Branchless Banking in Francophone Africa

September 14, 2011    

CGAP has been profiling the state of play of the branchless banking industry in various countries, including the West African Economic and Monetary Union region (WAEMU). WAEMU is a customs and monetary union of the republics of Benin, Burkina Faso, Côte d’Ivoire, Guinea Bissau, Mali, Niger, Senegal, and Togo, with the Central Bank of West African States (BCEAO) serving as the common central bank. CGAP recently developed a summary note on the branchless banking industry in WAEMU in English and in French.*

The WAEMU region is one of the most challenging for the development of branchless banking, especially given the countries in the region have a total population of 95 million with some of the poorest populations in the world. Seventy-four percent of the region’s population lives on less than $2 per day, and all countries in the region rank in the bottom 12% of countries in the human development index.

Access to financial services in WAEMU is very low, even by comparison to other regions of Africa. The rate of bancarization announced by the BCEAO in December 2010 was 9.5%, and only 12.7% of the population had an account with a microfinance institution.

Yet the WAEMU region has recently seen a significant amount of private sector activity in branchless banking. The single overarching regulatory framework in the BCEAO enables private actors to leverage regional investments at lower costs. This regional diversity also provides the opportunity to understand the impact that market aspects have on branchless banking in an environment where the regulation is constant. For these reasons, WAEMU is a unique place to push branchless banking and a region where the need for increased access to financial services is one of the greatest in the world.

According to CGAP’s summary note, there are many opportunities for branchless banking in WAEMU:

• Regulation allows for nonbank e-money issuers leading to different and unique business models. The BCEAO was one of the first regulators globally to pass regulation expressly permitting nonbank e-money issuers in 2006, and it remains one of a few central banks that allow this role by nonbanks. This regulation expands the realm of possibility in terms of the actors that can get involved in branchless banking and the types of services that can be offered.
• Regional players are big and can leverage their investments leading to greater outreach and scale. There are currently 17 MNOs operating in the region with 53% mobile penetration. Four of these MNOs are present in at least two countries (Orange, MTN, Etisalat, and Airtel). The largest regional African banks are all present in several countries (Attijariwafa Bank, Ecobank, United Bank for Africa, and Bank of Africa. These companies are potentially able to leverage an initially high up front investment in one country into expansion to other countries in the region.
• Regional remittances represent a major monetary flow which serves as a driver for adoption. The flow of remittances both within the WAEMU region and internationally represents a large portion of the movement of money and is a logical place for branchless banking services to add value in terms of cost, convenience and security. The World Bank estimates that bilateral remittance flows from France to the eight WAEMU countries totaled $531 million in 2010.

However, challenges for branchless banking in WAEMU still remain:

• The level of sophistication of distribution networks and how these networks are leveraged to create and nurture agent networks directly correlates with the success of branchless banking deployments. The lack of a fully developed, fast moving consumer goods (FMCG) market in WAEMU (especially in Burkina Faso and Mali, more so than in Senegal) makes branchless banking agent networks difficult to develop. Possible partnerships for agents are limited as are the actual agent locations themselves.
• While banks are usually more cautious than other actors in the branchless banking industry, within WAEMU, this is all the more accentuated by the small amount of retail banking that most commercial banks actually do. Microfinance institutions have been the only financial institutions attempting to reach down-market, and this has not reached substantial scale.

* Note: We were not able to travel to Côte d’Ivoire to update our information on branchless banking because of political unrest. Therefore, this note covers the branchless banking industry in Senegal, Burkina Faso, and Mali. We hope to add more information on Côte d’Ivoire soon.