Alliance for Financial Inclusion

Comoros lays the groundwork for its first ever National Financial Inclusion Strategy

Comoros financial inclusion

In August, The Banque Centrale des Comores (BCC) officially began work on the country’s first National Financial Inclusion Strategy (NFIS) as part of an AFI-led training workshop.

The event that occurred on 10th August, aimed to guide key stakeholders and BCC staff in formulating and implementing an NFIS to drive forward the country’s broader financial inclusion ambitions.

With this move, the BCC hopes to increase access to financial services and raise awareness among stakeholders of the pivotal role financial inclusion could play in reinforcing the country’s economic stability and the financial well-being of its people.

Challenges and Financial Inclusion Policies

While poverty has declined in recent years, spatial and geographical inequalities persist. Due to its geographical challenges and political instability, the economy faces economic challenges and lacks diversification. Plus, Hurricane Kenneth and COVID-19 have provided additional challenges to Comoros’ economic development.

Comoros has undertaken a number of steps to promote socio-economic development in the country. Its Poverty Reduction Strategy Paper Strategy for Accelerated Growth and Sustainable Development (SCADD; 2015-2019) is being updated to reflect the new government’s aim to promote growth through investments in electricity, roads, and telecommunications. A new Country Partnership Framework (CPF) with the WBG is being developed to determine areas of cooperation and priority.

The 2023 NFIS training workshop reflected BCC’s longer-term aspirations to advance inclusive growth in Comoros. In recent years the BCC has embarked on ambitious projects as part of its plan to modernize the country’s payment system – making it safer and more efficient to use.

Currently, 25% of the Comorian population has a bank account

Today, “only 25% of the Comorian population has a bank account”, explained BCC Governor, Dr. Younoussa Imani who attended the event along with BCC Vice Governor, Faouzia Radjabou. That’s well below the 55% regional average, according to the Global Findex Database. Governor Imani believes that the success of the country’s monetary policy depends heavily on financial inclusion, which is why the BCC decided to make the NFIS a top priority.

«The Central Bank has been an adherent member of AFI since the beginning of 2023. As a result, we benefit from the technical and operational support of the institution. The BCC has made financial inclusion its orientation, its vision for the orientation of the banking sector For the conduct of its monetary policy», stressed Governor Imani.

What About Smart Payments?

Compared with other African countries, the payment landscape is critically underdeveloped, perpetuating reliance on cash transactions, which are costly, inefficient, and risky. Several factors explain why cash remains the primary method of payment across all levels of society and economic sectors.

The use of cash is driven primarily by the lack of payment alternatives made available at retail level such as mobile money, cards, online payments. POS devices are essentially used in hotels and travel agencies, leaving the retail market fully cash-based. Innovation in the banking sector is also limited as banks have not invested in modernizing payment services.

Despite BCC efforts to allow Non-bank Financial Institutions (NBFI), such as e-money institutions and MFIs to issue payment instruments, the regulatory framework for fintech has yet to enable the digital transformation of the financial sector. Thus, BCC has attempted to limit extensive cash usage by requiring the use of non-cash payments for transactions equal to or above one million KMF (US $ 2,358); however, cash usage is still high.

The Need to Build a National Strategy

Financial institution branches in the little African country have more than doubled in the past 15 years. Microfinance institutions, more specifically, have played an important role in the country’s financial inclusion progress and serve as a major contributor to the Comorian economy.

However, increased research and investment in digital financial services, mobile money, and interoperability could go a long way in realizing the country’s full financial inclusion potential – especially in rural and semi-rural areas.

«Comorians’ reluctance to form part of the formal financial system is what first revealed the need for more advanced financial inclusion initiatives – stressed BCC’s Swabira Saïd, a member of AFI’s Financial Inclusion Strategy Peer Learning Group, to media. This is why the first thing we wanted to do after becoming a member of AFI was to build the national strategy».

A Cross-National Collaboration: From Morocco to Madagascar

As AFI sayed, the peer learning model also formed a core part of the training with two of its principal members – Madagascar’s Ministry of Economy and Finance and Morocco’s Bank Al-Maghrib – delivering presentations of their own experience in NFIS development and implementation.

This provided BCC staff with valuable insights on increasing stakeholder buy-in and ownership – a vital factor in bringing any NFIS to life, explained Ibtissam El Anzaoui, who heads up the Financial Inclusion division at Bank Al-Maghrib. For Morocco’s NFIS “we conducted three workshops to co-construct” the strategy.