Regulations Drive Success of Digital Finance in Côte d’Ivoire

In 2008, two years after M-Pesa was launched in Kenya, mobile money was introduced in Côte d’Ivoire. Since then, all three of the country’s mobile network operators (MNOs) have made significant investments in building agent networks, raising customer awareness and developing new use cases. While mobile money has not grown as quickly as it has in the unique case of Kenya, it is growing significantly.

The 2017 Findex found a clear uptick in use of mobile money in Côte d’Ivoire, with 34 percent of adults now owning an account. Perhaps most importantly, mobile money emerged as the most critical contributor to the country’s financial inclusion, accounting for the entirety of the 20 percent increase in account ownership between 2014 and 2017.

Mobile Money Contributes to Financial Inclusion in Côte d’Ivoire

Mobile money contributes to financial inclusion in Cote d'Ivoire
Source: 2017 Findex

As part of a series of deep dives into the factors driving digital financial services (DFS) success in Sub-Saharan Africa, CGAP set out to understand how Côte d’Ivoire joined the ranks of the continent’s most dynamic markets for digital financial inclusion. After speaking with stakeholders throughout the Ivoirian financial sector, a clear story emerged. An enabling regulatory approach — and, specifically, a decision by the Central Bank of West African States (BCEAO) to clarify nonbank e-money issuance in 2015 — has set the stage for the country’s DFS success.

Initial regulations lead to early struggles

In many ways, Côte d’Ivoire, as member state of the West African Economic and Monetary Union, was ahead of its peers in setting the stage for the emergence of DFS. In 2006, a year before the rise of M-Pesa in Kenya, BCEAO released its Guidelines for Electronic Money Issuers, which allowed both banks and nonbanks to issue e-money and establish agent networks. Within just two years, Orange would become the first player in the country to introduce a mobile money service, followed two months later by MTN and by Moov in 2013. Following a political crisis in 2010 and 2011, during which many Ivoirians turned to the security of mobile money to send money to friends and family cut off by violence and instability, hopes were high that Côte d’Ivoire would rapidly emerge as a leading market for DFS in Sub-Saharan Africa.

However, the inadequacies of the 2006 regulations quickly became apparent. Despite permitting MNOs and other nonbanks to become e-money issuers, the regulations lacked clarity on several important aspects, such as the compliance obligations for nonbanks and the respective roles and responsibilities of e-money issuers and distributors. Worried that this lack of clarity would create uncertainty for their businesses, MNOs chose to partner with banks instead of becoming e-money issuers themselves. Under these arrangements, banks issued e-money under BCEAO supervision while the MNOs took responsibility for marketing, agent recruitment and product development.

As CGAP notes in its global study on basic regulatory enablers for DFS, nonbank e-money issuance and agent networks are critical to the adoption and use of services like mobile money. But in Côte d’Ivoire, regulations effectively did not encourage MNOs to become e-money issuers. Instead, they left MNOs at the mercy of bank partners, which served as intermediaries between the MNOs and BCEAO and whose approval was required to recruit new agents or introduce new products and services. Similar to the situation in Ghana, where blocking nonbanks from e-money issuance initially impeded the growth of mobile money, the need to partner with banks left the MNOs without clear ownership over mobile money operations and without the ability to make their concerns heard by the central bank.

As a result, MNOs investments in agent networks, customer awareness and new use cases failed to reach a critical level for higher and faster adoption of mobile money. By 2014 there were only about 16,000 active mobile money agents in the country. Meanwhile, over 50 percent of mobile money accounts remained inactive.

Revised 2015 regulations mark a turning point

After engaging with industry players and observing regulators’ approaches in markets like Kenya and the Philippines, BCEAO recognized the need to provide greater regulatory certainty and decided to take action. In 2015, the central bank issued new regulations that clarified the position of nonbanks and encouraged them to abandon partnerships with banks and begin issuing e-money themselves through subsidiaries under BCEAO supervision. Additionally, the 2015 regulations introduced many elements of CGAP’s basic regulatory enablers, such as the ability of nonbanks to recruit and manage their own agent networks and launch their own products, measures to ensure price transparency, customer recourse mechanisms and personal data protection.

Registered and Active Mobile Money Accounts in Côte d’Ivoire

Registered and active mobile money accounts in Cote d'Ivoire. Source: MNO data. MTN data extrapolated for 2009 to 2012.
Source: MNO data. MTN data extrapolated for 2009 to 2012.

The industry did not waste time in taking advantage of the newly issued regulations. Orange quickly launched an e-money subsidiary and received a license from BCEAO in February 2016, followed shortly thereafter by MTN. The autonomy, flexibility and agility that full ownership of mobile money services bestowed on the MNOs, particularly the ability to directly manage their agent networks and obtain new revenue from interest earned on customer float held at banks, had an almost immediate impact on investment. For instance, annual growth in Orange Money’s agent network, which stood at just 37 percent in 2014, skyrocketed to 70 percent in 2015 and continued to accelerate through 2018. Importantly, the new regulations also clarified rules around the nonexclusivity of agents, promoting competition and allowing providers to take advantage of the existing agents network built by others to establish their own presence in previously underserved areas.

Active Mobile Money Agents in Côte d’Ivoire (Transacted in the past 90 Days)

Active mobile money agents in Cote d'Ivoire. Source: MNO data.
Source: MNO data.

By 2018, with more and more Ivoirians adopting and using mobile money, the volume and value of mobile money transactions had grown dramatically. It appears that the greater availability of agents, along with a range of compelling use cases introduced by newly emboldened providers, has helped to increase the convenience and value of mobile money for customers.

Transaction Volume and Value in Côte d’Ivoire

Transaction volume and value in Cote d'Ivoire. Source: MNO data. Data for MTN extrapolated for 2009 to 2012. Note: 1 million FCFA = 1,724 USD.
Source: MNO data. Data for MTN extrapolated for 2009 to 2012. Note: 1 million FCFA = 1,724 USD.

Still, there remains room for regulatory improvement. Unlike some other markets, such as Ghana, BCEAO prevents mobile money providers from passing along the interest earned on float to customers. Based on CGAP’s global experience, this may be a missed opportunity to increase the value of these services to customers. Other issues, such as the lack of a simple and affordable e-signature process and biometric national ID, have impeded the introduction of second-generation products like savings, credit and insurance. And limits on non-MNOs’ access to USSD has made it harder for fintechs to offer innovative products and services to customers. Clearly, there is more work to be done.

Regulations only part of the story

It may be tempting to attribute Côte d’Ivoire’s success to regulatory reform alone, but there is more to the story. As CGAP has found in markets like Tanzania and Ghana, an enabling regulatory approach is only one of several key components that drive DFS growth, including executive commitment and investment, healthy competition, interconnected services and compelling use cases. In a follow-up blog post, we will dive deeper into the Côte d’Ivoire story, looking at how these other components have contributed to a more inclusive DFS ecosystem and what lessons this holds for other countries.

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