Partnerships for Progress: Benin Could Benefit from Financial Sector Coordination

Eldan Goldenberg and Felipe Martin|Feb, 2016

In 2014, only 16 percent of adults in Benin had a financial institution account (1) compared to 29 percent of adults across Sub-Saharan African. While the digital financial services market is beginning to grow in Benin, less than 1% of the population actively uses mobile money services (2). While there are some promising initiatives currently underway, if Benin is to move toward greater financial inclusion it must forge partnerships within its financial sector to reach the unbanked.

Benin is making efforts nationwide to expand financial services. For example, Moov launched a mobile money service in late 2013 joining the incumbent MTN. Additionally, ASMAB recently became the first microfinance institution (MFI) in the West African Economic and Monetary Union (WAEMU) to be licensed as an e-money issuer. Yet, these few examples must be augmented and replicated across the country to achieve a significant impact on financial inclusion.

To better understand the situation, MIX launched a Benin workbook, which explores the current financial inclusion landscape within the country and has uncovered some exciting initial findings. Continue reading below and then visit the interactive dashboard to explore the findings yourself.

For the most part, financial service access points in Benin are evenly distributed. From the data we collected at the commune level (Admin 2), we see that there are no communes that do not have at least one access point. Indeed, most communes have at least six FSPs present, avoiding over-reliance on any single provider. Additionally, only one commune, Sô-Ava, has less than two institutional types of financial service providers (FSP) present. 

 Fig 1: FSP Distribution across communes 

 

 

However, it is clear to see from our data visualizations that the more rural communes are underserved relative to coastal areas and larger cities. Rural, inland communes typically have 5 or fewer access points per 10,000 people, as compared to 35 for Cotonou and 15-20 for the other main cities.  As demonstrated in Figure 2, some of the communes with limited access also have the highest rates of population growth, setting the stage for this disparity to widen further.

Fig 2: FSP distribution relative to demand 

 

 

Commercial banks are heavily concentrated in Cotonou, entirely absent from many communes.  While MNOs do cover the entire country, they are still mostly concentrated in a few big cities, including Cotonou, Abomey, Porto-Novo, Parakou, Borgou and Bohicon.  The other FSP types are each much more evenly distributed throughout the country.

Fig 3: FSP types and concentration 

 

The main access point type for MNOs is the agent network, while all other types trailing far behind. There is room for more partnerships between MNOs & MFI/bank branches, as shown by the disparity between the number of MFI branches and the much smaller number of MNO locations co-located with them.  Given the MFI network's relative strength in rural communes, expanding this partnership would help to address the relatively sparse availability of MNO locations in the same rural areas, giving people another option for accessing finance.

Fig 4: MNO AP types 

 

Historically, microfinance has played a key role in Benin to ensure access to financial services to the formal unbanked population. Despite some initial reluctance from MFIs to embrace digital finance, cooperation between these two institution types could improve financial access across the country and reach more underserved populations.

Sources:

(1)    http://datatopics.worldbank.org/financialinclusion/country/benin

http://www.cgap.org/blog/benin%E2%80%99s-expansion-digital-finance