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Gambia’s Financial Inclusion and Anti-Money Laundering Efforts Face New Challenges

Despite initial progress, The Gambia’s financial inclusion and anti-money laundering (AML) efforts have hit a snag due to the COVID-19 pandemic and Russia’s invasion of Ukraine. Economic growth slowed down to 0.6% in 2020 before recovering to 4.3% in 2021 and 2022. Per capita income grew by 3.5% in 2019 but contracted by 2% in 2020 and only weakly recovered to 1.8% in 2022, falling below population growth.

Financial Inclusion Remains a Challenge

The nation’s financial inclusion rate remains alarmingly low, with only 19% of the population having an account with a formal financial institution and another 12% using informal savings mechanisms, leaving 69% completely excluded from formal and informal financial services. This is significantly higher than the Sub-Saharan African average of 45%.

Constraints to Financial Inclusion

Experts point to both demand and supply-side factors as constraints to financial inclusion:

• Supply-side obstacles: uneven legal and regulatory frameworks, limited financial infrastructure, and access, eligibility, and affordability challenges hinder the growth of financial services.
• Demand-side obstacles: low income, inadequate financial literacy, poor consumer protection, and information asymmetries.

Recommendations for Accelerating Financial Inclusion

Recent World Bank reports recommend several key steps to accelerate financial inclusion:

• Update Payment Systems Act: incorporate emerging business models and new payment service providers to create a level playing field for fintechs.
• Reframe Mobile Money Regulation: cover digital payments more broadly and allow licensing companies providing other e-money services.
• Harmonize legal and regulatory frameworks: with ECOWAS peer countries and expand participation in the Pan-Africa Payment and Settlement System (PAPSS) to facilitate cross-border digital payments.
• Enhance GamSwitch: include broader functionalities and adjust its model to ensure wider usage, fostering competition and innovation.

Mobile Money as an Opportunity

Mobile money presents an opportunity to increase access and usage of digital payments, particularly for low-income individuals using USSD payments. SIM cards and mobile phone numbers could be used as identity proxies and aliases for financial onboarding and transactions.

Digitizing Government Payments

Efforts to digitize government payments must continue, with enhanced interfaces and connectivity between operational and core payment systems ensuring real-time notification of settlement and information flows. Well-designed Government-to-Person (G2P) systems can reduce operational risk, improve efficiency in fund disbursement, and incorporate excluded populations into the financial system.

AML Measures Remain a Top Priority

As The Gambia works to address these challenges, it is crucial that AML measures remain a top priority to prevent financial crimes and protect vulnerable populations. By taking concrete steps to enhance financial inclusion and AML efforts, the nation can unlock economic growth and promote financial stability for all citizens.