While mobile money has only recently begun to reshape the financial inclusion landscape in Senegal, a well-established microfinance sector, the largest in the West African Economic and Monetary Union (WAEMU) with 27% of WAEMU total deposits and 36% of WAEMU’s total gross loan portfolio remains key to increasing access to financial services for low income people. This explains why Senegal’s Maya Declaration focuses on strengthening these two channels as they aim to achieve financial inclusion across the nation. Specifically, the Ministry of Economics and Finance plans to strengthen these market actors by improving their risk management and fostering an environment that encourages the development of diversified financial services. While the country’s declaration makes a push toward financial inclusion, a need for a more concrete strategy moving forward remains; MIX’s mapping of financial inclusion in Senegal can support the Ministry as they work to develop more detailed andmeasurable goals.
To better understand the current state of access to financial services, MIX collected data on 1,903 points of service from mobile agents, microfinance institutions, commercial banks and post offices. By overlaying these access points on a map with socioeconomic and infrastructure layers, including population density, major roads and power sources, poverty and literacy rates, mobile coverage, and more, we are able to see that mobile agents and MFIs are more effective than banks and post offices at reaching those areas with higher inequality and poverty levels. There is still much to be accomplished in terms of extending access to these underserved areas, and MIX’s new financial inclusion data tools can help inform next steps towards achieving the country’s financial inclusion targets.
A rapid expansion of mobile agents
Mobile money, while a relatively recently entrant to the financial service landscape in Senegal, is growing rapidly across the nation. Looking at the distribution of the different types of FSPs’ aggregated points of services, mobile agents have already achieved the highest market share of Points of Service (POS), as can be seen from Figure 1.
Figure 1: POS by institutional type
Almost all of the 14 regions across the country have greater numbers of mobile agent POS as compared to other FSP types (with the exception of Fatick and Kaffrine, where MFIs have the highest number of points of services). It is also key to recognize that mobile agents have high penetration even in regions of high poverty, such as Ziguinchor, Kolda and Kaolack as can be seen on Figure 2 where most other FSP types are less prevalent. Could this mean that mobile agents are the most effective way to reach regions of the country with high poverty rates? Additional information on client demand and product usage will help answer this question, and drive towards an enhanced financial inclusion strategy.
Figure 2: Mobile agent’s location by region and poverty rate
Currently, three electronic money issuers in Senegal are licensed by the Central Bank of West African States (Banque Centrale des Etats de l’Afrique de l’Ouest – BCEAO): Orange Money, Yoban Tel, and Ferlo. In accordance with the options provided by the regulatory framework set by BCEAO, the first two have chosen to operate under a banking model. Orange Money stems from the partnership between the commercial bank Banque Internationale pour le Commerce et l'Industrie du Sénégal (BICIS) and the Mobile Network Operator (MNO) Orange. Yoban Tel is the mobile service partner of the commercial bank SGBS, which is eligible to partner with any MNO network. Both companies provide a full suite of financial services, including deposits and withdrawals, domestic transfers, bill payment and airtime top-up. The third one, Ferlo, has opted for the non banking model option. As such, it operates as an independent non-bank electronic money institution. This limits its product offerings to prepaid cards only, so Ferlo is not associated with mobile agents. Instead ATMs are the POS tied to Ferlo’s activities. Due to these limitations on services carried out by this provider, Ferlo has not been included in the dataset used in this analysis.
Domestic transfers are one frequently used mobile financial service in Senegal. A CGAP study on money management of low income people in Senegal revealed that over 40% had used mobile services for domestic transfers over the last year. While Orange and Yoban Tel both offer this service, there is also a quickly growing set of unregulated national players, such as Wari and Joni Joni, providing this service. Through conversations with local industry stakeholders, we understand that this type of actors is playing a large and growing role in financial inclusion across Senegal but there is no comprehensive information available on this institutional type. More complete information will reveal a more robust and detailed picture of financial inclusion in Senegal and MIX looks forward to including additional datasets as they become available, to better support effective decision making for the sector.
MFIs continue to play a key role
MFIs emerged in Senegal in the nineties while the banking sector was being reformed, with the mission of collecting savings and providing loans to low income populations who were otherwise excluded from formal financial systems. Most MFIs in Senegal are operating as savings and credit cooperatives or networks of cooperatives, and have strong local ownership. With the implementation of a single license regime, non-bank financial intermediaries (NBFIs) and NGOs are now covered by the same regulation as cooperatives. Additionally, the numbers of operating NBFIs has risen from zero in 2009 to four in 2012, including Microcred, a rapidly growing NBFI.
The Senegalese microfinance sector is currently led by three large networks of cooperatives, CMS, ACEP and Pamecas, which account for 61% of active borrowers and 71% of gross loan portfolio of the whole sector as of June 2013. These three institutions are the only MFIs with more than 50 POS. The majority of MFIs (there are a total of 238 MFIs, of all charter types, in Senegal) have less than five service points (see Figure 4).
Figure 3: MFIs landscape
Figure 4: Number of MFIs by number of service points
Our dataset currently includes geospatial data from the four main MFIs indicated above (see Figure 3) as well as from the MFI members of the Centre de Traitement Informatisé du Sénégal (CTISN) data processing center. However, we are missing information from the approximately 200 remaining intermediate and small MFIs scattered all over the country. These small MFIs have been heavily affected by the government reforming plan for the microfinance sector. Under this plan, the total number of MFIs has been reduced from 345 in 2009 to 238 in 2011 and 23 additional MFI licenses were withdrawn in 2012. Though the trend of MFIs shutting down is on the decline, it is still unknown whether additional MFIs will be affected by this plan in the near future. Overall, the implications of MFIs closing are twofold; on one hand, it is reassuring to see that the regulator ensures that licensed MFIs operate in compliance with the relevant rules and regulations, and that savers are protected; on the other hand, one can wonder if it impacting some regions or underserved populations more than others.
In the WAEMU region, MFIs are commonly referred to as Decentralized Financial Systems (DFS). In Senegal, as their name suggests, these FSPs are well embedded outside of Dakar, further supporting the key role MFIs can play in expanding financial inclusion. With 21% of the country’s population, the region of Dakar has 32% of all MFI access points, while the remaining 68% are spread across the country. Following mobile agents’, MFIs have the second highest number of points of services in regions of low population density and high inequality, confirming their ability to reach populations excluded from formal financial services. For example, in Tambacounda, the region with the lowest population density and the second highest unequal income distribution of all country, there are over 30 MFI access points out of a total of just 75 FSP’s access points present in the region, as Figure 5 shows.
Figure 5: MFI locations by region and Gini index
Formal financial services play a minor role
Commercial banks, which tend to be focused on urban areas and target high end clients, are not a key part of the country’s financial inclusion strategy, as per Senegal’s Maya declaration, but do have a role to play in the provision of financial services. As we have seen in other WAEMU markets (Ivory Coast and Benin), most commercial banks’ POS are located in urban centers, and Senegal is no exception: Dakar is home to more than two-thirds of all bank branches (see Figure 6). In contrast, Kaffrine, a region in the center-west with low population density and literacy levels, does not even have a single bank branch.
Figure 6: Commercial banks branches by region
The location of commercial bank branches is strongly linked to the types of clients they serve. With a bank account penetration rate of only 7.83% as of December 2011, the vast majority of Senegalese do not have a bank account. According to a bank users satisfaction survey conducted by the national Observatoire de la Qualité des Services Financiers (a financial services quality monitoring center), “banks appear to broadly adopt a policy of geographical proximity to 'business' customers”.
The absence of high end clients combined with the lack of infrastructure, including major roads and power supply, and the lower population density in the eastern part of the country (see Figure 7) correspond to the reduced presence of banks branches in this area. On the demand side, according to the same OQSF survey, “products offered by banks are not considered suitable for the investment needs […] of 64.1% of agriculture businesses”. Thereby, with regards to financial inclusion, Senegal's banking sector remains distant from the needs of low-income people who are actors of the informal economy, and rural clients who rely on other channels for their financial transactions.
Figure 7: Commercial Banks locations and roads, power lines and power plants layers
Post offices have a strong presence in the West coast and along the Senegal river, the most densely populated areas of the country. Postefinances, the financial services of La Poste, has set up 39 POS of which two-thirds are in Dakar, and offer current and savings accounts as well as domestic and international money transfers. Although, like commercial banks, Postfinances does not currently play a significant role in the country’s financial inclusion strategy, there is potential for expansion of its services to more post offices branches which would greatly increase its POS. However, this would still mainly reach the densely populated areas where there is already greater financial access.
More information support better decision making
While financial inclusion becomes more of a focus in Senegal, there is a strong need for in depth information to support the national’s strategic development in this realm. MIX’s mapping of financial inclusion in Senegal and additional analytical tools and visualizations provides a view onto supply and demand of the sector. In particular, our tools highlight the high penetration of mobile agents even in regions of high poverty as well as the high number of MFIs POS in regions of low population density, weak literacy rates, and high inequality. Given the prevalence of these type of FSPs, has there been any thought towards linking microfinance and mobile money to leverage the strengths of both FSP in order to provide a more complete set of financial services? Such a project was on the agenda of the Microfinance Directorate (Direction de la Microfinance – DMF) since 2010, but the latest information available indicates that the project has not been progressing as planned.
This first iteration of MIX’s financial inclusion data visualization begins to answer questions which can help shape an effective financial inclusion strategy: where are underserved populations located? What are the most effective channels to reach them? Do the services offered by mobile agents respond to all financial needs? It also highlights the need for more robust information to support analysis of the sector including a more in-depth look at product usage to help MFIs and mobile agents further tailor their product offerings for low-income individuals. Demand side research such as the Finscope survey that Senegal is planning to conduct next year will provide insight into some of these more demand-side questions.
MIX will continue to refine these tools as additional information becomes available. Stay tuned, as further updates are on their way as well as the launch of MIX's new financial inclusion data platform in 2014.
 WAEMU consists of Benin, Burkina Faso, Guinea Bissau, Ivory Coast, Mali, Niger, Senegal, and Togo.
 Figures from the “Rapport sur la situation globale du secteur de la microfinance au 30 juin 2013.” Direction de la Microfinance. http://www.microfinance.sn/docs/RapsecteurJuin13.pdf