BCEAO licensing boosts West African fintech expansion, but fragmented rules still slow regional momentum.
This article appears in the October issue of Global Finance Magazine.
The eight-member Central Bank of West African States (BCEAO) has made strides in easing regulatory and licensing constraints for fintechs seeking to expand further into the region, although digital-finance advisers say there is still more to be done to centralize licensing.
Most of the eight member nations of both the BCEAO and the West African Economic and Monetary Union have French as an official or at least a working language.
BCEAO identifies cross-regional obstacles to financial inclusion, such as inadequate infrastructure. Meanwhile, BCEAO-member countries such as Ivory Coast and Senegal are moving fast to permit fintechs to roll out services across borders.
The availability of cross-border permits has enabled Ivorian electronic-payments company Djamo to expand to Senegal. London-headquartered Capi Money, which has a presence in Senegal and Cameroon, has also been licensed by Ivory Coast to offer payments across the border into Ghana.
“We plan to expand further into West Africa after opening our second market in Senegal. When you get licensed in one jurisdiction under BCEAO, it becomes easy to apply for and land a license in other markets in the region,” Hassan Bourgi, CEO and co-founder of Djamo, said in an interview in Abidjan.
More than nine fintechs, including Flutterwave, PayDunya, and InTouch — which has expanded to Mali and Burkina Faso from its base in Senegal — have been licensed by the regional central bank since early last year.
Cross-Border Push
Regional fintechs such as Djamo and Capi Money are bringing operational advantages, including faster mobile-based loans, quicker physical and virtual credit card applications, and remittances and regional cross-border payments under regulated services.
This expansion of fintech services across the region is stirring up competition and helping to bring down service fees, said Bourgi. In Senegal, Djamo will compete against Wave, one of the region’s biggest fintechs.
Ecobank
Banks and mobile-money operators are also expanding into the wider West African region. MTN Group, which operates the MoMo platform, is seeking central banking permits to expand credit services. Absa Bank, which operates the Spark mobile wallet enabling instant payments without the need for a bank account, is gaining ground and competing in the fintech sector in Ghana.
“In Ghana, the fintech market has largely been shaped by nonbank players, with many banks now working to catch up with this pace of innovation,” said Johnson Idesoh, chief information and technology officer for Absa Group, formerly Barclays Africa.
Banks are now participating in fintech through partnerships that extend banking services to mass markets as new digital and fintech lenders also enter the market.
Paul-Harry Aithnard, Pan-African Ecobank’s CEO in Ivory Coast, said the bank is working well with fintechs, powering up their payments services.
“The model is what is going to work: working together with fintechs to deliver scale and expansion of digital payments even across the region. We are partnering with fintechs such as Djamo in terms of payments, bill payments, and on the cards services; and we consider everything possible working together,” Aithnard told Global Finance.
In Francophone West Africa, “licensing mechanisms are already a big win” for fintechs under the region’s central bank, said Jamelino Akogbeto, regional director for AfricaNenda, which works with regulators and payments companies to scale digital transactions.
However, growth of fintechs across Francophone West Africa’s borders remains limited due to the need for fintechs to obtain licenses and build infrastructure in each country. This prevents fintechs from expanding quickly, easily, and at a lower cost.
Tawanda Karombo is a contributing writer based in Zimbabwe.
