The penetration of digital financial services (DFS) in Benin has simply been spectacular. In 2014, the UN Capital Development Fund (UNCDF) estimated that just 2 percent of Beninese adults had an active mobile money account. The central bank, Banque Centrale des Etats de l’Afrique de l’Ouest (BCEAO), counted only 134,766 active e-money accounts from the two DFS providers in the country: Mobile Telephone Networks (MTN) and Etisalat Moov. Things have really changed. By the end of 2017, UNCDF estimates indicated that 33 percent of Beninese adults had an active mobile money account.

Benin is entering an era of second-generation DFS, with three initiatives that involve bank-to-wallet integration between mobile money operators and banks already going live. Contactless payments and QR codes are available for users. Pay-as-you-go energy products are steadily progressing, thanks to a partnership between MTN and solar energy providers such as ARESS, Fenix International and Qotto.

That’s definitely spectacular! The UNCDF programme MM4P, in partnership with the Mastercard Foundation, has played an important role in this ongoing success story. When MM4P entered the Beninese market in 2015, access was a key issue. In collaboration with MIX Market, the programme launched a service-point mapping platform to identify gaps in distribution. Along with the Helix Institute of Digital Finance and PHB Development, MM4P trained providers on agent network management and digital finance. The programme engaged in a distribution diagnostic with the providers MTN and Moov. Investments in dedicated field teams, agent profiling, onboarding and ongoing training resulted in a market boom in the mobile money agent network from less than 3,000 agents in 2014 (as per a UNCDF scoping mission) to over 28,000 active agents at the end of 2017 (as per a UNCDF annual provider survey). More clients are being served, even in rural areas.

However, experience has shown that the adoption of DFS depends largely on whether the services resonate with customers and truly meet their needs. Thus MM4P, together with Innate Motion and PHB Development, supported key providers to adopt human-centred design in order to better understand their customers and to empower them with convincing educational messages. While providers had already invested in above-the-line marketing, the trigger occurred when they prioritized investment in below-the-line marketing activities with a smart combination of community ‘brand ambassadors’ and airtime bonuses. These strategies all aimed at giving customers a reason to try DFS, to take their first steps towards DFS adoption with mobile money.

Another key activity that MM4P undertook was to launch and facilitate a national DFS Working Group. Looking back at 2015, ‘silos’ in the DFS industry existed: microfinance institutions (MFIs) on one side, banks on another and mobile network operators in the middle, with an overarching message that each provider type should stay in its lane—leaving finance to the banks, inclusion to the MFIs and telecommunications to the mobile network operators. By convening these stakeholders each quarter for the DFS Working Group, MM4P helped break down these information silos and share examples from other markets of successful partnerships among banks, MFIs, fintechs and e-money issuers. MM4P put significant effort into working with MFIs, in particular, to assist them on their voyage of digital transformation, from DFS capacity-building workshops to institutional diagnostics with selected MFIs and technical assistance to establish partnerships for new services.

Today, the DFS ecosystem in Benin is quite diverse. The first meeting of the 2019 DFS Working Group took place on 28 March, with a focus on second-generation DFS. This time, the stories were not from other markets but instead from Beninese providers and fintechs presenting savings-group solutions, pay-as-you-go energy success stories, m-health applications and more. There are lessons to learn from the inspiring path Benin has taken to reach an M-Dorado.^* Here are three of them:

First, there needs to be a conducive environment. Without it, little can happen. Benin was the first country in West Africa to design a digital legal and regulatory framework: the Code du numerique. The country also made a commitment to the Better Than Cash Alliance and is working on numerous initiatives to digitize payments and services, such as electronic visas to enter the country.

Second, without an accessible digital payment ecosystem, DFS cannot achieve their potential impact. In Benin, DFS providers substantially invested (and still do) in expanding agent networks in order to improve accessibility.

Last, client adoption should be encouraged, so that users understand first-hand the benefits of DFS. It all comes down to offering and explaining that there is a compelling value proposition for customers to adopt DFS.

Yet, there is still work to do in Benin. In the latest annual provider survey that the programme conducted, MM4P asked providers about the challenges they currently face. Here is a summary of the challenges they named:

• • Little readiness in rural areas for DFS adoption, due to low levels of literacy, phone ownership and digital skills as well as poor infrastructure (energy, GSM network quality, etc.)
• • Lack of interoperability of payment platforms, unsuitable MFI core banking systems, and mobile money APIs closed to integration with start-ups
• • Regulatory ambiguity on topics like USSD access, digital credit and an agency banking framework for MFIs

For DFS to achieve even more impact, Benin needs to take a leap forward towards inclusive innovations—some more complex than others. These innovative services could include utility bill payment options via mobile money, digital savings, digital credit, micro-insurance and digital solutions targeting agriculture to improve productivity. Moreover, stakeholders should ensure access to finance for women, youth and small producers and extend the reach of basic services such as health, education and water.

As per a GSMA state of the market report, the country has joined a cohort of emerging DFS markets—Benin along with Côte d’Ivoire, Ghana and Senegal—where 54 percent of the combined adult population actively uses mobile money.^** If a digital revolution is possible in Benin, it should also be so in more West African countries. UNCDF is looking forward to helping make it happen. For now, the programme is proud to have aided Benin along the road to M-Dorado, in partnership with the Mastercard Foundation, and the team looks forward to the next steps on the journey.

*M-Dorado is the concept of digital financial services ‘paradise.’ See more on the concept here: https://www.uncdf.org/article/350/m-dorado-fact-or-spoof

**Francesco Pasti, ‘State of the Industry Report on Mobile Money 2018’ (London, GSM Association, 2019).