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Exus Blog Article

Challenge or opportunity? North Africa and the unbanked

6 minute read


Though the region is evolving, North African banks are still working to provide a secure and viable path to financial inclusion for all. 

Banking the unbanked across North Africa has long been a fruitful opportunity. It is also, however, a lengthy game to play, as banks slowly develop and integrate products that attempt to capture the interest of those who either don’t have the access to financial services or simply don’t trust them.

The use of analytics, AI, and big data (the three pillars of digital transformation in banking) are still growing in this area, but initiatives that use them to create innovative and cost-effective digital banking services can not only play to the already banked and increasingly demanding consumer but the unbanked consumer too.

But what local challenges are individual countries facing when it comes to encouraging digital uptake? How quickly are things changing on a local level and how do these local changes affect the region’s unbanked as a whole? And more importantly, what opportunities does this present for retail banks?


There are over 44 million unbanked adults living in Egypt alone. Whilst the numbers might be rising (33% of adults in 2017 up from 11% in 2011) the inflexibility of banks in the region (not to mention their outdated legacy systems) means that the vastly unbanked population is still not being catered for.

Far from being a burden, however, lenders should instead be seeing this potential challenge as a serious opportunity. With only 1 in 3 working Egyptians having a bank account to their name, there are two-thirds of the market waiting to be tapped. With the economy expected to expand by 5.5% this year, the timing couldn’t be more ideal, but the right approach is key.

The central bank is taking a rather aggressive approach by offering licenses to foreign lenders and expanding the services offered to SMEs. Retail banks are where the greatest opportunities lie though, with major long-term growth potential. Indeed, Monsef Morsy, co-head of research at Cairo's CI Capital, estimates that retail lending represents a quarter of banks' combined loan value.

An academic study taken by S&P Global Market Intelligence in 2018 found that only 14% of Egyptians borrow from financial institutions. 55% choose to borrow from family or friends and 24% use credit and repay in installments. What is required for lenders is some incentive for Egyptians to change their borrowing habits. Digital can be the USP here.

In Egypt, only 11% of bank customers prefer to use the internet or mobile to complete transactions, with 78% still preferring to use a traditional branch. However, the banks are preparing for a shift to digital. Indeed, Egypt as a whole is undergoing a quite significant digital transformation right now. Recent reports suggest the central bank of Egypt is studying the effects of digital currency and ways to regulate it. Perhaps they could be considering issuing an Egyptian cyber currency similar to the expected joint Saudi-UAE digital currency project?

The country’s Ministry of Finance, meanwhile, feels that the country has financial inclusion within its reach thanks to the government's electronic payment and collection system. This launched in May and made government services more accessible to the country's citizens at their actual prices. 

Prepaid banking cards are also being made available free of charge at some of the country’s biggest banks until the end of the year and the ministry has also addressed citizens' payment of government dues. Now, any amount exceeding EGP 500 can be paid at a local post office.


Even though only 37% of the country had access to banking services until recently (it’s now estimated that around 60% of the population have at least one bank account), Morocco is one of many African countries currently poised on the cusp of a mobile money renaissance. 

In 2015, a law was passed by the central bank of the Kingdom of Morocco that allowed non-banks to offer payment solutions and the gates were officially flung wide open to other players, including Islamic banking and fintech companies. 

Offering access to Sharia-compliant services and products has had a transformative effect on the banking industry in Morocco, but it’s arguably the access the new regulations allow to digital solutions that stand to really transform the industry in the long term.

One particular sector that stands to benefit from these new and improved regulations is the mobile money sector, which is also being helped along quite comfortably by the country’s mandatory national identification cards. These cards represent a similar system to India’s Aadhaar biometric identity system and the country is actually working alongside the Indian government to implement the program.

The ubiquity of identity cards (and the fact that the mobile penetration rate in the country sits at around 130%) has meant that Moroccans are that much more open to accepting the idea of mobile banking. The m-Wallet (e-wallet) service is just one of many experimenting with mobile banking in the country. The Morocco CFG bank, meanwhile, is working with US-based digital banking specialists Kony on a “long-term digital transformation strategy” that aims to help Morocco enter the world of digital-first banking.

Digital solutions offer a range of advantages for low-income earners, which chimes neatly with the goals of the recent government coalition led by the Justice and Development Party (PJD). This coalition, which was appointed in the Spring of 2017, has rolled out several pro-poor reforms focusing on social protection programs, job creation, and reducing economic disparities across the country. 

According to the World Bank, economic performance is expected to stabilize in the coming years, with the overall fiscal deficit expected to converge to around 3% of GDP by 2021. A greater emphasis on digital transformation to allow low-income earners and women (around 40% now use banking services, up from only 25% a few years ago) to enter the banking world will undoubtedly help to make this optimistic prediction an inevitability.


Whilst Egypt and Morocco represent the fastest-growing side of North Africa’s economy, there are other countries also trying to help get their populations banked. The proportion of Algerian adults with a bank account had increased from one-third in 2011 to one-half in 2014, while the share of the adult population with a debit card increased from 13.5% to 21.6% over the same period. 

There has been even more progress in the last five years, but Algeria is still in the early stages of development when it comes to the internet and mobile banking. However, many market observers believe the potential is there. As long as the relevant legal, regulatory, and logistical frameworks are put in place, of course. 

The groundwork has already been laid. Towards the tail end of 2016, for example, 11 banks and nine companies participated in the launch of Algeria’s first e-payments service. By the end of that year, around 5000 e-payment transactions had been carried out and the service had accumulated around 930,000 subscribers.

The new government formed in 2017 also brought with it a pledge to reform banking in the country with an increased focus on mobile payments. Rachid Sekak, the senior consultant at BRS Consultants, said: “Mobile banking has the potential to greatly improve financial inclusion by increasing the proportion of the population that is ‘banked’, but there are three fundamental issues that need to be addressed for this to happen.”

He believes that there needs to be a mechanism for establishing identity, a protocol to ensure that financial institutions can access telecoms networks, and a greater focus on data protection before Algerian customers can have any confidence in a mobile banking system. Regulation is also still lacking.


Neighbouring Tunisia, meanwhile, is seriously considering utilizing digital banking to help boost its economy. In a media statement made during a seminar on digital banking at the headquarters of the Tunisian Confederation of Industry, Trade and Handicrafts (UTICA), the general manager of Monetique Tunisie, Khaled Bettaieb, said that greater digitization (and incentives for digitization) were required. He explained: “Tunisia records 2.4 million online payments for a volume of about 166 million dinars.” A figure that proves there is evolution but which he feels is insufficient.

There are, of course, some banks sticking their necks out above the digital waters. Arab Tunisian Bank (ATB), for example, recently partnered with Temenos to launch a thorough digital transformation program involving e-payments, analytics, and cloud technology, which it hopes will increase revenues by 40% in 2020.

The root problem is still that many Tunisians simply don’t trust their banks. New mobile banking apps such as the recently launched “Paymee,” however, are helping mend fences by allowing those who cannot easily access financial services, but who own a smartphone, to shop, transfer funds and pay bills online in a more secure and practical way. 

Since its launch last year, Paymee has attracted over 2,200 users, though just 2% of Tunisians have a mobile money account, compared with 4.4% worldwide, so there is obviously still a lot of ground left to be claimed.

It’s ultimately all about financial inclusion when it comes to capturing the unbanked in regions where trust and incomes are statistically low. Only when local banks and governments start to focus on this via digital transformation can progress be made in capturing unbanked groups with the same voracity as Egypt and Morocco.

Banking the unbanked

Based on the experiences of Egypt and Morocco, the inherent potential in digital banking has the scope to move more North African countries closer to universal bank access and, perhaps more importantly, a situation where people in the region can finally trust their banks.

There is still a heavy reliance on cash-based transactions in the continent, which is putting the brakes on many digital financial inclusion projects. However, the evidence would seem to suggest that many fintech companies are helping to ease the region into the 21st century. There is also evidence that the antiquated ideas that have led to so many women in the region being unbanked are beginning to melt away and that’s a major potential market indeed.

Around 86% of men and 75% of women in the region own mobile phones, so the potential is definitely there if banks and financial service providers are willing to look past (or adapt to) the challenges posed by geopolitical tensions and the displaced populations in the region.

What’s required is for governments and banks to work together to encourage further innovation by implementing effective regulatory practices and making greater investments in digital transformation. Then lenders should be able to present the unbanked institutions and individuals in the region with more enticing opportunities that will appeal to a much broader African audience.

Written by: Chris Maranis

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