The rise of mobile money in West Africa
It is of no doubt that Africa is being shaken by the volcanic digital revolution. Not surprisingly, the mobile money wave has crossed the sahelian band over to West Africa from its Kenyan birthplace.
A conducive policy and regulatory framework
Zooming in the WAEMU region comprised of francophone West Africa (Bénin, Burkina Faso, Côte d'Ivoire, Guinea Bissau, Mali, Niger, Togo, Senegal), one could see it as a one-of-a-kind success story when it comes to conducive regulation triggering increased access
of financial services for the poor. In 2006, the vision to foster economic growth through an improved state of
access to financial services
was part of the rationale for adopting an innovative regulation allowing non-bank players in the financial services market.
Building on the new regulatory framework and the integrated monetary and economic zone with regional payment systems, the regulator (BCEAO) opened consultations in 2007 with the banking sector and the member states for a "bancarisation" action plan in which every stakeholder was to implement a specific agenda aimed at improving the access and usage of bank accounts and electronic transactions.
Barriers to the upscale of mobile money
The granting of the first e-money licenses between 2007 and 2009 resulted in a timid surge of subscribers in the region. Barriers to access were still prominent and most banks were reluctant to embrace clientele with low purchasing power. In addition, very few innovative partnerships were initiated
between mobile network operators, financial institutions and other private sector players. Besides, the few stand-alone e-money issuers encountered serious financial distress partly due to lack of sufficient revenue to cover the cost of building a wide network of agents.
The surge of mobile money
It is not until the end of the political unrest in Côte d'Ivoire in the year 2010 that the number of mobile money accounts started to take stride with 22 million users at the end of 2015, up from less than 3 million in 2010. At the end September 2015, users' performance revealed that 347 million transactions valued at close to 8.5 billion USD were accounted for in the region, with Côte d'Ivoire, Burkina Faso and Mali as the most dynamic markets. On average more than 1.2 million transactions were processed every day during that period.
Strikingly, digital cross border remittances are today increasingly dominating the traditional rapid money transfer services, particularly on corridors between Côte d'Ivoire and Burkina, Mali and Senegal, Togo and Benin. In addition, microfinance
and government services are progressively being processed on digital wallets.
Aside from the enabling regulation, this speed of growth can be attributed to a dynamic and competitive market of over 33 deployments representing more than a quarter of the number of mobile money deployments on the continent. Overall, users are increasingly using mobile money as opposed to cash for financial transactions, which is the proof of a progressive acceptance of e-money as a means of payment.
A decade after the initial e-money regulation was adopted, access to financial services in the region has soared to 49.5%. When subtracting mobile money accounts, this rate merely reaches 30%.
Yet there is still more to do
Despite this progress, today's WAEMU market calls upon the necessity to evolve to a diversified range of financial services able to attract and retain users in the digital sphere. A large portion of the money deposited in the mobile wallets is cashed out and barely 40% of users are active. It would take sustainable and tailored service offerings that address the real demand for digital financial services for specific categories such as women, youth and rural consumers, before the WAEMU region can unlock its potential to achieve near universal financial inclusion given its assets.
The African Development Bank aims to achieve near universal access to financial services in Africa. In particular, the Financial Sector Policy and Strategy prioritizes digital solutions as the most promising approach to making those services affordable to the poor. Progress towards universal financial access in Africa requires action along a number of dimensions. These include: (i) Introduction of innovative pro-poor products and delivery mechanisms, services and business models that can deliver broad based financial services in economically viable ways; (ii) Core infrastructure that is sufficiently interoperable that these products and services can be linked not only within a country but across borders; and (c) Regulation and supervision that balance IT-enabled innovation, enhanced competition and protection of customers.
About the Author
Maimouna Gueye is a digital finance expert with over 15 years of experience in the financial sector. She has solid experience in payment systems, digital financial services policy and regulation as well as oversight. She has significantly worked on financial inclusion in developing markets. She graduated with an MBA in Finance and Economics from Saint Peters University in the United States and is a fellow of the Fletcher School Leadership Program for Financial Inclusion funded by Bill and Melinda Gates Foundation. After working for JP Morgan Chase and the Central Bank of West African States (BCEAO), Maimouna Gueye recently joined the African Development Bank as a Principal Financial Inclusion Officer in charge of funding a portfolio of projects targeting universal access to financial services for people in Africa