In WAEMU, where around 50% percent of the population is living under the poverty line, financial inclusion is one of the appropriate ways to reduce unemployment and inequality, through financial services to entrepreneurs.
Only 20% of the population have access to financial services and products. According to the experts, limited financial literacy impedes meaningful financial inclusion for african people. So, Governments adopted Financial Education Strategy programme to improve consumers’ ability to evaluate the appropriateness of financial products in relation to personal situations.
However, these initiatives remind Microcredit programs for poor people or farmer as we know, didn’t achieve the expected results. People rarely rising above subsistence level couldn’t manage debt, low saving rates, financial scams without the knowledge of recourse mechanisms as a successful entrepreneur. More than succeeding, for many people in Africa doing business means earning a living in a system without a social welfare.
Even if people aren’t financially literate, they may be responsible and want to improve their lives and that of their families or communities.
That’s why a Swiss Bank funding for Financial education programmes in line with the strategy of the BCEAO, the Central Bank of WAEMU, has unlocked significant resources for financial inclusion. The initiative will cover teaching methods ranged from face-to-face instruction and other digital platforms, and involve also financial services institutions providing financial education to people.
However, experts speak on financial inclusion for Africa’s development, but do nothing for excess liquidity and informal sector. Despite a GDP growth, whatever boost it even more, African central Banks are struggling to provide liquidity support to their economies. Banking system is deeply disconnected to factual economy, or otherwise limited to primary resources exploitation activities, leaving behind african SMEs which are yet the driving force of this growth. For example, traditional Financial system like Tontine round have more success rather than the modern ones, too expansive and unable to provide competitive and affordable services. Because of an easy access to funding on flexible terms, free of interest loan or costs, local merchants prefer Tontine round system.
Nethertheless, WAEMU financial institutions aren’t to blame. Any efficient financial system is based on trust. When that faith breaks down, no great insight is needed to waste effort and funding on initiatives which otherwise do not reflect reality. In countries with high corruption and inefficient management of public affairs, how necessary political will would be apparent to make a difference.
Especially since the failure of Microcredit program, hopes rest on mobile financial services. However, BCEAO still has strong reservations, and restrict mobile financial services to payments or money transfers. In fact, in WAEMU, to offer any financial service by collecting savings, an institution must have been licensed in accordance with the standards in force. The primary objective of the Central Bank remains ensuring financial stability and strengthen banks’ resilience to large losses, that means protect savers and monetary policy.
Therefore, mobile financial services or any other financial services must first and foremost take into account the risk of a build-up of financial imbalances in developing countries, mostly the banks’ solidity relies largely on the trust among creditors and debtors. Without it, we would wait decades for a financial inclusion in WAEMU area.
Gisèle Aké is a Business Consultant for the West African Economic and Monetary common market