By François Coupienne
Washington DC — The market for digital financial services in Benin is nascent. With an adult population of approximately 6.5 million, it is fairly small compared to countries like Cote d’Ivoire and Senegal where big players seem to have focused most of their efforts to date. There are currently three providers of mobile money in Benin reaching close to 500,000 mobile money users, approximately 10% of whom are active.
While the beginnings have been timid, providers are getting more excited about the opportunities digital finance offer. As part of the West African Economic and Monetary Union (WAEMU), Benin’s digital financial services market is regulated by the regional regulator hosted in Senegal, and benefits from allowing all types of financial service providers to offer digital options. Both Etisalat and ASMAB launched their services in late 2013 and are developing services and partnerships to expand their client bases. ASMAB is the first microfinance institution (MFI) in WAEMU to be licensed as an e-money issuer. MTN has just partnered with others to offer a mobile insurance product for drivers of motorcycle taxis. In addition, MFIs and the postal network offer a high number of access points including in rural areas; thus creating interesting opportunities for partnerships. E-money Solutions – a technology provider – could play a major role in pushing for the development of a digital finance solution in remote areas in partnership with the postal network. All these are examples of recent developments in Benin and we’re expecting to see more in the future. Furthermore, the Central Bank at regional and national levels is supportive and keen to see expansion of digital finance in the country.
However, for digital finance to thrive and contribute to financial inclusion in Benin, major barriers need to be addressed:
- Clients. Little data on customers’ needs for financial services is available, and there is almost no offer of formal savings or insurance product for the unbanked. The current offering predominantly focuses on the first generation money transfer services. In addition, multiple governance scandals in the microfinance sector have increased distrust of financial institutions and led consumers to reorganize their financial habits outside of formal channels.
- Infrastructure. Towards the end of 2013, maintenance problems and disputes between MTN and the telecommunications regulator led to periods of disturbance on the mobile network and errors in payment processing. While these problems are solved, the crisis revealed the weakness and vulnerability of local mobile networks.
- Agents. There are currently about 600 agents registered to distribute digital financial services. While MFIs and La Poste possess a large network of access points, their limited core banking capacity prevents them from offering a viable platform.
What responses are needed to facilitate the development of digital finance and address these important challenges?
All market actors - including local regulators and the private sector - should explore the following solutions:
- Stakeholders that play a role in digital financial services, including regulators, providers and others in Benin would benefit from increased knowledge and exposure from other countries. Understanding opportunities, resolving challenges and building internal capacity are key success factors for accelerating the development of the industry in the country.
- Providers who are willing to further develop or enter the market need to collect detailed information about the specific market context of Benin. Customer perceptions and needs, agent experience and expectations, payment and financial services preferences of the population are specific to each country and should be clearly understood to better answer clients and agents expectations.
- Appropriate products and services, innovative agent models, and partnerships with new and existing stakeholders all need to be explored, designed and tested in order to tailor various offerings to Benin’s population.
- The Central Bank should also seek to continuously listen and understand challenges faced by the private sector in the development of appropriate financial services that reach unbanked people and work hand in hand with the providers in updating the regulation to allow further outreach in more and more challenging environments.
In this context, UNCDF’s Mobile Money for the Poor (MM4P) is planning to help build the knowledge base about digital finance in Benin through targeted research and local workshops. The goal is for the central bank, MNOs, MFIs, and other stakeholders to understand and implement best practices so that the industry can expand sustainably. UNCDF will also be providing direct technical and/or financial support to providers to pilot specific models for Benin, which will be also key to accelerating the development of digital finance.
Each country is unique and has its own specificities in the development of digital finance. Benin is a nascent market with limited information about this sector and with new challenges to be learned and understood. What do you think are the key aspects to be taken into consideration in the development of digital finance in Benin? What would be the key success factors to make the sector successful in the country? Are there lessons from other countries that Benin could use foster growth in the market?