Thanks to the support of The MasterCard Foundation, since 2012 CGAP has been involved in the development of an ecosystem for digital financial services in the WAEMU region – a customs and monetary union between the countries of Benin, Burkina Faso, Côte d’Ivoire, Guinea Bissau, Mali, Niger, Senegal, and Togo. When we started our work, we thought the conditions were right for digital finance to significantly advance financial inclusion in the region. Two years later, it is a good opportunity to reflect on the state of play.
Very early on, the regional central bank (BCEAO) understood the potential for alternative electronic delivery channels to advance financial inclusion. In 2006, the BCEAO issued a regulation on electronic money, creating opportunities for nonbanks to offer e-money solutions. Since then, the ecosystem expanded quite rapidly with currently 25 mobile money deployments registered. The BCEAO is also reviewing 30 or so requests for new e-money issuers or partnerships for the use of e-money solutions. As in other African countries, the ecosystem is dominated by mobile network operators (in partnership with banks).
However, in contrast to developments in other markets in WAEMU technology providers have emerged as an important player issuing e-money as means to offer digital payments solutions. Money transfer providers, banks and microfinance institutions (MFIs) are also getting interested. This diversity offers promising innovations and creates a dynamic market with diverse options available to customers. However, there are still important obstacles to be addressed if digital finance is to reach its full potential in WAEMU. Distribution networks are poorly developed in rural areas. Services continue to be focused on traditional offerings such as money transfers, bill payments and airtime top-ups, and are not customized enough to the needs of the low income population. Customers are not sufficiently empowered to become active players in the ecosystem. With growth and competition, new issues are also emerging such as interoperability and access to USSD channels.
While all WAEMU countries share the same regulation for e-money, the ecosystem is developing unevenly across the eight markets. Each market displays different dynamics, financial access structure, challenges, and customer needs, which open the door to different opportunities and country-specific responses. Achievements on digital finance in Cote d’Ivoire are quite impressive and it is an interesting success story in WAEMU. Take also the case of Senegal. It has the most crowded and diverse provider ecosystem for digital finance. Yet, providers have not managed to reach large scale and demand-side data confirms that mobile money usage among the low-income population is low. It will be interesting to watch how providers progress by offering a broader range of financial services and leveraging the existing distribution infrastructure offered by money transfer companies, postal networks and MFIs. But what about digital finance in a country like Niger with very low levels of financial inclusion and mobile money penetration (approximately 1% of adult population with a mobile money account)? The current challenges are probably bigger, but so is the potential upside. The question is, where do you start?
There is no doubt that some interesting strides have been made developing digital finance in WAEMU but the journey towards financial inclusion continues. By highlighting some of the recent developments, sharing lessons, and documenting aspirations for the future, we hope this blog series will contribute to further develop the digital finance ecosystem.