« Fintech », contraction of « technology » and « finance », refers to a structure that offers innovative financial products and services without itself being a financial institution (bank, microfinance institution...). In Senegal, Fintechs are entering into the market, offering various products and services that could contribute to the growth of digital finance in the market. However, they are having to experiment in an environment that is not necessarily set up to favor them.

If you're a Fintech start- up be prepared for the following challenges:

1. As a Fintech, you must develop innovative offerings, in accordance with the existing legal, financial and tax regulations in Senegal. But who are the authorities with whom you need to validate this compliance? Identifying them will be your first big challenge. There is more than a dozen in the country: Bank of West African States (BCEAO), Directorate of Money and Credit (DMC), Regulatory Authority for Telecommunications and Posts (ARTP), Directorate of Micro Finance (DMF), just to name a few.

2. You will also have to deal with regulations that are not always aligned with your commercial realities. For example, if crowdfunding is your core business, you may suffer from banks’ monopoly on providing credit and the regulatory context around public offering.

3. The regulatory framework on electronic signature, set up by the Agency of Information of the State (ADIE), can be complex for Fintechs to understand. To dematerialize contracts, you will need a lot of time and patience. This may be tough for a structure whose originality is its ability to develop instant and digital offers.

4. A Fintech needs to build partnerships to expand its offerings. In Senegal one of the difficulties in this area is the weak bargaining power with big billers and incumbent financial institutions and operators. This may impose constraints for Fintechs whose business models are mainly based on the aggregation of services. This leaves little room for them to maneuver which could in turn affect the viability of their business model.

5. Despite robust growth potential, finding financing remains a challenge for Fintechs. The banks are still reluctant to finance emerging business models. And even if there are guarantee funds, their processes are often too long and unsuited to the development cycles of Fintechs.

6. Another problem, you must be aware of, is the lack of an ecosystem fostering the development of Fintechs. There is almost no framework in Senegal to share your projects with research centers, large companies, public actors, and investors, and develop partnerships.

This last point probably includes all the obstacles to the development of the Senegalese Fintechs. So where does this leave Fintechs? Is there a future for these new market players?

Yes, because innovation, the main added value of the Fintechs is one of the core drivers of digital finance. When it comes to digital financial services, people are hungry for innovative services tailored to their needs and aspirations

Fintechs in Senegal need assistance to overcome their challenges, whether these are related to regulation, funding or establishment of partnerships.

The MM4P program whose mandate is to act as a neutral broker in market and bring together all the relevant stakeholders in digital financial services, is actively working on assisting Fintechs in the regard. A first meeting was organized on the 7th of September2017, in the offices of MM4P, to broker an exchange with Fintechs on their current projects, challenges and perspectives. The next step will be to formalize a framework to assist them in the market.

By Bery Dieye Kandji, KM Consultant in Senegal.

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