Digital Financial Services can bring inclusion and growth to Mali

Moussa bought his first SIM card in 2011 to keep in touch with his family Kati, a rural community in Mali. He had moved to Timbuktu, and the mobile phone was his only connection to home. Almost a decade later, people like Moussa can not only call home, but they can also send money, save money, and access insurance and credit through their phones. Insights from the World Bank DE4A policy note on Digital financial services (DFS) and the World Bank project to promote access to finance (PAFEEM) highlight the potential to leverage technology in enhancing inclusive growth and recovery in Mali.

DFS played in key role in increasing financial inclusion from 43% to 55% in Sub-Saharan Africa. Thanks to DFS, individuals can make payments, receive remittances, access savings, credit, insurance, and investments. For governments issuing emergency funds to citizens and businesses, digital financial services can strengthen accountability, improve the ability to track where funds are spent, and evaluate their impact. Leakages can be reduced so that beneficiaries receive the full value of funds.

Mali has a dynamic financial sector and access to financial services in Mali increased from 38% to 44% between 2017 and 2021. 

Mobile money increases as a share of GDP, from 21% in 2015 to 65% in 2021, with 935 mobile money accounts per 1,000 adults in 2021. However, there is still a high dependence on cash payments. Only 38% of Malian adults received a digital payment in 2021, vs. 79% in Kenya, and 49.5% in Ghana.

Beyond mobile money, digital remittances have boosted inclusion. Mali is one of the largest recipients of remittances. Malians formally received $987 million in international remittances in 2020.  The BCEAO estimates that $450 million worth of remittances passes through the informal sector within the region.

Mali’s gender gaps exist in the financial services. Inequalities show in bank account ownership (18% for women vs. 26% for men), credit card ownership (4% vs. 9%), and digital payments (14% vs. 22%). Only 22% of Malians Fintechs are women-headed.

Mali has taken steps to develop DFS, but challenges remain at the infrastructure, regulatory and market levels. Mali’s government wants to connect its Public Treasury to the regional switch to scale digitization of government payments. But inefficient interface connection to the regional switch limits public and private stakeholders in Mali from using the payment system and creates interoperability issues.

The share of government payments in digital form is lower than in most other countries in the region. Several payment systems, banking, and microfinance regulations are out-of-date.

The credit infrastructure is limited, and the institutional framework needs to be strengthened. Credit bureau regulations exclude client data from prepaid service utility bills, hence impeding alternative credit scoring methodologies.

The lack of a strategy to modernize revenue mobilization and government expenses places Mali behind. A clear roadmap for digital payments is needed to enhance financial inclusion and DFS. Collaboration between the central bank and the telecom regulator Agence Malienne de Régulation des Télécommunication et des Postes is lacking. Another pitfall is the lack of recourse mechanisms for addressing consumers’ financial complaints despite the rise in fraudulent incidents.

High costs also limit DFS adoption. According to a World Bank study, most WAEMU countries have no transfer charges. However, in Mali, transfers charges on person-to person payments are $.10, while fees on cash outs can be as high as $4.5. Low literacy rates also affect DFS adoption and usage.

Mali, with support from the World Bank, is committed to increasing access to financial inclusion, through the 2021-2026 National Financial Inclusion strategy and to supporting the vulnerable with social payments delivered through an account.  The Jigisemeyiri Project distributed cash transfers to 62,000 households suffering from food insecurity during the pandemic. The PAFEEM will accelerate access to transaction accounts for thousands for individuals and MSMEs.

To accelerate the adoption of digital financial services, Mali should:

• Improve financial and digital infrastructure: The Public Treasury plays a central role in DFS adoption. The first step is to connect to the GIM-UEMOA payment system and establish a national platform. Authorizing the credit bureau to expand its client database to adopt scoring methodologies and help boost micro loans. Expand Internet coverage in rural areas will also help.
• Update the regulatory and legal framework to reflect technological changes. New guidelines enabling easier market entry for newcomers and facilitating recruitment of agents will expand DFS. They must be coupled with a rigorous consumer protection framework. The establishment of a Financial Services Quality Observatory will be key.
• Adapt technology to local financial habits. To improve female adoption of DFS, micro-savings groups (‘tontines”) and micro-insurance services, which are informal financial services developed by Malian women, could be digitized.
• Introduce DFS across sectors and multiply use-cases. Programs for each priority sector (education, agriculture, social protection, and energy) will strengthen the digital transformation by developing second-generation services: micro-credit, micro-insurance and micro-savings. Malian Fintechs are active in this niche and offer payment services, and digital credit and insurance.