One of the explanations for the historically very low policy rates is a downward trend in global real interest rates, that is, the interest rates obtained when inflation is subtracted from nominal interest rates. Most central banks control a short, risk-free nominal interest rate – the so-called policy rate. This then affects other nominal market rates to households and companies with longer maturities. The nominal rate has a certain impact on household consumption and corporate investment and hence on demand in the economy. But perhaps an even more important role is played by the real interest rate. Monetary policy is considered to be able to affect the real interest rate in the short term. This is partly due to the fact that it can take time for companies to adapt their prices when demand changes. Via the real interest rate, the central bank can thus influence demand in the economy and by extension inflation. On the other hand, monetary policy is not considered to be able to affect the real interest rate over the longer term. Instead, it is then determined by other factors, such as demographic development, households’ valuation of consumption today compared with in the future, trend growth and, in smaller economies, also by the international real interest rate level. But the long-term real interest rate plays an even more important role for rate-setting. If it has fallen, the average policy rate needs to be lower in order to be able to uphold the inflation target.
But regulators cannot halt the advancement of technology just so that they are ready to regulate. In this situation, our challenge is to ensure that we keep pace with technology so that we are able to offer the required protection to all who access financial services using the new and unconventional payments systems. On our part, the Bank of Zambia shall focus its attention on the development of a robust regulatory framework that will address the key “hot button” issues of; 1. Prudential requirements; particularly those that relate to liquidity management and capital for infrastructure,  2. Consumer protection; with emphasis on disclosure of charges and confidentiality of customer information, and  3. Unfair trading practices particularly those related to monopolistic tendencies such as development of platform that are not compatible or not interoperable with platforms of other service providers. To strike a balance between a robust regulatory framework and the need for the framework not to hinder innovation and allow business to flourish, our efforts in establishing a robust  2  BIS central bankers’ speeches  framework will therefore be anchored on five key or internationally accepted best practice principles. These are: 1. The need to identify the types of mobile payment platforms to be permitted;  2. The need for an efficient mobile payments infrastructure such as settlements systems;  3. The need to design rules to regulate the information communication technology platform which is itself rapidly evolving;  4. Consumer protection; and finally  5. The need for compliance monitoring.