Digital sector supporting funding of activities in Africa

Article of the journal Analyse Financière, published by the Société française des analystes financiers (SFAF) (57th edition) October-December 2015


Today, six types of actors operate in the sector of digital finance. The study being carried out currently on behalf of the Mediterranean World Economic Foresight Institute (IPEMED), which will be published by the end of 2015, provides data on Ivory Coast, Morocco, Tunisia and Senegal situation. Its conclusions should provide informations on the evolution of balance of power between actors.

According to the African Development Bank, less than 25% of Africans have access to financial services. This analysis usually refers to the notion of bank-account penetration which is not, and rightly so, used by the UNCTAD (United Nations Conference on Trade and Development) as the possession of a bank account shall not necessarily be compared to the number of inhabitants but with the number of inhabitants old enough to legally possess a bank account, or to the number of families. Besides, the development of information technologies reveals two types of financial inclusion that are banking inclusion for people having access to a bank account and digital inclusion for those using other means of payment such as the mobile money offered by Sub-Saharan telecommunication operators or microcredit accounts offered by the Decentralised Financial System (DSF).

From an ongoing study carried out on behalf of IPEMED1, I analysed the e-commerce payments performed in four African countries: Morocco, Tunisia, Senegal and Ivory Coast. A Paypal study on e-commerce in the Middle East2 shows that payment upon delivery remains dominant (60 % in 2015) even if it has been decreasing since 2012 (80 %) in favour of debit cards (25 % in 2015 against 15 % in 2012) and Paypal (15 % in 2015 against 5 % in 2012).

As regards m-banking, let’s quote the words of IDATE (European Institute for telecommunications and Audiovisual Media)3: “Financial services represent a major mobile service, with for instance the well-known success of M-Pesa (now used by over 17 million people in Kenya). Major operators, such as Bharti Airtel, Orange, Vodafone (in partnership with Safaricom), Etisalat and Maroc Telecom have now included this type of services to their range. Initially developed for transfers between accounts, mobile payment services were quickly extended to other financial services: invoice payment, payment in points of sale, cash withdrawal at ATMs. Operators have already reached critical volumes on this booming market: in June 2013, nine mobile operators had over a million users. However, competition is intensifying between operators but also with new MVNOs (Mobile Virtual Network Operator) specialised in this service. The competitive pressure forces operators to reduce their prices and extend their ranges of services: partnerships with banks and insurance companies in order to offer additional services to bank accounts, credit, savings and insurance; interoperable services between branches of neighbouring countries. Besides, mobile payment is the first service with a significant value, accounting for 18 % of Safaricom revenues in 2014, for example. “

The global figures being stated, one can now observe the major disparities between countries and more specifically between those of North Africa, where the bank-account penetration is high, and those of Sub-Saharan Africa where mobile payment is booming.

In Morocco

In Morocco, the multichannel platform Fatourati4 enables any debt issuer or service or product provider to diversify its payment collection channels by extending them to the Internet, ATMs, mobiles phones with payment services, call centres and points of sales equipped with had hoc terminals. A new banking law n°103-12 regarding credit institutions and similar establishments5 was passed recently. It explicitly targets payment services linked to e-commerce and especially “the execution of payment operations by any remote means of communication, provided that the operator only acts as an intermediary between the payer and the provider of goods and services”. Therefore, the Central Bank has already authorised three electronic payment platforms and five payment service provider (PSP) platforms. As regards mobile payments (mobile money), they have been authorised since 2013, and yet they do not develop much: according to the regulator6, only 2% of Moroccans say they have used the m-payment service in 2012.

In Tunisia

In Tunisia, two main payment platforms are operational. The platform clicktopay7 of the Société Monétique Tunisie currently gathers 700 retail sites and a total of 640,000 transactions coming from 96,000 buyers, of which two thirds used local cards and one third foreign ones. The e-Dinar8 platform of the Tunisian Post claims 320 affiliated retailers and 5.3 million transactions. This figure includes cash withdrawals and student operations in university, where its use has been made compulsory. Mobile payments are not allowed yet. Nevertheless, an agreement between banks and telecommunication operators enables Tunisians to make transfers from or to their bank accounts via their mobile phones (mobile banking). This situation should evolve once the new statuses of the Central Bank enable it to regulate mobile payment operators by including some mobile payment operators that are currently excluded from its sphere of competence.

In Senegal

In Western Africa, there is already a certain regional integration in the financial field thanks to the West African Economic and Monetary Union (WAEMU), which has a common legislative framework and common organisations such as the Central Bank of the West African States (CBWAS), which unifies and boosts regional interbanking. Banks ensure the system management via two common private structures. The first one is the WAEMU Interbank Card Processing Grouping (GIM-UEMOA), created in 2003 to ensure the system governance. The second one is the WAEMU Interbank Card Processing Centre (CTMI-UEMOA), created in 2005 to ensure the management of common technical means and make the system operational in order to reduce costs and ensure product qualities. Following a negotiation with international transmitters, the latter agreed on a global acceptance of WAEMU regional debit cards so that there is a virtuous ecosystem gathering the concerned actors. By 31st December 2013, the GIM-UEMOA had accredited one hundred and eight (108) banking establishments to issue debit cards, with the following results (see image below : tables 1 and 2).

We have a few interesting data regarding the first mobile payments per country, and particularly for Senegal, where the bank-account penetration9 was of 16.40% in December 201410. Along with traditional banks, many microfinance institutions (or decentralised financial systems, DFS) meet the financial needs of 16.21 % of unbanked populations11, which makes it an important access mode to financial services. In 2013, there were 18 banks for 383 microfinance institutions, mostly located in Dakar and Thiès7. Taking advantage of the booming mobile telephony, mobile banking is progressively developing in the country thanks to innovative financial services offered by mobile telephony operators, commercial banks, DFSs, non-bank electronic money issuers, etc. The solutions offered by major operators such as Yobantel, Orange Money, Tigo cash, Mobile Cash, W@ri and Joni-Joni are deployed at a national and sometimes regional scale. As for the results, about 1,500,000 clients were registered with a mobile account in March 201413, which remains low compared with the country’s 14 million inhabitants.

See attached images below : Table 3: Use of electronic money on mobile phones on Ivory Coast in 2013

In Ivory Coast

The bank-account penetration15 reached 16.49%16 in 2014 against 7.35% in 2009. Alternatives to banking solutions have been identified in the country. This is the result of a study carried out in the framework of the “Partnership for Financial Inclusion”17, which is a joint initiative of IFC and the MasterCard Foundation to develop microfinance and promote mobile financial systems in Sub-Saharan Africa. Once again, the bank-account penetration is not representative of financial inclusion given that Ivorians have 6.17 million mobile financial accounts (mobile banking), 2.81 million bank accounts18 and 1.30 million microcredit accounts. Ivory Coast is also active in terms of payment and access to bank accounts via mobile with services such as Mobile Money and e-Tranzact, W@ri, and actors like Ekobank and Paypal. The 2 million users of mobile financial services completed nearly 66 million transactions amounting to 1,300 billion CFA francs, or nearly €2 billion. But if we take a closer look, it turns out that apart from the purchase of telephone minutes and invoice payment, mobile money is little used for payments.

Who are the other actors?

Six types of actors operate in the African sector of digital finance:
- banks rank first with their national (CMI and SMT) and regional (GIM UEMOA) emanations, as well as their international partners such as Visa and Mastercard;
- they are followed by mobile phone operators with their mobile money systems which, however, are taking a long time to be interoperable;
- Posts are starting to emerge in Tunisia, Morocco and Senegal, with captive markets imposed by governments willing to diversify the activities of their postal operators;
- GAFA (Google, Apple, Facebook et Amazon) are taking advantage of their massive amount of information on clients to engage in e-finance;
- cybercriminals have a new ground to launder or embezzle money;
- governments and their central banks are working on regulating the system.

The coming months will no doubt bring new information on the evolution of the balance of power between these actors. The IPEMED study, which should be published at the end of 2015, will provide more detailed information on electronic payments used in e-commerce in Africa.

About the author:
Alain Ducass has worked in the French Senior Civil Service for 40 years. He left it in 2014 to set up his consulting company (www.ernegeTIC.fr) and employ its talent at the service of Africa - a continent he knows well and appreciates - as well as digital sector companies wishing to settle in the continent. An expert in international matters, he has a triple experience on each of the three pillars of this transformation that are connectivity, economic development and digital governance. He includes the “e-finance” sector into his analysis, in which he currently identifies six types of actors competing on the African continent. Alain Ducass is an engineer, with a degree from Paris’s Ecole Polytechnique. 

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Notes : 

(1) Af www.ipemed.coop
(2) PayPal Insights e-commerce in the Middle East September 2013 2012-2015.
http://static.wamda.com/web/uploads/resources/24-09-2013_FINAL-low_res.pdf
(3) www.idate.org/en/News/DigiWorld-Yearbook-Africa-and-the-Middle-East_900.html
(4)Presse file : http://www.maroctelecommerce.com/docs/cp.pdf
(5) Law officially published in Arabic on January, 22nd, 2015 and in French on March, 5th, 2015. https://ribh.files.wordpress.com/2015/03/loi_nc2b0_103-12_vf_ribh-cover.pdf
(6) ANRT, Rapport annuel 2013, p. 57. www.anrt.ma/sites/default/files/Ra_Annuel_Anrt2013.pdf
(7) www.clictopay.com.tn
(8) www.e-dinar.poste.tn/fr/index.htm
(9) Calculations done taking into account over 15 years old population, exception being made of open accounts in decentralised financial systems, money issuers and postal financial services. 
(10) www.bceao.int/IMG/pdf/note_d_information_4e_trimestre_2014.pdf
(11) http://drs-sfd.gouv.sn/sitedrs/documents/Publications/Situation_T4_2014.pdf
(12) www.cespi.it/AFRICA-4FON/wp4%20BAYE.pdf
(13) http://uncdf.org/sites/default/files/Documents/senegal_french.pdf
(14) See some data on electronic money of mobile financial services in Ivory Coast. http://www.agenceecofin.com/monetique/1411-24320-le-marches-de-mobile-money-de-cote-d-ivoire-connait-un-developpement-parmi-les-plus-rapides-dans-le-monde
(15) Calculations done taking into account over 15 years old population, exception being made of open accounts in decentralised financial systems, money issuers and postal financial services. 
(16) www.bceao.int/IMG/pdf/note_d_information_4e_trimestre_2014.pdf
(17) Susie Lonie, Meritxell Martinez and Rita Oulai, International Finance Corporation (IFC),  data on electronic money of mobile financial services in Ivory Coast. 
(18) This does not allow to calculate the banck-account penetration rate as certain persons own more than one account.