The Last Frontier for Branchless Banking: State of Play in WAEMU
We’ve been profiling the state of play of the branchless banking industry in various countries over the last few weeks. Today we look at a region of the world that is in many ways in a class by itself. The West African Economic and Monetary Union (WAEMU), or UEMOA in French, is a customs and monetary union of the republics of Benin, Burkina Faso, Côte d’Ivoire, Guinea Bissau, Mali, Niger, Senegal, and Togo. The Central Bank of West African States (BCEAO) is the common central bank of the eight member states. Here is our summary note on the branchless banking industry in WAEMU. Et voici la version en français.*
The other country notes we’ve released are for countries that are already considered middle-income or are very near to reaching this status (Brazil, Mexico, Pakistan, India, Ghana, South Africa). I would argue that WAEMU is the most challenging of the countries/regions from this list for the development of branchless banking. The 8 countries in WAEMU have a total population of 95 million and include many of the poorest countries in the world. 74% 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 finance 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 12.7% of the population had an account with an MFI.
Yet the WAEMU region has recently seen a significant amount of private sector activity in branchless banking (see a summary chart of activities). 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.
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. Interestingly, none of the MNOs have opted for this license, while MNOs in other parts of the world long to have this option. Three nonbank institutions have received the e-money issuer licenses from the BCEAO. 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. Regional players have the scale to dominate in the WAEMU region. There are 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…see a summary chart of the telco market in WAEMU). The large regional African banks are all present in several countries (Attijariwafa Bank, Ecobank, United Bank for Africa (UBA), and Bank of Africa (BOA). 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. Côte d’Ivoire is the dominant country that sends money to other countries in the sub-region, concentrating a third of all flows. International flows especially to and from Europe (and France in particular) and the United States are significant. The World Bank estimates that bilateral remittance flows from France to the eight WAEMU countries totaled $531 million in 2010.
Challenges for branchless banking in WAEMU:
- Underdeveloped distribution networks. 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.
- Lack of retail banking expertise among the commercial banks. 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.
Highlights of current branchless banking deployments:
- Orange is the biggest branchless banking player in the region having launched Orange Money in Côte d’Ivoire, Senegal, Mali and Niger.
- Yoban’tel is a mobile prepaid account in Senegal offered by Societe General, using Obopay’s platform, and leveraging the distribution of the MFI CMS branches.
- FERLO is a Senegalese technology company that was the first to receive the nonbank e-money issuer license from the BCEAO, after which it started issuing prepaid card in all 8 countries of WAEMU.
- All 3 big MFIs in Senegal (CMS, ACEP, PAMECAS) are involved in some type of branchless banking activity and appear more active than the banks themselves.
- Inova is a Burkinabe technology company that received the nonbank e-money issuer license from the BCEAO in October 2009. Inova’s main offering is an electronic wallet that can be accessed via the mobile phone, via magstripe cards, or via Internet (depending on the customer segmentation).
- The largest MFI in Burkina Faso RCPB has issued cards linked to Inova’s mobile wallet.
- Airtel is planning the launch of Airtel Money in Burkina Faso.
- Sarah Rotman
* 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.
Very interesting and informative read Sarah. Thank you!
I have a couple of questions:
- In your opinion, why has no MNO in this region opted for a nonbank e-money issuer license?
- Would you say unbanked populations are more attracted/comfortable using cards for their potential cash operations (as opposed to using their mobile phones)? [I refer to the country note on Mali where the RCPB+Inova model allows for cash deposits and withdrawals by either card or mobile phone]
Thanks a lot Sarah for this new focus on West Africa
In “Highlights of current branchless banking deployments”, you don’t give credit to MTN Mobile Money services in Côte d’Ivoire, soon in Benin, Guinea, … !?
Thanks Philippe. Yes, I should have mentioned MTN’s work in the region, although we weren’t able to travel to Cote d’Ivoire over the last several months to get an update on their activities there. I believe MTN launched in Benin last September. By Guinea, do you mean Guinea or Guinea Bissau? The former is not a part of WAEMU, and MTN Mobile Money has not launched in the latter as far as I’m aware. Merci encore!
Thanks for your comments and questions, Sahana. In answer to your first question, I really don’t know why MNOs haven’t opted to issue e-money themselves. I believe there is a clause in the 2006 regulation which states that a company would have to create a separate subsidiary for the purposes of e-money issuance in order to receive the license, so perhaps MNOs see this as a barrier. But I would think that a close partnership with a bank to issue e-money for the MNO is also quite complicated to establish, probably more complicated than establishing a subsidiary. Perhaps this is a question that the MNOs in WAEMU can answer for us!
Your second question is a very good one. I’d say that cards do provide a status symbol to unbanked populations which the mobile phone doesn’t provide. So in this sense, there may be an advantage to cards. But I think there is a level of comfort with the mobile phone which advantages this form of technology…plus the fact that it is cheaper for the provider. As you mention, the Inova solution is an interesting one whereby the customer segmentation determines which technology is used (mobile, card or Internet). FERLO also has been doing a lot with card-based systems in Senegal.
Merci a vous!
The question regarding mobile phone and/or cards seems indeed recurrent in WAEMU.”Card as social status”, “cards are easier for illiterate people” (not wrong at first sight, when you see the user experience of some mobile system…”, “people trust more something they already know about” (and seen past failure, such as some MFIs that launched them before and failed – no name here). I wonder if the main reason is not that most service providers outside the MNO have a professional card managment background and dream to piggy-back on the GIM-UEMOA NETWORK (as FERLO is trying now).
But I have a question: is your paper available in French? As obviously the people most interested in your research are French-speaking and as you know not always very confident in English
Dear Sarah, really interesting article. How - and potentially where - can i find some update on the situation ?