West African Trends Newsletter: Banking the Unbanked

February 2, 2012
In West Africa, over 80% of the population are outside the scope of formal banking. This unbanked population, mostly small farmers, traders and small entrepreneurs in the informal sector have limited access to mainstream banking services. In recent times however, the banks in the region are beginning to find new ways to facilitate access to financial services for this population.

This has the potential to strengthen the banking sector in the region and increase opportunities for the poor and vulnerable. The unbanked in the sub region may not lie outside the banking sector by choice. Often banks do not offer products that can be profitably tailored to their needs. In addition, they do not have sufficient disposable incomes to sustain an account and have limited access to banks especially in remote or rural areas. A lack of trust between the formal banking sector and the unbanked has widened this gap.

In this issue we examine three strong signals which indicate a drive towards developing more effective banking systems that reach the vast majority of the population. The first article explores how mobile banking and traditional ‘Susu’ savings schemes are expanding the banking ecosystem. The second article discusses how Islamic banking – a model of banking that charges no interest on loans – could offer new affordable options, especially to West Africa’s vast Muslim population. The third article explores how banks founded in West Africa are opening operations across the region, and broadening financial access beyond borders. Building more inclusive financial systems is important; it not only accelerates economic growth, but also expands and equal izes opportunities for all. These trends have the potential to transform the landscape for banking in the future and possibly the lives of the poor and vulnerable in the region.

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