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WEST AFRICA MONITOR

Cape Verde, Gambia, Guinea, Guinea-Bissau, Liberia, Mali, Senegal and Sierra Leone

2013 African Development Bank Group

Issue 1, September 2013

 Month
Month Day
Day Year
Year

TheWestAfricaMonitorisproducedbythecountryeconomistsoftheAfricanDevelopmentBankGroups
(AfDB) West Africa Regional Department (ORWB)1. Part of the Departments Knowledge Management
Strategy,itaimsatmonitoringkeysocioeconomicdevelopmentsintheregionandprovidesbriefanalysis
onlatesteventsacrossthecountries.

The report is deliberately crafted to be succinct and in non

technicallanguageforwidercirculation.Eachissueincludes(i)
a Regional Overview highlighting major trends; (i) a set of
country notes each of them featuring a special theme of key TABLEOFCONTENTS
relevance for the country at the time of writing; and (iii) a
REGIONALOVERVIEW 3
dedicatedsectiononatopicofcommoninterestfortheregion.
The present issue features a note on financial sector in West
Africa, which was produced in collaboration with Making COUNTRYUPDATES 6
FinanceWorkforAfrica(MFW4A).

ThispublicationhasbeencoordinatedbyEmanueleSanti,Chief SPECIALTHEME 15
Regional Economist and Paula Racamonde, Intern, under the
overallguidanceofFranckPerrault,RegionalDirector(ORWB).

Contributors to this issue include Adalbert Nshimyumuremyi
(Cape Verde and Gambia), Olivier Manlan (Guinea), Yannis
Arvanitis (Guinea Bissau), Patrick Hettinger (Liberia),
LEGALDISCLAIMER
Abdoulaye Konate and Dicko Hamacire (Mali), Toussaint
Houeninvo and Khadidiatou Gassama (Senegal), Jamal Zayid
The findings, interpretations and
andAnsuBangura(SierraLeone)
conclusions expressed in this report are
The note on financial sector has been produced by Emanuele those of the author(s) and are not
Santi, Paula Racamonde and Mara Isabel BerbegalIbez necessarily those of the African
(MFWA) with input from Country Economists. The note has DevelopmentBankGrouporitsBoardof
been peerreviewed by Meritxell Martnez, IFC Advisory Directors.Everyefforthasbeenmadeto
ServicesAccesstoFinanceAfrica offer the most current, correct and
clearly expressedinformationpossiblein
Pleasedirectyourfeedbackandcommentstoe.santi@afdb.org thepreparationofthisdocument.

2013AfricanDevelopmentBankGroup Nonetheless, inadvertent errors can

WestAfricaRegionalDepartment(ORWB) occur, and applicable laws, rules and
AfricanDevelopmentBank regulationsmaychange.
7AvenueJosephAnoma
01BP1387 The African Development Bank Group
ABIDJAN01 makes its documentation available
withoutwarrantyofanykindandaccepts
Web:www.afdb.org no responsibility for its accuracy or for
anyconsequencesofitsuse.

Company Name Here

1
CapeVerde,Gambia,Guinea,GuineaBissau,Liberia,Mali,SenegalandSierraLeone
 RegionalOverview

Summary

With Real GDP growth accelerating from 3 percent in 2011 to 5 percent in 2013 on average, economic
activity in West Africa2 is experiencing an exceptional increase, driven mostly by expansion in extractive
industryandtheeconomicrecoveryofcountriesemergingfrommajorpoliticalinstability.

Thisstronggrowthisvulnerabletodownsiderisksthatcouldarisefrominternalorexternalsources.Potential
threats include: (i) extended economic stagnation in the euro area and (ii) political or social instability,
particularlyintheSahelandfragilestates

Inflation is on a downward trend in all countries, reflecting more stable global commodity prices, end of
droughtandimprovedlocalweatherconditions,andtightmonetarypolicy.Afteraperiodoffiscalexpansion,
mostcountriesareexpectedtotightenfiscalpolicyinthemediumterm.

Robust growth in many countries is driven by natural resource extraction, while political crises
hasslowedgrowthinothers Table1 RealGDPgrowthrates

Output in West Africa has expanded

from 3.5 percent in 2011 to over 5
percent in 2013 and could reach 6
percentin2014,accordingtotheAfrican
Economic Outlooks (AEO) forecast.
(Table1)

The subregion displays significant

variations,withSierraLeone,Liberiaand
Gambia having significantly higher GDP
growth rates compared to all other
countries. Sierra Leone is experiencing
the highest growth in the region
recording a double digit growth during
the outlook period 201114, reaching a
peak of 16.7 percent in 2012 and
remaining above 7% in 2013. Sierra Leones growth is driven predominantly by new iron ore exploitation.
Gambiasgrowth,thesecondhighest,isnearing9percentin2013duepredominantlytotherecoveryofits
agriculturesectorafter2011sdrought.Liberia,thethirdfastestrunningeconomy,recordedasustainedyet
deceleratinggrowth,mostlydrivenbytheminingsector.

While extractive industries and agriculture production are the key drivers of growth for most countries,
politicalcrisesandtheirresolutionareamajordeterminantinmanycountriesperformance.

Inthisregard,GuineaBissauandMalidisplaysimilartrendsbyenteringarecessionin2012andrecoveringin
2013 and expected to have high growth in the medium term. Prolonged political uncertainties and the
impactoftheEurocrisisexplainslowgrowthinGuineaandCapeVerderespectively

2
ThispublicationusesthetermWestAfricareferringtotheeightcountriesoftheORWBdepartment:Cape
Verde,Gambia,Guinea,GuineaBissau,Liberia,Mali,SenegalandSierraLeone.

 Apromisingoutlook,overshadowedbypoliticaluncertainties

Overall the growth in the region is expected to converge around 6 percent in 2014. Growth in most
Western African countries and its fluctuations will continue to be largely driven by more intense
exploitationofitsnaturalresources.Agriculturerepresentsthesecondmajordriverofgrowthintheregion
asawhole,representingthesinglemostimportantgrowthdriverforGambia,Guinea,GuineaBissau,Mali,
Senegal.TourismaccountsforthelargestproportionofoutputinCapeVerde.

Growth performance in some countries (e.g. Mali, Guinea and GuineaBissau) will remain highly
dependent on the political developments against the backdrop of a rather fragile political environment.
While the end of the conflict and the election in Mali are likely to be a stabilizing factor for the region,
uncertaintiesremaininviewoftheupcomingelectionsinGuineaandGuineaBissau,officiallyscheduledfor
November2013.

ExtendedeconomicstagnationinEurope,themaintradingpartnerofthemajorityofthecountriesinthe
region,islikelytorepresentanothermajorrisk.TheEurocrisisisalreadyrecordedtohavehadanegative
impactonSenegalandCapeVerde.

Theregionsgrowthpotentialishamperedbyanumberofvariousstructuralproblemssuchaslowquality
infrastructure,inadequateskillsandlackofdynamicmiddleclass,withhighlevelsofinequality.Furthermore,
rapidurbanizationhasincreasednumbersofurbanpoor,which,couldconstrictresourcesandincreasefood
insecurity.

Lowerfoodpricesandpeggedexchangerateshavecontributedtolowinflation

West Africas average inflation rate has decreased from 7.7 percent in 2011 to 6 percent in 2012. It is
expected to continue declining but remain
above4.1percentin2013/14.(Table2) Table2 Inflation(%)
The increase of inflationary pressures in
2011/12 was mainly due to higher food and
fuelprices,whichnotablyaffectedurbanpoor
consumers. In several countries, 2012
imported inflation was exacerbated by
currency depreciation and exceeded 10
percent in countries like GuineaandSierra
Leone, but inflation rates in Cape Verde,
Gambia,Guinea Bissau, SenegalorMali(with
theexceptionofMalispoliticalcrisison2012)
remainedbelow5percent.

Senegal,Mali,andGuineaBissau,as
membersoftheWestAfricanEconomicand
MonetaryUnion(WAEMU),havebenefited
fromapegtotheeuro,whichhascontributed
tocontaininginflationarypressures.CapeVerdehasalsoexperiencedrelativepricestabilitywiththe
assistanceofitspegtotheeuro.
FiscalConsolidation
Table 3 Fiscal Balance (% of GDP)
Overall the region is experiencing a
fiscal expansion which is expected to
be followed by a moderate
consolidation post2013 (with the
exception of Cape Verde). With the
exception of Sierra Leone, virtually all
countries are boosting public spending
andexperiencinghigherdeficitreaching
a regional average of 5,6 per cent in
2013.AfDBstaffprojectionspointtoan
overallstabilizationaround5%in2014.

Significant differences can be found

amongcountriesintheRegion,ranging
from a mere 1 percent deficit in
GuineaBissautoadoubledigitonefor
CapeVerdeof16.2percentinthesameyear.Withslowbutconstantgrowthinmostcountries,evenwhere
fiscaldeficitshaverisen,fiscalplanswouldneedtobedeterminedbymediumtermobjectives.

CountryUpdates

Cape Verde

Gambia

Guinea

Guinea-Bissau

Liberia

Mali

Senegal

Sierra Leone
Guinea, Guinea-Bissau, Liberia, Mali, Senegal and Sierra Leone
 CapeVerde
Thecountryseconomicperformancecontinuestobeunderminedbytheeconomicandfinancialcrisisaroundthe
globe,andintheeuroareainparticular

Theeurocrisishasamajorimpactontourism,thedrivingforceofCapeVerdeseconomy

TheGovernmentsexpansionaryfiscalpolicyhasledtoaspiralingbudgetdeficitanddebtsustainabilityrisks.

Overview
Figure1 RealGDPgrowth2013(West)

Theslowdownobservedsincetheendof2011persisted
in 2012,
due to economic stagnation around the globe,
andintheeuroareainparticular.Reducedforeignaidand
sluggish
foreign investment resulted in gross domestic
product (GDP) growth dropping from 4% in 2011 to an
estimated
2.5% in 2012. Remittances inflows held up,
however,andtourismdidwell.

Tourism and ancillary activities remained the driving
forceoftheeconomyin2012,accountingforaround30%

of GDP and 90% of total exports. Data through the first
quarter of 2013 suggest some weakening, implying real
growthcouldbeinthe12percentrangein2013.

In spite of its past success, Cape Verde is facing

Table1MacroeconomicIndicators2013
challengestomaintainsustainableandinclusivegrowth.
The countrys lack of natural resources and poor
conditions for agriculture make it highly vulnerable to
external shocks. The government has therefore been
seeking to promote a more balanced economic
development. The Third Growth and Poverty Reduction
Strategy Paper, adopted in April 2013, reflects the
governmentsattempttoaddressthecountrysstructural
challengesandadaptthecountrysdevelopmentmodelto
itsnewnonLeastDevelopedCountrystatus.

DebtSustainabilityRisks

Government debt has increased from 69% of GDP in

2009 to an estimated 81.0% in 2012, further to an
unprecedented increase in the public sectors borrowing Figure2 GrossPublicDebt
requirementstofinancelargeinfrastructureinvestments.
The external debt represents 59.8% of the GDP in 2012
although it is predominantly concessional. Contracted
mostly from the nonbanking sector, the domestic debt
represents 21.3% of the GDP. IMF Debt Sustainability
Analysis(DSA)indicatesarisingriskofdebtdistress.

Cape Verdes public debt should remain sustainable in

thelongrun,butsignificantvulnerabilitiesareexpected
to persist. Consequently, accelerating the process of
budgetary consolidation would help slow the growth of
thedebtburden,reducethegovernmentstotalfinancing
needsoverthemediumterm,andmitigatethelikelihood
of debt distress. Reforms in States Owned Enterprises
oversight should also mitigate the risks coming from
contingentliabilities.


TheGambia

TheGambianeconomyhasfullyrecoveredfromthenegativeeffectsofthedroughtintheSahelin2011,andis
expectedtoreachahighgrowthin2013.
Highpublicindebtednesscontinuestoposeriskstomacroeconomicstabilityandsignificantcoststothebudget.

Whileeconomicgovernancehasbeenimproving,politicalgovernanceremainsachallenge.
Overview

Figure1RealGDPgrowth2013(West)
Economic growth was hurt in 2011 by a harvest crop

failure due to the drought in the Sahel, but agricultural

productionstartedtorecoverin2012.RealGDPgrowthis
to have recovered to just over 3.9% in 2012
estimated
comparedtoacontractionof4.3%in2011,ledbyapartial

reboundincropproductionlateintheyearandcontinued

strengthintourism.Strongefforts,ledbytheGovernment

and supported by Development Partners, helped to
mitigate the crisis through the provision of seeds and



fertilizers.TheoutlookisoptimisticasrealGDPisprojected
toreach8%in2013and2014.


Prudent monetary policy has helped the Gambia to
Source:AfDBStatisticsDepartmentusingdatafromtheWEF,2012
contain inflation and reduce pressures on interest and
exchange rates. Inflation remains at a single digit level,
belowthecentralBanktargetof5%.Itslippedfrom4.8%in
2011 to 4.2% in 2012, but is projected to climb to 5% in Table1 MacroeconomicIndicators2013
2013 and 5.1% in 2014 in response to the introduction of
thevalueaddedtax(VAT)inJanuary2013.

Thedebtburdenandtheriskofdebtdistressareveryhigh
in the Gambia because of the large accumulated public
deficitfromexcessivegovernmentdomesticborrowing.The
public debt stock increased from 71.1% of GDP in 2011 to
78.9% in 2012. It is projected to reduce to 68.2% in 2013
and64.3%in2014inresponsetotighterfiscalpolicy.

Governanceisachallenge

The Gambia has made good progress in key aspects of Figure2 PoliticalContext2011
governance and the fiduciary environment and has been Score4.1(Worst)to2.5(Best)
pursuing reforms in public financial management since
2004.TheGambiasAfDBCPIAindicatorshaverisenin2012,
withtheoverallCPIA(excludinggovernance)reaching3.47,
comparedtoonly3.37in2011.The2012MoIbrahimIndex
ofAfricanGovernancerankstheGambiainthemiddleat27
outof52countries.

GovernancechallengesintheGambiaremainhighwiththe
countryfacingarecentdeclineofcountrysscoreformost
indicatorsonbusinessenvironment.In2013DoingBusiness
Report the country ranked 147th out of 185 countries
dropping in most indicators. The country also dropped its
rankinginGlobalCompetitivenessReportfrom98thof144
th
in 201213 to 116 out of 148, with investors protection
beingreportedasofoftheworstintheWorld(142/148) Source:AfDBStatisticsDepartmentusingdatafromtheWEF,
 Guinea
The socioeconomic
situation is marked by persistent poverty with a huge mineral potential which, if properly
exploited in a peaceful political environment and streamlined business climate, can underpin economic

diversification
Theinitiationofsignificantreformsin2011and2012,whichpavedthewayforattainmentoftheHIPCcompletion

point,andwhichplacedthepostHIPCagendaatthecoreofpolicydialogue,hassloweddownandneedstobe
deepenedandaccelerated,inanenvironmentofbudgetaryconstraintandlowcapacity.

ThepostHIPCagendaisconstrainedbythreemajorshockswhicharepolitical,institutionalandeconomic.

Overview
Figure1 RealGDPGrowth(%)
The socioeconomic situation is marked by persistent

poverty(55.2%),despiteachievingtheCompletionPointof
theHIPCInitiativeattheendofSeptember2012.

Guineahasbenefitedfromareductioninitsexternaldebt
tune of USD 2.1 billion. After more than 50
stock to the
yearsofindependenceandpoorgovernance,thecountryis
ranked178 thoutof187countriesintheHDI;infrastructure
and services are deficient; the administration is weak and
theprivatesectorisstillnascent.

The projected
economic growth for 2013, driven mainly
by agriculture, construction, and mining projects, was
revised down
to 3% (against the 4.8% initially projected,
and 3.9% achieved in 2012). Political (riots related to the
organization
of elections between March and May 2013)
and economic (reduction of imports related to delays in Table1 MacroeconomicIndicators
major mining
projects) shocks are essentiallyto blamefor
thesituation.
2011 2012(e) 2013(p) 2014(p)

ACountryFacedwithMajorChallenges
3.9 3.9 3 5
A postHIPC agenda constrained by three major Real GDP growth
1.5 1.7 2.2 3
challengeswhichareespeciallypolitical,institutionaland Real GDP per capita growth
economic. At the political level, divisions between the 21.4 13.1 10.6 8.5
opposition and the government on the organization of CPI inflation
elections deepened during the 1st half of 2013. Elections Budget balance (% GDP) 0.3 1.4 0.6 0.3
finally took place September 28th, following the inter
GuineadialoguefacilitatedbytheUnitedNations. Current account (% GDP) 24.2 25.4 25 28.7

At the institutional level, after the huge and constant coordination effort that allowed the country to initiate
significantreforms,thepaceofimplementationsloweddown.Thisismoreofaslowdownthanafizzlingoutofwill,
and is primarily ascribed to the structural lack of capacity in all areas of economic development coupled with an
organizational/structuralweaknessoftheadministration.

In economic terms, the waitandsee attitude of investors in the face of political uncertainty, including mining
operators who initiated policy changes and savings and debt reduction plans, has greatly impacted growth. The
subsequent decline in imports has resulted in a shortfall of more than 2% of GDP in tax revenue. This further
complicatesreformimplementation(resourceallocation),althoughthecountryremainsontherighttrack,withinthe
frameworkofrestructuringofspending.

Whereasreformsoughttobedeepenedandaccelerated,growingpoliticalandsocialdemandsaremajorchallenges.
Theauthoritiesshouldincreasinglymobilizeandcoordinateto:runsuccessfulparliamentaryelectionsandcalmdown
the political climate; ensure social cohesion in the face of growing impoverishment, and the impatience of the
population who do not see the social dividends of democratic change in their living conditions; continue reforms
initiatedwithgrowthandemploymentasthecorepointofthepoliticalagenda.


GuineaBissau
Theeconomyshrankbyanestimated1.5%in2012duetolowerproductionandpricesofcashewnutsaswell

aseconomicdisruptionsfollowingtheApril2012coupdtat.Growthisexpectedtobe4.2%in2013and3.5%
in2014.

Economic recovery will depend on a return to political stability following the planned November 2013
elections,resumptionofofficialaid,andarecoveryofcashewnutproductionandprices.

Tightbudgetconstraintshaveresultedfromlingeringpoliticaluncertainty.In2012,totalrevenuesfellshort
ofbudgetarytargets,fuellingabudgetdeficitequalto2.3%ofGDP.Deficitsareexpectedtofurthercontract

by0.8%in2013and1.0%in2014.

Figure1 RealGDPgrowth2013
Overview

The countrys economic situation was negatively
affected by theApril2012 coup dtat. In particular,
disruptions in cashew nut production (the countrys

largestexport),coupledwithlowerworldmarketprices
contributedtoaneconomiccontractionofanestimated
negative1.5%ofgrossdomesticproduct(GDP)in2012.
The AEO projects growth at 4.2% in 2013 and 3.5% in
2014, which assumes the resumption of peaceful
politics and a recovery of cashew production and its
price.

In 2012, total government revenues fell short of

budgetary targets by an estimated 3% of GDP forcing
the government to further curtail capital spending. In
spite of spending cuts, the budget showed a deficit of
2.3% of GDP in 2012 after a 0.7% surplus in 2011. Table1 MacroeconomicIndicators2013
Assuming enhanced budgetary discipline, better
revenue collection, and resumption of official aid, it is
2011 2012(e) 2013(p) 2014(p)
expected to shrink to a deficit of 0.8% in 2013 and of
5.3 1.5 4.2 3.5
1.0%in2014.
Real GDP growth
3.2 3.6 2.1 1.5
Inflationary pressures are expected to remain Real GDP per capita growth
moderaterangingbetween2.1%in2012toaprojected 5 2.1 3.3 2.5
3.3% in 2013 on account of low domestic demand CPI inflation
pressure which comes as a result of lingering political Budget balance (% GDP) 0.7 2.3 0.8 1
uncertainty.
Current account (% GDP) 1.6 6.3 4.7 4.3

Fiscalchallengesunderpoliticaluncertainty
Tightbudgetconstraintshaveresultedfrompoliticaluncertainty.FollowingtheApril2012coupdtat,adropindonor
grantsanddwindlingnontaxrevenueshavereducedgovernmentrevenuesandgrantsfrom19.1%ofGDPin2011to
16.9%in2013(IMFestimate).

Ontheonehand,fiscalrevenues(excludinggrants)havechangedonlytoalimitedextentaspositiveeffectsofasmall
recovery of cashew prices in 2013 have been offset by revenue loss due to the suspension of the EU agreement on
fishingcompensations.However,ontheotherhandgrantrevenueshavedroppedfrom7.5%ofGDPin2011to6%in
2012andaprojected5.1%in2013(IMFestimate)asmaintraditionaldonorsincludingtheBankhavesuspendedtheir
transferssincethe2012coup.

Thegovernmenthasreactedbycommittingtospendingcutsofupto2.1%ofGDP.Italsoconsentedtotheneedto
strengthenfiscalcontrolinordertoavoidspendingslippagesandincreasesinarrears.Tothatend,somemeasureshave
beenimplementedincludingthecollectionoftaxesandpaymentsforcivilservantsthroughbanksoreffortstocurtail
thefiscalcostoffueltaxexemptions.Concurrentlyhowever,thebudgetapprovedinJuly2013showsadeficitofFCFA
50billion(or47%ofrevenues)presentingseriouschallengeswithregardstosourcesoffunding.
 Liberia

Liberias postwar economic growth was sustained in 2012, led by the first full year of iron ore exports,

construction, and strong performance in the service sector. Export composition is adjusting in 2013 due to
governanceissuesintheforestrysectoranddecreasedrubberproduction.

The Government presented their Draft FY2013/14 Budget to the Legislature. Revenue shortfalls in the

FY2012/13 budget significantly reduced spending, and the new budget makes more conservative revenue
projections.

Extremely low energy access has been cited as one of the leading barriers to economic expansion, and
connections have increased from 2170 in mid2010 to more than 13,500 in March 2013. Connections are

projectedtoincreasetoaround90,000by2016,andtariffsmayhalveonceMt.Coffeecomesonline.
Overview
Figure1:CommodityExportValues(U$,million)
LiberiasGDPisprojectedtogrowby7.7%in2013,driven
by strong
commodity exports, after 8.9% growth in 2012.
Exports performed well in the first quarter of 2013, despite
governance
issues in some sectors. Iron ore exports have
regained their prewar dominance with exports from the
Arcelor
Mittal mine increasing. Rubber exports, which had
previously provided the bulk of postwar export revenue,
continued
to stagnate, due to lower production and rubber
prices.FollowingthebanonPrivateUsePermits(PUPs),the
increasing
trend in round logs exports seen in 2012 nearly
halted.Ironoreexportscanbeexpectedtocontinuegrowing
in the
medium term, as additional mines come online over
thenexttwoyears,althoughlowerinternationalpricesmay
also contain receipts. Timber exports will continue to
stagnatependingtheliftingofthePUPmoratorium.
Figure2 BudgetExpenditure(U$,million)
The Government submitted its draft FY20 13/14 Budget to
the Legislature
at the end of April 2013 and hearings are
ongoing.TheUS$553millionbudgetisadecreasefromlast
years US$ 672 million budget after various contingent
revenue and borrowing sources did not materialize.
Expenditure
is projected at US$ 531 for FY2012/13. The
FY2013/14 budget makes more conservative assumptions
about contingent revenue and borrowing. While capital
investment is budgeted at levels comparable to FY2012/13
projected outturns, overall employee compensation is

budgeted to increase by more than 15% and it remains the
largestcomponentofexpenditure.

Improvingenergyaccess

Improvingenergyaccessandloweringelectricitytariffsare
Figure3 EnergyAccessandDemandProjections
amongst
the Governments top priorities in its Agenda for
Transformation for 20122017. Publicly supplied energy
access has increased from only 2,170 connections in July
2010 to 13,500 as of February 2013. The Liberia Electricity
Corporation projects connections to continue increasing, to
around 90,000 by 2016, although this will still represent
access for less than half of Monrovia. Electricity expansion
and tariff reduction has been hampered by high losses
29.8% cumulative YTD as of March 2013. High rates of
electricitytheftarethelargestcontributortolosses,andthe
incentive to steal electricity will only increase with lower
tariffs, and can only be offset by areabased saturation of
connections. Tariffs are expected to roughly halve once Mt.
Coffeecomesonlineinearly2016.
 Mali
TheMalianeconomyexperiencedarecessionin2012withrealGDPgrowthof1.2percentagainstaninitialforecast
of 5.6 percent.
Growth will return in 2013 with a rate of 4.8 percent under the assumption of continued strong
agriculturalandgoldsectors,aswellastheresumptionofforeignaid.
Thepovertyrateincreasedin2012(42.7percent)withanincreaseof1.2percentforthesouthand6.4percentin

thenorthbecauseofthefood,securityandpoliticalinstitutionaltriplecrisis.

Unemployment, especially among young people is a crucial problem in Mali. The overall unemployment rate is
estimatedat9.6percent,andyouthunemploymentreaches15.4percent.

Overview
Figure1MaliRealGDPGrowth2013
The year 2012 has been marked by a political and security

crisiswithacoupdtatperpetratedbyamilitaryjuntaon22
Marchandtheoccupationofthenorthernpartofthecountry
forninemonthsbyIslamistgroupsandTuaregrebelsfromthe

NationalMovementfortheLiberationofAzawad(MNLA).The
securitysituationiscurrentlystableinthesouthernpartofthe

countrywhilesecuringthenorthernareasremainsachallenge
for integrated
multidimensional United Nations Mission for
Stabilization in Mali (MINUSMA), which began operations on
July1andhas12600menwitha"Frenchforceof1000men"

responsibleforcombatingterroristgroups.

Thecountryemergedoutofthepoliticalcrisis,apresidential
electionwasheldonJuly28andAugust11withthevictoryof

Mr.IbrahimBoubacarKeita.

The economy experienced a recession of 1.2 percent of real
GDPin2012againstaninitialforecastof5.6percentand2.7 Figure2UnemploymentratesinWestAfrica(%)

percent in 2011. This recession is due to the
underperformanceofthesecondary(5.4percent)andtertiary

sector (8.7 percent), while the primary sector grew by 8.6
percent thanks to the performance of agricultural production

(13.9 percent). Growth will return in 2013 and 2014 with
growthratesofrealGDPby4.8percentand6.3percentdueto
the increase in production of rice and cotton, the increased
productionofgold,telecommunicationswiththesaleofathird
telephonylicense,andtheresumptionofinternationalaid.To
help the country going out of the economic crisis, an
internationaldonorconferencewasheldinBrusselson15May
2013, with the announcements of 3.285 billion euros for the
period 20132014.Youth employment isplaced as oneof the
challengesfor therecoveryoftheeconomyinthe20132014
period.

TheissueofyouthemploymentinMali

Unemploymentdisproportionatelyaffectsyoungpeoplewitharatereaching15.4percentfortheagegroupfrom
15to39years.Inaddition,81.5percentoftheunemployedareyoungpeopleseekingtheirfirstjob,andtheaverage
duration of unemployment is five years. Each year, nearly 300,000 young people enter the labor market. This
phenomenon affects more women (58.8 percent) than men, it occurs more in Bamako (27.3 percent) than in
secondarycities(14percent)andinruralareas(6.6percent).Severalfactorsexplaintheextentofthephenomenon,
including:i)themismatchbetweentrainingandemployment,ii)highpopulationgrowth(3.6percentperyear)witha
veryyoungpopulation(agegroupsfrom0to15yearsandfrom15to35yearsrepresent49percentand30percent
respectivelyofthepopulation),iii)theruralexodus,andiv)thelowabsorptioncapacityoftheformalsector.

 Senegal

Senegals 2012 growth recovered to an estimated 3.7 percent, after a slowdown in 2011, when agriculture
suffered.Thisshouldcontinuein2013and2014,thankstonewinfrastructureprograms.

The new president and government elected in 2012 have taken steps to improve good governance, which
shouldboostthemanagementofpublicresources.

EnergyproblemscausedSenegaltoloseoneannualGDPpointoverthepasttwoyears.

Overview
Figure1 RealGDPgrowth2013
Senegal'seconomy recovered to an estimated GDP 3.7 in
2012, comparing to a 2.1 percent in 2011. The projected
growth for 2013 and 2014 are respectively 4.3 and 5.1
percent.

The opening of the Senegalese economy makes it

vulnerabletoglobalcommoditypricesfluctuationsaswell
as the economic crisis in Europe and the political crisis in
neighboringMali.

Moreover, there are also internal risks related to floods

and other natural disasters, so as to the slowness of the
road infrastructure program and structural reforms in
particularintheenergysector.

EnergyanditsmacroeconomicimpactinSenegal

In Senegal, only half of the population has access to

electricity. Access rate is about 80 % in urban areas, but Figure2 AveragepriceinUScents/Kwh
only 24 % in rural areas. The average annual electricity
consumptionisbelow200kWhperperson.Theproduction
of electricity is 90 % thermal, predominantly through the
use of liquidpetroleum products. Thisis why theincrease
in oil prices leads to a substantial increase in operating
expenses.

Furthermore, often outdated and poorly maintained

generationfacilitiesmakethesystemunreliableleadingto
numerouspoweroutagesandpoorqualityofservice.The
number ofoutages inSenegal was about 12 permonth in
2007 (and it has increased in 2010 and 2011) against one
day every 10 years in the United States. In addition, the
averagetariffinSenegalremainsquitehigh(seechart).

EnergyproblemscausedSenegaltoloseonpointofGDPperyearoverthelasttwoyears (2010and2011).Inthesearch
forsolutions,anemergencyplan"PlanTakkal",wasestablishedin2011,aimedatreducingloadshedding,butatavery
high cost. The Government of Senegal is also launching a policy of diversification of its electricity production involving
coal,naturalgas,hydroandrenewableenergy.Thenewlawonrenewableenergyanditsimplementingdecreeshowthe
Government'scommitmenttosustainablesolutionsfortheenergysector.

SierraLeone

TheminingsectormaderealGDPgrowthleapfrom6%in2011to16.7%in2012,withsupportfromagriculture,
servicesandconstruction;itisprojectedtostabilizein2013and2014.

TwonewironoreoperationsarelargelyresponsibleforthisonetimeboomofrealGDPgrowthin2012.

SierraLeoneranksasoneofthetopreformerssince2005inthelatestWorldBankreportDoingBusiness

Overview
Figure1RealGDPgrowth2013(West)
Drivenbyminingsectorproduction(particularlyironore),real
GDPgrowthacceleratedfrom6%in2011to16.7%in2012and

is projected to stabilize around 7.2% in 2013 before reaching
12.1%in2014accordingtoAEOprojections

Thisrobusteconomicgrowthhasbeenaccompaniedbyatight

monetary policy. As a result, the inflation rate has fallen from
18.5% in 2011 to 11.6 % in 2012 and is projected to return to

singledigits7.1%in2013andto6.9%in2014asagricultural
production recovers and international food prices fall. Indeed,
the government implemented several reforms to contain
inflationandhastakencorrectivemonetarypolicymeasures.

Policiestostrengthenfiscaldisciplinein2012havealsohelped

reducethefiscaldeficitfrom4.5%ofGDPin2011to1.8%in
2012,whichisprojectedaround2.3%in2013,and2%in2014.

Restrictive fiscal policy also contributed to a reduction in the
domesticdebtburden.
Figure2 IronoreExportsandGDPinSierraLeone

Sierra Leone has implemented a number of reforms in the

business environment, risingeight places in the latest World
Bank reportDoing Business(140thout of 185 countries) and
ranks asone of the top reformers in improving business
regulationandpropertyregistration

IronoreExportsandGDP

Newironoreproductionisthekeydriverofgrowth,leadingto
ainaonetimehikeofrealGDPgrowthin2012andasustained
growthin2013.

Twonewminingoperationsmakethebulkofthenewironore
boom in the country. Figure 2 shows the increase in GDP
starting2011onaccountofthejumpinironoreexportsbysuch
operations(African MineralsLimited,AML,andLondon Mining, Figure3MovementsinIronOreprices
LM).

TheAMLminehas12Bntonnesofreserves,arguablyoneofthe
largest ironore deposits in Africa, with an estimated mine life
of80years.Howevertheminesironoreislowgrade,withonly
58%content,andsellsforalowerprice.

TheLMminesoperationhasanestimatedtotalreserveof1.5
Bn tons of high quality iron ore with 64% content. The mine
operated in the 1950s and 1960s, but closed since the 1970s
dues to lower international prices, and went back to full
operation in 2012. The expected narrowing of the price
differentialbetweentwoqualitiesofIronorerepresentsamajor
riskforLM(seeFigure30).Bothironorelicenseshavealifespan
of25years.
SpecialThemeFinancialinclusioninWestAfrica:overview



oftheG20GPFIDataset


1. Introduction

Despitethegrowthinthefinancialsectorduringthelastdecade,alargemajorityofindividuals,
firms andhouseholdsintheAfricancontinentdonothaveaccesstothebasicfinancial services
that could transform their economic lives. According to the G20 Global Partnership for Financial
Inclusion(GPFI)dataset,inacontinentofmorethanonebillionpeople3,lessthanonequarterof
adultshaveanaccountinaformalfinancialinstitution,andmanyadultsuseinformalmethodsto
saveandborrowmoney(GPFI,2013).

Newplayersandproducts,advancesintechnologyanddecreasingcostsoffertheopportunityto
extend financial services to more people, especially the poor and those living in remote areas,
whichareusuallytheunbanked.However,stilltoday,manylowincomepeopletendtodependon
informalfinancialservices,which,astheyarenotsubjecttosupervisionbyregulators(centralbanks
or other supervisory authorities) can put people in a vulnerable position if their money is lost or
stolenorifmoneylendersapplyusuriouspractices.

This note takes a look at the state of financial inclusion in the West Africa subregion4, and it
drawspredominantlyfrom2011dataavailableattheGlobalFindexDatabaseoftheG20BasicSet
ofFinancialInclusionIndicators5.Dataaredrawnfromasurveycollectedin2011,coveringmore
than 150,000 adults in 148 economies and representing about 97 per cent of the worlds
population6. This dataset features data for five West African countries in the sub region, namely
Guinea,Liberia,Mali,SenegalandSierraLeoneforindicatorsonhouseholdsandforallcountrieson
indicators for SMEs. The database currently provides the more recent crosscountry comparable
dataonfinancialinclusionavailableforthecontinent.

Thepurposeofthisnoteisnottoprovideacomprehensiveanalysisoffinancialinclusioncauses
andsolutionsintheregion,butrathertoprovideasnapshotofwhereweareintermsoffinancial
inclusionintheregionascomparedwiththerestofSubSaharanAfrica.Followingthisintroduction,
sectiontwoprovidesabriefoverviewoffinancialinclusioninthesubregionanddiscussesstylized
factsonaccesstoformalandinformalservicesbyindividualsandSMEsintheregion.Sectionthree
cites briefly some general causes of financial exclusion in the region. Section four provides some
examples of innovations that are fostering financial inclusion in the region. Finally, section five
concludes byprovidingsome recommendationshow to deepen accessto financial services inthe
WestAfricaregion.

2. FinancialInclusioninWestAfrica

This section will look at individuals and SMEs who hold an account at a formal financial
institution,aswellasindividualswhoborrowedandsavedataformalfinancialinstitutionduring

3
AfDBSocioeconomicdatabase,May2012
4
ThepaperlooksatthecountrieslocatedatasetofcountriesinlocatedonthefurtherWesternpartoftheGulfofGuinea,
classifiedunderORWBcountries:CapeVerde,Gambia,Guinea,GuineaBissau,Liberia,Mali,SenegalandSierraLeone.
5
ThisdatasetwasdevelopedbytheGlobalPartnershipforFinancialInclusion(GPFI)andendorsedbyG20leadersattheir
summitinJune2012.
6
DemirgucKunt,AsliandLeoraKlapper,2012.MeasuringFinancialInclusion:TheGlobalFindexDatabase.WorldBank
PolicyResearchWorkingPaper6025.Fordetailedinformationonthedatasetandmethodology,pleasereviewtheGPFI
websiteathttp://www.gpfi.org.
thepreviousyearinasubsetofWestAfricancountries7.Itwillalsoincludespecificdataforwomen
andlowincomeindividualsastheyareusuallymoreexcludedthanmenandhigherincomepeople,
respectively.

2.1 Accessanduseofformalfinance:individuals
The most notable finding is that all West
African countries in the sample display a
significantly lower level of access to formal
financial services than the SubSaharan
Africa average across all groups and for all
countries.

The region features important disparities,

withGuinea,MaliandSenegal,havingeven
lower level of access than the other
countries. A recent CGAP survey (2013) on
theuseoffinancialservicesinSenegalpoints
to religious reasons as being the main
concernfornotopeningaformal accountat
a financial institution, over other reasons
such as lack of trust on financial institutions
orthedifficultiesofopeninganaccount8.

Women have less access to formal bank

accounts than men for all countries, and
beyond the SSA average. Moreover, the
gender gap is considerably higher in those
countries where more individuals have
accounts at financial institutions, such as
LiberiaandSierraLeone,withthepercentage
ofwomenholdingbanksaccountsbeingconsiderablybelowthegeneralaverage.

AccesstoformalfinanceservicesissignificantlyloweramongthepoorerhouseholdsinallWest
African countries, when considering low income people (people at the bottom 40% of income)9.
AccessbythepoorisalsolowerthantheSSAaverageforlowerincomepeople.

2.2 Borrowersatformalfinancialinstitutions,individuals

West African countries feature a relatively higher level of loan usage, as the percentages of
individuals who had taken a loan from a formal financial institution10 in the previous year is
relatively higher or closer to the SubSaharan African average. Liberia and Sierra Leone present
moreindividuals(includingwomen)borrowingthantheaverageforSSA.

7
DataonindividualsisonlyavailableGuinea,Liberia,Mali,SenegalandSierraLeone,whereasdataonSMEis
alsoavailablealsoforallotherremainingcountriesinthesample,namelyCapeVerde,GambiaandGuinea
Bissau
8
Inacountrywith94%ofpeoplepractisingIslam,thestudysuggeststhatcurrentfinancialproductsand
servicesmightnotbeshariacompliant,whichcouldpreventsomepeopletoopenaccountsinthecountry.
ReligionmayalsoexplainloweraccessinothercountrieshavingIslamasmainreligion.
9
TheBottom40%povertyindicatordefinesacutoffat40percentconsideredthebottomsegmentofthepoorest
populationineverycountry.
10
Denotesthepercentageofrespondentswhoreportedborrowinganymoneyfromabank,creditunion,
microfinanceinstitution,oranotherfinancialinstitutionsuchasacooperativeinthepast12months.

Within the region, Liberia displays the highest
percentage of borrowers in the region, while
SierraLeone hasthehigherpercentageofwomen
takingloansatfinancialinstitutionsfortheregion,
andaheadofmeninthesamearea.However,the
figures are not very optimistic, as only 6.5% of
Liberianstookaloanfromafinancialinstitutionin
the year previous to the survey, which is well
below other African countries such as Uganda
(8.9%)orKenya(9.5%).

Looking at remaining countries, Mali presents a

relatively higher percentage of borrowers, when
comparedtoSenegalandGuinea,butisstillbelow
the SSA Average. In all the three countries, there
aremorementhanwomenborrowingatfinancial
institutions.





Intermsofincomedisparity,thecaseofLiberiaisrather
remarkable, as the country has a both the highest
percentageintheregionintermsofadultsborrowing,but
also the largest gap between high and lower income
people.Just1.2%oflowerincomeindividualsborrowedat
a formal financial institution, which is well below the SSA
average for the lower income people and below most of
the countries of the region, just above the Guinean
percentage,whichsuggeststhatfinancialinstitutionscater
mainlyhighincomeindividuals.



2.3 Savingsatformalfinancialinstitutions

West African countries feature a relatively stronger

predispositiontomakeuseoffinancialinstitutiontokeeptheir
savings,ascomparedtotakingloans,inasimilarpatternthan
other African countries, and as can be observed for the SSA
averageThedifferenceamongcountriesintheregionsismore
acute, however, when compared with usage of loans, with
Liberia and Sierra Leone showing similar levels to the SSA
average;whileGuinea,MaliandSenegalpresentverylowuseof
formalsavings.

In terms of gender disparity, the case of Guinea stands out;

withthe percentage of womensavingat financial institutions
being actually higher than the general percentage for
individuals for the same country. For all the other countries,
therearefewerwomenusingformalsavingsserviceswhencomparedtomen,withthebiggergaps
beingregisteredinSierraLeoneandLiberia.

Regardinglowerincomepeople,thegapbetweenthebottom40%andtherestofthepopulation
isvery wideacrossallcountries. Moreover,thepercentageof lowerincomepeopleusingformal
savingsisbelowtheAfricanaverageforallcountriesintheregion,whichsuggeststhateitherformal
savingschemesdonotmeetpoorpeoplesneedsinthesubregionorthereisnotawarenessonthe
existenceofthoseservices.

2.4 Useofinformalfinancialservices
Use ofinformal financialservices is widespreadintheregion.Far more individuals borrow from
friendsorfamilythanfromfinancialinstitutionsthroughoutSubSaharanandWestAfrica.Inallbut
twoWestAfricancountries,theuseofinformalloansisbelowtheSSAaverage.LiberiaandSierra
LeoneaccesstoloanslevelssimilartotheSSAaverage.

Regarding savings, all West African countries

present a higher number of people saving at
informal clubs than at formal financial
institutions, except for Sierra Leone. This is
the pattern for the continent, as informal
financialservicestendtobemoreflexibleand
accessiblethanformalones,especiallyforlow
income people, are those living in more
isolatedareas,wherefinancialinstitutionsmay
notoperate.

Different types of informal finance clubs can
befoundintheregion,suchasTontines,Pari,
Ausuor Nath. One of the more common
Savings and Credit Association (ROSCA) is
theSusu,11whichcanbefound forexamplein
Gambia, Liberia and Sierra Leone in the sub
region, and in other West African countries
suchasNigeria,GhanaorNiger.

However,theuseofinformalsavingsclubsis
still well below the SSA average for all
countries.Thiscouldbeexplainedbyculturalreasons.SavingsclubsaremorespreadinotherAfrica
regions,suchasSouthAfrica,peopleuseinformalandsemiformalsavingsclub(SouthAfrica17.1%,
Lesotho17.6%,andMozambique27.6%)tofindresourcestocaterforhighfuneralcosts.

2.5 AccesstoformalfinancebySMEs

11
SusucollectorsareoneoftheoldestfinancialgroupsinAfrica.ThistypeofROSCAorinformalclubprovides
accesstocreditaswellasthepossibilitytosaveandwithdrawmoneyforasmallfee.IntheSusuarrangement,
asaveragreestodepositaspecificamountdeterminedinconsultationwiththecollectorforanagreedperiod
oftime(usuallyamonth).Attheendoftheperiod,theSusucollectorrenderstheaccumulatedsavingstothe
client,keepingoneday'ssavingsascommission.Theseclubshelppeoplemanagingirregularcashflows.For
exampletheycanfacilitatemanagingseasonalcashflowcyclesinruralcommunities.
When looking at the percentage of SMEs holding an account in a formal financial institution12,
financial inclusion data has a different patterns compared with the other financial inclusion
indicatorspresentedearlierinthissection;withMali,CapeVerdeandSenegalpositioningcloseto
orevenabovetheAfricanaverage.

ThecaseofCapeVerdestandsout,
with more than 96% of SMEs
having an account at a formal
institution. In Senegal the
percentageisjustslightlybelowthe
SSAaverageof87%ofSMEshaving
an account. The lowest percentage
is registered in Guinea. One of the
impediments of having access to
financial institutions and their
services, such as credit, is that the
SME documentation to prove
solvencytobeabletoaccesscredit
is often misaligned with the
financial institutions requirements.
Having access to capacity building
for entrepreneurs on financial
accountingandreporting,nonfinancialservices(suchasadvisoryservices),guaranteeschemesor
credit bureaus and an enabling environment might be very relevant to increase access to formal
financialservicesforSMEs(seeBox1).

3. SomecommonCausesofFinancialExclusion

There is no single explanation behind the financial exclusion in the region. A study by the
EuropeanCommission(2008)highlightsanumberoffactorsconsideredasmajorcausesoffinancial
exclusion. These include (i)popularityand flexibility ofinformal financialservices;(ii) the physical
accessandtraveldistance;(iii)theculturalbarriersandfinancialknowhow;(iv)thegenderfactor;
Box1.SMEssupportagenciesregionalnetworkinWestAfrica
In2012,theMakingFinanceWorkforAfricaPartnership,hostedbytheAfDB,createdaSMEs
agencies support network, with the support of the Adepme (Senegal) and the Commission de
lUEMOA to stimulate the exchange of information on innovative approaches and successful
practices;andpromotethedialoguewithnationalandregionalauthorities,financialinstitutions
anddevelopmentpartnersonnonfinancialservicesascatalystforthedevelopmentofSMEsin
theregion.Currently,themembershipofthisnetworkcountsninepublicandprivatestructures
fromsixWestAfricancountries,includingtwoORWBcountries,MaliandSenegal.
(v)theinsufficientincome;and(v)thelackofregulatoryandinformationalframework.Theglobal
findex data tend to confirm the persistence of the above mentioned findings, as people in the
regiontendtorelymoreoninformalthanformalsourcesoffinancing.

Oftentimes,formalproductsmaynotbeadaptedtotheunbankedintermsofscaleandflexibility
(European Commission 2008), so that inadequate products and services being offered by formal
financialinstitutionsmightbeacauseoffinancialexclusion.

12
DataregardingaccesstoformalfinanceforSMEs(between5and99employees)isavailableforalltheeight
countriesoftheWestAfricasubregion:CapeVerde,Gambia,Guinea,GuineaBissau,Liberia,Mali,Senegal
andSierraLeone.

Poor physical infrastructure in the region might be contributing to financial exclusion. The
countries in thesamplehas thelowest quality oftransportservices,asmeasured by theLogistics
PerformanceIndex,comparedtobothotherregionsinAfricaandtherestoftheworld(AfDB2011).
The lack of communication facilities, poor quality of roads and transport, leading to isolation of
largesegmentsofthepopulationsnamelyintheruralareasofmostWestAfricancountriesmake
morepeoplefinanciallyexcludedinthoseareas,whencomparedtothoselivinginurbanareasand
explain why in many West African countries the providers of rural finance are smaller and locally
basedinstitutions.

Newtechnologies,suchasmobilemoneyservicesmayhelpovercomesomeofthesechallenges.
Althoughtheregionisbehindothermoreactivepartsofthecontinent,suchasEastAfrica,aglobal
pioneerinthistechnology,somesuccessfulexamplesoftheuseoftheseservicescanbefoundin
theregion,suchastheWariplatforminSenegal13.Astheseinitiativesareveryrecent,wedonot
have comparable crosscountry data at this stage on its impact on financial inclusion, but mobile
technologyhasahugepotentialtoovercomesomeoftheunderlyingfinancialexclusioncausesin
WestAfricaandelsewhere.

Poorpeoplepresentsystematicallyloweruseoffinancialservicesforallcountriesintheregion.
Asthepoorhavetodealwithunpredictableandlowincomeflowsonadailybasis,theirneedfor
financialservicesisevengreater.Toservethoseatthebottomofthepyramid,financialproducts
andservicesneedstoaddresstheirspecificneeds.Toidentifytheclientsprioritiesandconcerns,as
wellastheirculturalcontextiscrucialtounderstandhowindividualsmanagetheirmoneyandhow
they understand the financial sector. As this might vary across countries, and even across
communitiesandethnicitieswithinsomecountries,adeeperstudyonfinancialbehaviorisneeded
iffinancialinstitutionsaimattargetingthem.Financialeducationprogramsmightbeveryusefulto
overcomesomeofthesechallenges.

Women are also relatively more financially excluded than men in the region. Indeed, a
multivariateregressionanalysisdrawingfromtheGlobalFindexDatabase,confirmsthatwomenin
developingcountries14arelesslikelytohaveanaccountthanmen,evenaftercontrollingforahost
of individual characteristics. Gender affects account ownership also indirectly through gender
differences in income, education, and employment status. The studys results also suggest that
economywidelegaldiscriminationagainstwomenandgendernormscanhelpexplainthisgender
gap.SomeidentifiedconstraintsandbarrierstoaccessformalfinancialservicesforAfricanwomen
are numerous. The lack of financial capability, time availability and her traditional role as family
care, together with income generation activities, reduces womens mobility to interact with
financialinstitutions.Inruralareas,challengesareevenharder,withwomenhavinglowincomeand
education levels,high illiteracy rates,and limited accesstoland, whichconstraints their ability to
investinagriculturalproductionandprovidecollateralforloans(MFW4A,2012a).

Finally,theregulatorycontextandthegovernmentspoliciesinthesocialandeconomicfieldsare
also very important factors. Banks across the world offer different terms and conditions to open
accounts, and require diverse identification and documents. Policymakers in developing countries
have an important role to play in creating the conditions for improved access; homogenize
regulationandtherebypromotingtheeconomicpotentialoftheirpopulations.Removingphysical,
bureaucratical,andfinancialbarrierstopromoteaccesstofinanceforallischallengingsinceitalso
requiresaddressingthestructuralcausesoffinancialexclusion.Evenso,measurestostimulatethe

13
Formoreinformation,pleasevisittheCGAPBlog:Wari:ALocalPlatformHeadstotheGlobalMarket
availableattheCGAPwebsiteat<http://www.cgap.org/blog>.
14
Aselectionof98developingcountries,includingSenegal,SierraLeone,Ghinea,MalifromtheWestAfricasubregion.
information and regulatory environment and the adoption of new products, processes, and
technology,mayhelpovercomethesebarriersinthesubregion.

4. Someemerginginnovationsforfinancialinclusion

Box2.Senegal,thefutureofMicroinsurance
ThecaseofSenegalisofparticularinterest.With6%ofthepopulationcoveredbymicroinsurance
in2011,itrankedthe8thpositioninthecontinentandthefirstintheregion(MFW4A,2012b).In
Senegal,regulationdoesnotyetallowMicroFinanceInstitutions(MFIs)todevelopmicroinsurance
products. MFIs have rather developed selfinsurance in form of solidarity fund (usually formed
throughobligatoryreductionsonthepercentageofcredit),whichhasbeentoleratedinpractice,
partlyduetocertainambiguityofitsregulation.Since2008,regulationhassomewhatclarifiedthat
MFIsareallowedtoprovidecreditandsavingsbutforotherfinancialservicestheyneedtoobtain
thenecessarypermits(MicroinsuranceNetwork,2012).AlsoInsurancecompaniesarepromoting
microinsurance products in the region. In May 2013, six Senegalese insurance companies have
created the Micro Health Insurance Pool, which aims at promoting medical care, prevention,
educationandpublicawarenessoftheinsuranceindustry.Thisinitiative,thefirstinSenegaland
theCIMAregion,mayexpandtheopportunitiesforlowincomepeopletoaccessmicroinsurance
productsintheregion.
West Africa is experiencing a number of innovations which have the potential to increase
financial inclusion. This section gives a nonexhaustive snapshot of several interventions to
promote financial inclusion, specially designated to serve the needs of those more financially
excludedintheWestAfricaregion.

4.1 Microinsurance

Microinsuranceisincreasinglyrecognisedasbeingabletopromotefinancialinclusion,helppoor
people managing better the different risks they may face (such as illness, death or crop damage)
andthereforereducingitsvulnerability.

WestAfricaistheregionwithhighestnumberofpeoplecoveredbyhealthmicroinsuranceinthe
continent.Thisismainlyduetothelargepresencecommunitybasedhealthmutuals,throughwhich
donorspromotegroupownershipofinsuranceinFrancophoneAfrica(McCord,etal.,2013).
Microinsurance in theregion andinthe African continent isoftendevelopingoutsideof formal
legal frameworks (see Box 2). An Africawide Microinsurance study shows that over 80% or
propertiesidentifiedasbeingcoveredbymicroinsurancewereregisteredincountriesthatwerestill
developingamicroinsurancelegalframework(McCord,etal.,2013,p.27).

4.2 Remittances
In2012,RemittancesinAfricarepresented11%ofglobalremittances,andforthefirsttimethey
were the largest source of external financial source, largest than foreign direct investment or
OfficialDevelopmentAid.However,since2008,Africawastheregionwereremittancescostwere
also higher (AfDB et al., 2013). Remittances play an important role in the region contributing to
around10%ofGDPinCapeVerde(seebox3)andSenegal.Ongoingeffortstoreducingremittance
costs and easing the transfer of money is an important ways to increase access to finance in the
region.


4.3 Alternativecollateralforloan

Often poor people,

especially women, may Box3. The Culture Bank: A Communitybased Museum that
have problems to access providesMicroCredittoMalianvillagers.
credit (including micro The CultureBank is an institution that integrates a community
credit) at formal financial museum with a village bank. Created in 1995 in Fombori, Mali, its
institutions because of mission is to preserve cultural heritage in African villages while
their inability to use land providing microcredit to locals who place their cultural objects as
or other assets as collateral.ThebankhasturnedFombori'sculturalheritageintoavital
collateral. Finding economic resource and permitted to prosper this relatively isolated
alternative sources of area.Individualsgetaccesstoaloanof$5to$40,dependingonthe
collateral will enable objects historical information and after its reimbursement (46
banks to promote months) the owner can chose between reclaiming the object and
financial inclusion. An leaving it in the museum's collection for another loan of increased
interesting experiment in value. The accumulated interestfromthese loans is usedtofinance
this regard can be found the bank/museum operations and activities that include artisan
in Mali with the culture workshops,concerts,andtraditionalfestivals.Visitorsadmissionfees
bank(box3). support local artisans by purchasing artisan goods (no the
antiquities). The initiative has preserved cultural heritage and
increased the clients incomes, which includes an important
percentageofwomen.

5 Conclusionandrecommendations

ThenoteshowsthattheWestAfricaregionsuffersfromagenerallylowaccessanduseofformal
financialservices,withanotabledifferenceamongthesamplecountries.

Theregionalsorecordsaveryhighgendergapintheaccessanduseofformalfinancialservices,
withfinancialinclusionindicatorsbeinggenerallymuchlowerforwomenthanformen.Theseare
worrying statistics, as women are the main financial managers in most households in Africa, but
theyhavelessaccesstofinancialservicescomparedtomen,andcomparedwithwomenglobally.

Reducingthegendergapandpromotingfinancialinclusionforwomeniskeyforregion,givenits
potential development impact, including more inclusive growth through higher levels of
productiveinvestmentandassetaccumulation(MFW4A,2012a).Thedatacallsforfurtheraction
toadvancewomensfinancialinclusion.

Lookingthepoor,thefiguresarestillmorealarmingwiththepoorerbeingmoreexcludedfrom
formalfinancialservicesandwhencomparedwiththeSSAaverageforlowerincomepeople.Itis
criticaltoaddresssuchdiscriminationaspoorpeopleneedtomanagelowandunpredictablecash
flows, and are more vulnerable to income losses, so that for them having access to flexible,
affordable,reliable,convenientandaccessiblefinancialservicesisevenmoreimportant.

Thenotealsounderscorestheimportanceofinfrastructureinaddressinggaps,aslimitedaccess
to finance in rural underserved areas, is intrinsically linked to poor physical infrastructure. The
Bankscontinuoussupporttoinfrastructuredevelopmentintheregionhasalsoagreatpotentialto
contributetothefinancialinclusionagenda.

SMEaccesstoformalinstitutionismoreencouraging,withcertaincountriessuchasCapeVerde
andSenegalleadingtheway,yetotherssignificantlylowerthantheAfricanaverage.Itisextremely
importanttopromoteaccessanduseofformalfinancebySMEsastheyareonethemainvectors
ofeconomicgrowthandjobcreationandtheycancontributesignificantlytoeconomicactivityand
socialstabilityintheregion.

Theregionisalsoexperiencinganumberofinnovations,whichhavethepotentialtodeepenthe
financialinclusionagenda.

Further research on the deep roots of financial exclusion for each country is necessary to
underpinaclosedialoguewithgovernmentstopromotethedevelopmentoffinancialsectorsin
aninclusivemanner,andlookingatthosefinanciallyexcluded:thepoor,thoselivinginruralareas,
andwomen.

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