Compliance Challenges Halt Digital Banking Growth in Senegal
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The fintech industry in Senegal is facing significant hurdles as innovative financial service providers struggle to navigate a regulatory environment that often prioritizes traditional institutions. Despite the sector’s growth potential, compliance challenges and lack of support from established players are hindering the development of digital banking services.
Regulatory Challenges
Fintech startups in Senegal must contend with a plethora of regulatory bodies, including:
- Bank of West African States (BCEAO)
- Directorate of Money and Credit (DMC)
- Regulatory Authority for Telecommunications and Posts (ARTP)
- And others
Identifying which authorities to consult can be a significant challenge, especially for new entrants.
Misaligned Regulations
Regulations often fail to align with commercial realities, creating difficulties for fintechs that operate in areas like crowdfunding. The regulatory framework on electronic signature, set up by the Agency of Information of the State (ADIE), is also complex and time-consuming, making it tough for fintechs to dematerialize contracts.
Challenges in Partnerships
Fintechs need partnerships to expand their offerings but face difficulties in negotiating with big billers and incumbent financial institutions. This can limit their ability to aggregate services and affect the viability of their business models.
Access to Financing
Access to financing remains a major challenge for fintechs, as banks are still reluctant to support emerging business models. Even guarantee funds have lengthy processes that do not cater to the development cycles of fintechs.
Lack of Ecosystem Support
The lack of an ecosystem fostering the development of fintechs is another significant obstacle. There is almost no framework in Senegal for sharing projects with research centers, large companies, public actors, and investors, making it difficult for fintechs to develop partnerships.
The Need for Support
Despite these challenges, innovation remains a key driver of digital finance growth. Fintechs need assistance to overcome their obstacles, whether related to regulation, funding, or establishing partnerships. The MM4P program is actively working with fintechs to address these issues and provide support.
Conclusion
A first meeting was organized by MM4P on September 7, 2017, to broker an exchange with fintechs on their current projects, challenges, and perspectives. The next step will be to formalize a framework to assist them in the market.
By Bery Dieye Kandji, KM Consultant in Senegal.