The State of Financial Inclusion in Ivory Coast in the Aftermath of the Crisis
Date: December, 2013
Ivory Coast has long been a thriving economy within the West African Economic and Monetary Union (WAEMU). It remains a regional power despite a decade of political crisis that culminated at the end of 2010 when the two presidential candidates both claimed to have won the election. This led to a national conflict that weakened the economy and made the population more vulnerable. The return of civil peace allowed the economy to recover: in 2012, GDP growth reached 9.8%. Many reforms have since been initiated, spanning multiple sectors, from cocoa to coffee, the judicial system, and the electricity industry. The financial services sector has not been left behind and Ivory Coast has begun to address financial inclusion as a means to promote economic growth. In collaboration with UNCDF and UNDP, the Ministry of Finance conducted an initial diagnostic of supply and demand of the financial sector, the results of which laid the groundwork for the development of a 5-year financial inclusion strategy. This strategy calls for a comprehensive reform of the financial sector and focuses on the following four areas of intervention:
- “Reforming and restructuring the sector, while strengthening regulation and supervision;
- Supporting, in a sustainable and professional way, the diversification and expansion of financial services to excluded populations;
- Ensuring the protection of customers and providing them with information [on financial services] and financial education;
- Improving the business environment”.
As the government adopts this strategy, MIX’s data visualization tools will help provide a baseline by which to track progress towards financial inclusion goals and offer detailed insight onto the current picture of financial inclusion. Our tools help to answer questions like: is mobile money revolutionizing financial services in Ivory Coast as a delivery channel which can span the nation more readily than traditional brick and mortar bank branches? Is the microfinance industry supporting otherwise underserved populations? What does the financial landscape outside of Abidjan look like? What types of institutions are reaching rural areas and areas of high poverty rates?
Figure 1: FSP Location by district and population density
A view onto the financial landscape
Not surprisingly, almost one third of the access points across the country, regardless of Financial Service Provider (FSP) type, are located in the densely populated economic capital, Abidjan, which covers only 0.6% of the entire country in terms of square kilometers but accounts for over a quarter of the total population (see Figure 1). This trend is very similar to what we have observed in our other financial inclusion maps across Africa (including: Zambia, Uganda, Rwanda, Kenya, South Africa, Nigeria and the soon to be released maps of Senegal and Benin), where most Points Of Service (POS) are concentrated in the urban centers.
Beyond Abidjan, the populous and economically dynamic southern districts account for a significant portion of the remainder of the financial sector. These districts benefit from a more developed infrastructure than the rest of the country, and host the seaports of Abidjan and San Pedro. In contrast, the north-western districts of Woroba and Denguele, with much lower population density and little to no access to major roads, are almost devoid of FSPs.
Commercial banks: focused on high end clients in urban areas
It is worth noting that Ivory Coast has more commercial bank branches than MFI branches. Though this is fairly common in eastern and southern Africa (we can see similar trends on the Kenya, Uganda and Zambia financial inclusion maps), it is unique in the WAEMU region where MFI branches tend to outnumber banks, as can be seen from our data from Senegal and Benin (see Figure 2).
Figure 2: FSP location by type
Thanks to its substantial infrastructure, Abidjan remains far more developed that any economic capital of WAEMU, and historically Ivory Coast has been an attractive country for investors. The large number of banks is thus explained by Ivory Coast having the largest commercial banking market in francophone west Africa, which accounts for over 20% of both the total number of banks and total assets of the WAEMU banking system. While banks are prevalent in Ivory Coast, more than half of bank branches are clustered in Abidjan and serve mainly corporate clients, which raises a question as to what role commercial banks play in increasing financial inclusion in the country. Additionally, the transformation of the Caisse Nationale des Caisses d’Epargne de la Côte d’ivoire (CNCE) into a commercial bank in 2004, significantly increasing the banking retail network in the country, did little to diversify the urban, high end clientele.
MFIs play a key role in providing savings and loans outside Abidjan but struggle to reach full potential
Another explanation for the lower number of MFIs POS as compared to those of the formal banking sector is the concern about the sustainability of the microfinance sector. The withdrawal of investors and donors from this market, the deterioration of portfolio quality, and lower capital levels, are some serious consequences of years of political crisis. This, coupled with capacity issues inherent to the sector such as insufficient staff training and weak governance, led the government to develop a national microfinance strategy in 2007. Though the strategy was not fully implemented due to a lack of funds, it remains a focal point of the five year financial inclusion strategy. Some actions have been taken to reform the sector including placing the two largest MFIs under temporary administration and closing a number of unsustainable MFIs (76 licenses were withdrawn in 2011). Much remains to be done to further strengthen the sector and ensure that MFIs are a viable option in the provision of loans and savings services.
The vast majority of Ivorian MFIs are operating as savings and loan cooperatives regulated as decentralized financial systems by BCEAO. The largest one, UNACOOPEC-CI, was created in the late seventies to promote rural development and its first branches opened exclusively in rural areas, before extending to urban ones. A number of other large MFIs, including RCMEC - the second largest, were initiated in secondary cities where a need for financial services existed but no formal providers addressed it.
Though MFIs have fewer branches than banks, they are able to provide access to financial services in underserved areas of the country, typically districts with very low population density, such as Denguele and Woroba in the northwest, as well as Zanzan in the northeast. MFIs outreach to underserved areas is especially important in Zanzan, which has very low population density as the Comoe National Park occupies almost one third of the district’s area.
With this preliminary data on rural outreach of MFIs, one can wonder if a strengthened microfinance sector is the way forward to provide financing and savings solutions in rural areas and among informal and poor clients? If so, how can this reinforcement take place? Many markets in Africa are developing complex financial ecosystems: is there potential in Ivory Coast for MFIs to partner with mobile money providers to expand access and reach otherwise underserved people?
Figure 3: FSP prevalence by district
Mobile money playing a large and increasing role in financial inclusion
In Ivory Coast, mobile money is a fairly recent and quickly growing phenomenon. With mobile penetration rates at 92%, the highest of the WAEMU region, according to a CGAP blogpost, there is significant potential to play a key role in Ivory Coast’s financial inclusion strategy. In our dataset, mobile money agents already account for over 65% of FSP locations (see Figure 4).
Figure 4: Breakdown of FSP types
The regulatory framework set by BCEAO in 2006 allows two models of e-money issuers:
- A banking model: a bank in partnership with a Mobile Network Operator (MNO) can request an e-money license
- A non banking model: the e-money issuer is an institution with a specific license delivered by the Central Bank
Ivory Coast has four mobile money providers, more than any other country of WAEMU. These consist of three MNOs (MTN, Moov and Orange) who partner with banks, and Celpaid, a non-bank e-money issuer (different from an MNO). To date, no MNO has made a license request to directly issue e-money as can be seen from the December 2012 list of authorized e-money issuers. Instead, they have all chosen to work in tandem with banks.
Overall, mobile agents’ distribution networks have broader coverage in the already well-served southern districts: Abidjan, Bas Sassandra, home of the second largest port following Abidjan, and Comoe. In these districts the cellular coverage is good, especially on the coast. They are less prevalent in the districts of Denguele (where the cellular coverage is low) and Woroba, in line with the districts where there is also a scarcity of banks. This could potentially be linked: are mobile agents less present there due to their inability to find bank branches to manage their cash? Or is it linked to the types of products offered, less adapted to rural clients needs?
Financial services offered by mobile agents in Ivory Coast include cash-in and cash-out, money transfers, merchant, bill and wage payments. Among these, national mobile money transfers make up more than 90% of transactions according to a CGAP study of the low income population. Though widely known, bill payment services are only used by 3% of customers according to the same survey.
The launch of Orange Money international transfers which makes transfers possible between clients of Orange Money Ivory Coast, Mali and Senegal is an exciting prospect given the popularity of money transfers and the presence of 2.4 million immigrants in the country.
There is great potential for increasing financial inclusion in Ivory Coast, especially in underserved regions. The way forward requires both support for the expansion of mobile money providers’ and a larger and stronger national microfinance sector. These FSPs are most able to provide access to financial services in remote rural areas, and have found ways to reach and serve clients for whom more formal financial systems are not relevant. Will the microfinance sector be able to correct the financial and governance situation? Will it be able to achieve this development in the short or midterm? Will there be a way forward for institutions to collaborate and work together to better support financial inclusion across Ivory Coast?
It is encouraging to see Ivory Coast focus on the expansion of financial services across the country. Similar to the reforms in other industries, this is essential to building a strong and stable economy particularly following such a long and difficult crisis. While the relatively limited data [MIX1] environment in Ivory Coast made it difficult to go beyond answering basic questions relating to access to financial services, this initial glimpse does provide a strong overview of the supply of financial services within the context of population density, urban/rural geography and infrastructure, a perspective that helps to identify gaps in services and accessibility. As more information becomes available, including an updated census slated for 2014, MIX looks forward to providing a richer analysis on the socioeconomic aspects of demand for financial services.
 WAEMU consists of Benin, Burkina Faso, Guinea Bissau, Ivory Coast, Mali, Niger, Senegal, and Togo.  World Bank Data  Second largest port in Africa after Lagos  Formerly Caisse d’Epargne et des Chèques Postaux (CECP), La Poste’s financial institution for savings mobilization.  UNACOOPEC-CI dominates the market with 39,042 active borrowers and 822,028 depositors as of December 2011.  Actors offering e-money services, such as mobile payment  Ivory Coast is the first country of emigration in Francophone West Africa