The success of mobile banking in Burkina Faso: a simple analysis
Burkina Faso is a country in sub-Saharan Africa with an estimated population of over 18 million and an area of 274200km2. Its economy is predominantly based on agriculture (32% of GDP occupying 80% of the population) and gold production (4th world producer). Despite many socio-economic programs of poverty reduction for nearly forty years, this country of the African savannah is still ranked among the poorest in the world (183 out of 188 countries in 2015 according to the UNDP HDI). Under-14s account for 41% of the population but only 34.6% of those over 15 are literate (UNESCO, 2014, 2016).
The telecommunications sector, which has made considerable progress in recent years, is interesting to analyse.
The telecom framework in Burkina Faso
If the mobile phone and the Internet connection are now part of the Burkinabe people daily life, that is not really a long time ago.
Until 1998, Burkinabe used relatively only landline phone and postal mail to communicate remotely in a fast manner. Even then, the precious fixed-line phone was found only in certain privileged places such as public or private offices, at home to the better-off and especially in the famous ‘telecentres’ to designate phone boxes. The telephony market was monopolistic and held by the National Office of Telecommunications (ONATEL), a public company. The clientele was largely urban at the expense of rural areas where the profitability was considered low. As an example in 2004, Burkina Faso had only 4101 public phone boxes, 75% of which were concentrated in the only city of Ouagadougou (ONATEL, 2002).
The mobile phone arrived in Burkina Faso in 1996 thanks to the France-Africa summit in Ouagadougou. It is also at the same period that Burkina Faso will be connected for the first time to the internet. But actually it is in the year 2000 that Burkinabe will experience the use of mobile phone. In addition to TELMOB subsidiary of ONATEL, the first private operators to occupy the market are CELTEL subsidiary of MSI Cellular BVV Investments Holdings and TELECEL subsidiary of TELECOM International at this time. Since then, there are nowadays 3 main mobile operators in Burkina Faso: TELMOB, TELECEL and Orange, subsidiary of the Orange Group. All of these operators are global licensees, offer 2nd generation (2G) mobile telephony services and Internet services. In addition to 2G, Airtel and ONATEL have acquired 3G licenses since April 2012 and have been offering 3G services since May 2013. Telecel Faso was not yet 3G-enabled in 2016.
In terms of market shares, the Regulatory Authority for Electronic Communications and Posts in Burkina Faso (ARCEP) indicates that the electronic communications market achieved a total turnover of 326 billion FCFA (497 million euros) at the end of 2016, compared to 319 billionFCFA (€ 487 million) in 2015. The ARCEP also specifies that the market is growing steadily over the period 2011–2016 and that this evolution has been significant on the national economy. But it’s mostly the mobile payment methods that catch our attention.
Mobile payment operators in Burkina Faso: ‘Orange money’ & ‘Mobicash’
Long before the mobile wallet, Burkinabe used commercial banks, microfinance, postal services, credit unions and other international transfer services such as Teliman, Sytaf, Money Gram and Western Union.
With the arrival of the mobile phone, Orange money and Mobicash from respectively Orange and Telmob are the two mobile payment services used in Burkina.
Indeed, Burkinabe discover mobile payment for the first time in 2012 through a partnership between Airtel Burkina and Ecobank Bank, to launch Airtel money, currently known as Orange money.
Later in 2013, a partnership between TELMOB’s and BICIA-Burkina subsidiary of BNP Paribas allowed launch of the Mobicash service.
These two applications offered almost the same services namely money transfers and bill payments.
But nowadays, the evolution of the mobile payments market is impressive such that they compete with traditional banks at some locations. A year ago, the CEO of Orange Burkina on the channel franceinfo said that there are 13,000 points of distribution for mobile money while noting that the best deployed banks in Burkina Faso have no more than 300 cash points. According to these figures, a bank that considers itself well established in Burkina only 2% of cash points against 98% for the only operator Orange. This comparison already makes it possible to measure the success of mobile payments. But why so successful compared to other means of payment? Let’s break down the structure first.
The mobile banking structure in Burkina
- The key actors: There are two telephone operators in Burkina, Orange and Telmob who have the mobile payment service respectively Orange Money and Mobicash. Cash points can be seen anywhere in urban or rural areas. Finally, there are private users (individuals, companies, etc.) who wish to make payments (invoices, goods) and transfers (withdrawal, deposit).
- Links between actors: The telecom companies deal with individual resellers to deliver mobile payment services. Resellers in turn offer services such as account creation, payments (invoices, goods) and transfers (withdrawal, deposit) to private users. Users have the possibility to do these operations directly at the central agencies of Orange and Telmob, where shops are made available to them.
- The nature of investments: In order for the mobile payment service offer to be routed, the operators must have telecommunications infrastructures containing the database of customers, the phone interface where offers are displayed to customers. Retailers must have a telephone, a located shop and fulfill administrative and financial conditions (deposit of an amount ranging from EUR 763 to EUR 1500. Finally, there are private users who must have an account or not and hold an official ID. Transfers between different operators are possible but additional fees may apply.
Some reasons of the mobile banking success in Burkina
Mobile banking is most often solicited for personal, family, work or other reasons.
Family reasons include remittances of migrants residing in the sub-region countries, as support or investment in their home country. Businesses, particularly in the informal sector, use mobile payment much more to pay bills.
Availability of the service
Mobile banking is a success in Burkina in part because the telecom network is vast covering both national and sub regional territory. Everywhere in Burkina areas there is a distribution point for one or other of the operators. In addition, these distribution points have very flexible work schedules; and some of them close very late in the night. Every reseller is free to work anytime they want which is very good for the economy and financial transactions.
To use the mobile banking, the conditions are relatively easy. Geographically, there are cash points throughout the country even in rural areas. Some resellers in addition to offering the mobile services are also mobile by moving with their only phone to meet private users. Financially, transaction costs (maximum 2% of the amount of capital) are lower compared to other payment mechanisms.
With only a phone with a SIM card connected to the network, mobile banking is functional. However, restrictions are possible depending on whether the SIM card has an account or not. The costs are lower when the transfer is made from one account to another and higher when it involves different networks.
In addition, being a decentralised system the mobile banking is a success as it offers some kind of freedom to users to manage their transactions.
Apart from some cases of fraud caused by a lack of vigilance of victims who are manipulated, the mobile banking system is relatively safe. In a technologically and securely poor country, this offers people the advantage of transporting their money safely. Even in case of phone theft, the user has the possibility to recover his account with his balance intact by reporting the incident to his operator. In fact, the account is protected by a password and by the identity of the owner. Finally, there is the feature that allows users to see the identity of the recipient before confirming each transaction. This contributes to minimizes errors greatly and makes users happy.
By enabling instant transactions, mobile banking is a very good time saver for users. When a transfer or payment is made, the sender and recipient receive instant confirmation messages. This application increases users’ confidence in mobile banking technology. The criterion of trust is very important in a context where the majority of customers are illiterate.
Ranked among the poorest countries in the world, Burkina Faso faces enormous challenges, especially in terms of people’s access to the latest technologies in the domain of finance. However, despite the relatively late arrival of mobile telephony and the Internet in this country, we are observing today a real success of the applications of these technologies in the daily life of populations even in a deeply rural environment. This is more tangible as the phenomenon of mobile banking is nowadays a successful application in the daily life of Burkinabè people. Without conducting a thorough scientific research, this article wanted in a very simple way to expose the context, to explain the functioning of the phenomenon based on observation of the everyday life of the Burkinabè. This made it possible to understand why mobile payment system is a success, when one observes the socio-economic criteria of the population or when one makes a comparison with conventional financial institutions. In the era of digital and the transition to the Internet of higher generation, it is interesting to wonder how Burkinabè will manage to adapt again to the global phenomenon of cryptocurrencies.
By Achille Sawadogo, Mid Junior Expert in Development cooperation