Developing mobile banking in Madagascar

Despite a difficult context and protracted crisis situation, Madagascar’s financial sector remains dynamic and resilient to the crisis. There are currently eleven territorial banks, including three microfinance institutions (MFIs) with a banking licence. The banking sector is, however, highly concentrated: the four main banks hold 86% of loans. The banking penetration rate, i.e. access to a bank account, among Madagascar’s population stood at 5.7% in 2014, making the country’s financial sector one of the least developed in Sub-Saharan Africa.

The microfinance sector is developing well, with a 17% penetration rate among households. However, there is strong competition between microfinance institutions in urban areas, while rural and remote areas are neglected.

Mobile banking, an initiative of private mobile phone operators, provides access to financial services via a mobile phone. In 2011, mobile banking had already reached 700,000 people in Madagascar in less than two years of operation, i.e. as many as the current number of microfinance clients after twenty years of existence. In late 2014, there were 890 service points and some 1,300,000 clients for an outstanding loan amount of some EUR 145m.

The AFD mobile banking project aims to: Increase the penetration rate of the financial services offered by microfinance institutions in rural areas by developing the mobile banking service; Reduce transaction costs for microfinance clients in rural areas thanks to mobile phones.

• There are a number of outcomes expected from this project, which starts in 2016, including: Increase in the number of microfinance clients in rural areas; Increase in microfinance flows transiting through remote banking systems in rural areas;
• Reduction of fees for the financial services offered via the remote banking solution;
• Increase in the outstanding credit and savings of MFIs in rural areas;
• Increase in new clients in rural areas using remote banking solutions.