. The financial services sector must open to competition or be privatized. The state role should restrict itself to being the lawmaker and enforcer. It should not be doing business and unfairly competing – indeed suffocating – the nascent private sector, added Khmaira.
It is worth underlining to what extent Libya is still a cash-based society. It is only the cash shortage that has precipitated after the 2011 revolution, peaking in 2016, that banks have been forced to resort to pushing POS, debit and ATM cards.
The use of POS cards has been identified by the Central Bank of Libya (CBL) and the Audit Bureau as one of the solutions to solve Libya’s current cash shortage crises. The CBL has spearheaded a joint and concerted drive to rollout the use of POS at Libyan retailers.
The CBL has also been printing new money and injected into the system. In June alone it had introduced LD 1 billion worth of newly printed money. ”This is inflationary and we are living the effect, the parallel market rate increased 20% since the introduction of the new notes”, noted Khmaira.
Libya’s cash shortage crisis is caused by a combination of decreased state revenues caused by decreased oil revenues due to the occupation of oil installations by militias causing a two-third drop in oil production which is combined with a crash in international crude oil prices. Libya’s political polarization and instability has added fuel to the fire.
Together with increased kidnappings-for ransom, assassinations and crime in general, the drastic political situation has led to a loss of confidence by Libyans in the political and economic situation in the country. This has led to people hoarding their cash at home rather than depositing it in their bank accounts.
The cash crisis has led to the imposition of cash withdrawal limits at banks, long queues and crowds, with some people sleeping outside banks overnight. There have also been demonstrations and attacks on banks and staff by frustrated customers unable to withdraw their money. The use of POS cards was hoped to reduce the need for cash.