Digital Financial Services Diagnostics in West Africa

Apr 1, 2016

Mobile money is proving to be inclusive and efficient in Africa’s growing economy. © UNDP Sierra Leone/J. Terry

West Africa - The UN Capital Development Fund (UNCDF) and the UN Development Programme (UNDP) have completed the Digital Financial Services (DFS) diagnostics in the three West African fragile states Guinea, Liberia and Sierra Leone, also Least Developed Countries, recovering from the impact of Ebola.

In Guinea and Sierra Leone, UNCDF and UNDP conducted national workshops to discuss the findings of the DFS diagnostics, in partnership with the respective Central Banks. The findings of the study were presented to a cross section of stakeholders on March 24th 2016 in Sierra Leone and March 31, 2016 in Guinea, with over 50 participants from the commercial banks, private sector, mobile network operators (MNOs), insurance companies, third party service providers, and government ministries.

In Sierra Leone, Dr. Ibrahim Stevens, Deputy Governor at Bank of Sierra Leone, welcomed stakeholders to the workshop and provided the central bank’s perspective in relation to the progress, opportunities and challenges for digital financial services in the country, setting the tone for discussions, interactions and assessment of the future prospects for DFS in fragile states.

According to UNCDF’s Regional Coordinator Mathieu Soglonou, “access and usage of financial services in these African fragile states are lower than in other African economies. In fact they lag behind other fragile states in Asia and Europe as well”. Guinea, Liberia and Sierra Leone are transitioning from post-crisis and reconstruction to long term sustainable economic development and resilience. Considerable challenges remain, with a huge infrastructure deficit and governance, institutional, and capacity constraints, and continuing risks of fragility.  “For example, poor infrastructure in fragile states is an impediment to the expansion of financial services access points. In addition, the lack of identification due to weak institutions constitutes a sizable barrier to financial account ownership.”

UNDP Guinea Country Director, Lionel Laurens said, “When there is no deposit insurance and unclear regulation or communication about customers rights and protection, people, especially those that are living in very precarious conditions, tend to be cautious, distrustful and thus reluctant to trust and use DFS. However, UNDP together with UNCDF believe that DFS can be instrumental to poverty alleviation. Hence, we are supporting Government’s efforts to improve financial literacy which remains challenging, and enhance communication and access to information as well as transparency requirements in Guinea.”

Some of the common themes emerging in the recently conducted DFS diagnostics across the three fragile states are the focus on strengthening the supervisory capacities of regulators in areas of digital financial inclusion, particularly to effectively supervise and regulate new and shifting risks; to advocate and support interoperability between various players in the digital financial system such that traditional financial institutions serving the poor can transfer benefits of digital transactions to the end-clients.

The diagnostics also call for greater integration across and between banking, data and telecommunications solutions that allow for a greater range of products and delivery channels, including shared infrastructure in more remote areas and help reduce cost of access and usage.  Lastly, a focus on developing client-centric and demand-driven financial products while leveraging technology will help to reduce costs and deepen usage.

Evidence-based research and pilots on the impact of digital financial inclusion is fragile states is in its early stages.  Concurrently, discussions on the role of digital payments as a powerful way to deliver humanitarian assistance is only gaining momentum, with emerging evidence on how to effectively leverage digital payments, and in turn digital financial services, in humanitarian response, in such a way that builds resilient financial ecosystems in fragile and protracted crisis areas.

This initiative is a follow-up from the Payments Programme for Ebola Response Workers (PPERW), and part of UNCDF and UNDP’s joint programme West Africa Digital Financial Services for Fragile States, with the Liberia component implemented by the Mobile Money for the Poor (MM4P) programme. The final DFS diagnostic report will be available after incorporating feedback from the recently concluded national workshops, on April 30, 2016.  

Contact information

Tenzin Keyzom Ngodup

Regional Technical Specialist for Fragile States, UNCDF

tenzin.ngodup@uncdf.org

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