Senegal, with its geographic and economic position significant to West Africa, possesses enormous potential as a financial inclusion leader in the region. The country already successfully increased access to formal financial services among adults to 42% in 2017, up from 15% in 2014, according to the latest World Bank Group Global Findex. Further focus on inclusive finance could keep the momentum going into the future.
The important role of digital financial inclusion for Senegal has been heightened since the coronavirus pandemic hit. For instance, authorities incentivized the use and acceptance of electronic transactions to promote social distancing and public health. This included more efficient mobile money account openings by remotely conducting identification and client verification protocols.
Senegal might well provide an example for other countries under the purview of the Central Bank of West African States (Banque Centrale des Etats de l’Afrique de l’Ouest, BCEAO). Headquartered in Dakar, the BCEAO’s member states comprise the eight countries which form the West African Economic and Monetary Union (WAEMU). Along with Senegal, these include Benin, Burkina Faso, Côte d’Ivoire, Guinea-Bissau, Mali, Niger, and Togo.
With an aim to support accelerating policies and initiatives to increase digital financial inclusion, especially in the context of COVID-19, H.M. Queen Máxima of the Netherlands conducted a virtual country visit with Senegal in her capacity as the United Nations Secretary-General’s Special Advocate for Inclusive Finance for Development (UNSGSA) on 19-21 January 2021. The visit was a follow-up to a meeting between the UNSGSA and Senegal President Macky Sall during the World Economic Forum (WEF) in Davos, Switzerland, in January 2020. At that time, President Sall conveyed interest in further support and collaboration with the Special Advocate. Further, the UNSGSA previously visited Senegal in 2011.
In addition to meetings with President Sall, the UNSGSA held bilateral meetings with BCEAO Governor Tiémoko Meyliet Koné, Minister of Finance and Budget Abdoulaye Daouda Diallo, Minister for Microfinance and the Solidarity-Based Economy Zahra Iyane Thiam, and Minister for the Digital Economy and Telecommunications Yankhoba Diatara. The Special Advocate also participated in a roundtable with international development partners and representatives from the fintech sector.
Financial Inclusion Gains Made in Senegal, though Gaps Remain
Despite strong financial inclusion gains in recent years in Senegal, gaps across gender, geographic, and income groups remain. The main obstacles to inclusive finance in the country are lack of income and the high costs of services. Formal savings is considered low—only 16% of adults report saving with a bank or other formal financial institution compared to 25% in Sub-Saharan Africa overall. This highlights the importance for additional products adequately adapted to the financial needs and capacities of a broader set of the Senegalese population.
According to the Global Findex (2017), 55% of adults without access to financial services say their revenues are insufficient relative to the costs, 27% find fees charged prohibitively expensive, and 19% state that financial institutions are too far away.
Meanwhile, the financial inclusion gender gap—an ongoing challenge in Senegal—sits at eight percentage points, with 38% of women having an account compared to 46% of men (this is, however, among the lowest in West Africa). Additionally, the gender gap in terms of internet use via a mobile telephone, which is an important enabler for using digital financial services, is nine percentage points with 37% for women versus 46% for men (GSMA 2020).
Given the COVID-19 crisis, the UNSGSA highlighted that financial inclusion is now more critical than ever. The pandemic has underscored the importance of financial services to help vulnerable communities manage shocks, secure adequate nutrition, and help small businesses stay afloat, as well as enable society to build back better and become more resilient for the future. The Special Advocate also encouraged responsible digital transformation of payments to support digital economic objectives.
And, throughout the visit, the UNSGSA and her partners stressed reforms to support digital financial inclusion and emphasized underserved segments, particularly micro and small businesses, women, and the rural. Fintech solutions, for example, are playing a role in promoting economic recovery by making financial services more accessible and affordable to low-income clients.
UNSGSA Queen Máxima’s Four Key Priorities for Senegal
1. Finalizing the National Financial Inclusion Strategy (NFIS)
Senegal is in the final stages of drafting and approving a national-level financial inclusion strategy, an effort Queen Máxima commended in meetings with President Sall and Minister of Finance Diallo, among others. The UNSGSA suggested further elevating its importance in the policy agenda to support broader economic and social inclusion objectives, particularly in the face of COVID-19.
Based on policy dialogue throughout the visit, the Special Advocate noted that it could be important to set up working groups on gender, financial technology, digital payments, and financial education/financial consumer protection, backed by adequate technical and financial resources to achieve intended outcomes. The UNSGSA offered to provide ongoing technical support in the strategy’s finalization.
2. Supporting Payments Digitization
The prioritization of digital transformation as a source of growth and development is a commitment of Senegal. Throughout meetings, the UNSGSA discussed the importance of digitization to support increasing financial inclusion and competitiveness. She also listened to updates on progress regarding digitizing recurrent payment flows, including government-to-person and person-to-government payments, as well as in the private sector.
The Special Advocate highlighted that there could be significant scope for digitizing government-to-person cash transfer programs, and underscored that Senegal could aim to make greater progress on the digitization of government revenues, including medical and school fees, and local taxes.
3. Supporting Responsible Oversight and Development of Fintech
The development of fintech remains a policy priority for Senegal (as well as regionally across BCEAO member states). Among other topics, the Special Advocate stressed to Governor Koné and Minister Diallo that investment in a foundational infrastructure will also support fintech development. This includes key digital public goods such as connectivity and digital ID.
The UNSGSA also emphasized the importance of setting up a fintech innovation office to support responsible development and oversight objectives and offered to aid BCEAO on technical guidance related to establishing it in a timely manner. The innovation office could facilitate more useful dialogue between fintech companies and regulatory authorities, resulting in better support for emerging fintech and providing additional policy certainty for the sector. The Special Advocate advised the BCEAO that it could be useful to include national Senegalese-level actors in this effort.
4. Modernizing Legal and Regulatory Framework for the Financial Sector in Senegal and the BCEAO
In dialogue with Governor Koné, Minister Thiam, as well as with various ministries, the UNSGSA covered the importance of legal and regulatory modernization to support development and responsible innovation for the financial sector in Senegal and throughout the BCEAO.
Microfinance regulation and market development was also discussed. The UNSGSA suggested it would be helpful to have regulatory and policy guidance about operational and financial standards needed for microfinance institutions (MFIs) to sustainably move from small to larger institutions. The UNSGSA encouraged projects aimed to update legal and regulatory texts related to the banking and microfinance sectors, ensuring they are in line with international consensus guidelines and well positioned to support effective supervision and market development.
UNSGSA Senegal Country Visit Partners
Better than Cash Alliance, United Nations Capital Development Fund (UNCDF), and the World Bank