What Are the Odds of Being Formally Financially Included in Senegal?

The World Bank
Siegfried Zottel



In developed countries, the vast majority of adults can be expected to hold an account at a formal financial institution such as a bank. However, in many Sub-Saharan countries, notably Senegal, is not the reality. In fact, a new World Bank Group (WBG) Financial Capability Survey revealed that less than one in five Senegalese adults (17%) report owning an account at a formal institution, which includes banks, microfinance institutions, or e-money agents. As compared to other lower-middle income economies, Senegal is in the middle of the pack in terms of financial inclusion, however it lags behind the average inclusion rate amongst Sub-Saharan African economies.

So why are nearly 6 million Senegalese adults financially excluded? To answer this question, it is important to understand that when it comes to being formally financially included, not everyone is on equal footing. In Senegal, financial inclusion varies substantially across sub-populations.

For instance, the odds of being financially included are 9 percentage points higher for Senegalese men than they are for Senegalese women. This difference can be partially explained by the fact that women generally participate less in household financial decisions. Having greater access to financial services, urban populations are also more likely to be financially included than rural populations (22% versus 13%). Furthermore, adults who earn a high or medium incomes are 12 percentage points more likely to be financially included than those earning a low income.

According to the same WBG survey, 54% of Senegalese report that they lack enough money to own a formal account. A preference for cash was cited by 19%, while 14% do not feel the need for a formal account. Lastly, 8% of financially excluded adults find formal accounts too costly to use.

The 2015 WBG Financial Capability Survey also indicates that there are several challenges concerning people’s awareness of financial concepts and products and their ability to choose financial products. For instance, while around 80% of the surveyed adults stated to be familiar with money transfer services, commercial banks are known by less than 70%, and microfinance institutions and their products are known by only around a fourth of the sample. An international comparison of survey participants in twelve countries shows that Senegalese adults tend to monitor expenses and plan for old age, but they are among the most challenged with respect to their ability to shop around, read terms and conditions, and choose financial products that fit their needs.

These findings are of concern because they hinder beneficial uptake and usage of formal financial products and services in Senegal. In addition, transactional accounts are a first entry point into the formal financial system, and without them, people are left to transact in ways that are often risky, wasteful, and inconvenient.

Senegal has taken important initial steps to help increase the odds of being formally financially included. In September 2012, the Senegal’s Ministry of Economy and Finance made a commitment under the Maya Declaration to raise financial inclusion and increase access to and responsible usage of financial products and services. It has successfully managed to raise the inclusion rate from 15% in 2014 to the aforementioned 17% in 2015.

However, given the challenges revealed through this recent WBG survey, Senegalese authorities can take further measures to increase the odds of being financially included, in particular for the poor, women, and rural dwellers. Here are a few suggestions:

• Continue to strategize. The authorities should continue to develop a National Financial Inclusion Strategy to ensure that the public and private stakeholder commitment to advance financial inclusion in Senegal is explicit, strong, and sustained over time.
• Allow and advocate for branchless banking. New business models such as mobile or agent banking can dramatically reduce the costs of delivering financial services, in particular in low-density and remote areas. Moreover, it can not only reduce explicit costs but also implicit costs such as the opportunity cost of time lost to traveling and waiting for the 54% of the adult population who indicated lack of sufficient income as a main barrier to formal account ownership.
• Encourage uptake and usage of basic transaction accounts at no or low costs. Existing regulation gives any person in Senegal the right to a basic bank account at no cost, but there may be little economic incentives for private sector parties to voluntarily offer these accounts to their customers.
• Promote provision of diversified financial services. Many Senegalese have little money, but this survey revealed that they still save, although mainly relying on informal channels. Formal savings products thus have potential and their promotion could contribute to safeguard savings, which can help households manage cash-flow spikes, smooth consumption, and build lump sums.
• Innovate. Conveying financial messages through innovative ways such as using popular TV soap operas, films, videos or radio programs can be quite effective, not only in improving knowledge but also in altering behavior. Periodic text messages and mobile applications could be another promising and cost-effective outreach channel.