Mobile Money in the UEMOA Region:Overview of the legal and regulatory framework
Updated: Nov 4, 2022
Mobile Money, a digital payment platform, emerged in sub-Saharan Africa in the early 2000s. Mobile Money users are able, from their mobile phone’s SIM card, to carry out financial transactions, such as withdrawing, depositing money or paying bills. Having a bank account, a smartphone or an internet connection is not required.
Mobile Money has enabled a large proportion of unbanked UEMOA nationals – i.e., people who do not hold a bank account – to have access to financial solutions from which they could not benefit before. The low cost of Mobile Money transactions, its wide access in rural areas, as well as its ease of use, are all factors that drove financial inclusion of populations and small and medium-sized enterprises (''SMEs'') advocated by the Central Bank of West African States (''BCEAO''). In 2007, when Mobile Money was introduced in sub-Saharan Africa, banking access – proportion of the number of bank accounts in relation to the active population – in the UEMOA Region was less than 10% according to BCEAO 2007 annual report.According to BCEOA December 2021 report on the situation of financial inclusion in UEMOA, it reached 19.3% in 2020 versus an overall rate of use of financial services of 63.8% the same year.
This article provides an overview of the legal and regulatory framework of the Mobile Money sector in the UEMOA Region.
I. Regulation & sector regulators
Mobile Money is subject to Regional, as well as sectoral member states regulations. At the Regional level, 2 main texts apply: (i) Regulation n°15/2002/CM/UEMOA of September 19, 2002, on payment systems in UEMOA member states (“Regulation 15/2002”),and (ii) BCEAO Instruction N°008-05-2015 of May 8, 2015, governing the activities of electronic money issuers within UMOA (“Instruction 008/2015”). Regional regulators of the Mobile Money sector are primarily: (i) the Council of Ministers of the member states, which sets the main guidelines to be followed in the banking and financial sector in the UEMOA Region, and (ii) BCEAO, which is responsible for ensuring proper operation and stability of the banking and financial system of the UEMOA Region. It grants approvals, licenses or authorizations required to operate.
Member states legislations for their part, generally relate to telecommunications, protection of personal data and cybercrime. Some member states have also adopted legislations that govern electronic transactions. Corporate law issues are governed by laws enacted by the Organization for the Harmonization of Business Law in Africa (‘‘OHADA’’). In general, post and telecommunications regulatory authorities of the member states oversee activities of mobile telephone operators (‘‘MTOs’’) in their respective jurisdictions.
II. Sector players
Mobile Money brings together different players:
(i) MTOs, which launched the Mobile Money technology and that, until relatively recently, were the only ones able to provide mobile financial solutions. They had the advantage of controlling communication infrastructure, with a monopoly on connectivity;
(ii) Fintech companies, attracted by the dynamism of the industry, and invigorated by increasingly favorable regulations, set themselves up as competitors of MTOs and offer almost the same financial solutions at much more attractive rates. Wave Mobile Money (“Wave”), an American Fintech company is leading the way. It set up a first subsidiary in Senegal in 2016, before expanding in Côte d’Ivoire in 2020. Wave offers its services from an application that allows people to perform various financial operations at very low rates for money transfers, and no cost for money deposit and withdrawal;
(iii) Banks are also key players. They are the main partners of MTOs and Fintech companies, which initially did not position themselves as direct competitors of banks. Before Instruction 008/2015, banks were the only institutions eligible for and/or holder of a banking license, and the infrastructure allowing the issuance and exchange of money in electronic form. Therefore, they were essential partners.
Instruction 008/2015 was a game-changer in that it enabled entities other than banks to apply for and obtain an electronic money issuer license (‘‘EMI’’). Almost all MTOs operating in the UEMOA Region hold an EMI license that allows them to offer a wider range of financial solutions and products directly to their customers. In April 2022, Wave Digital Finance SA, a subsidiary of Wave, became the first non-banking, non-MTO entity to obtain an EMI license.
An EMI is defined by Instruction 008/2015 as any other entity, other than banks, financial payment institutions and decentralized financial systems, authorized to issue means of payment in the form of electronic money and whose activities are limited to the issuance of electronic money and its distribution. In practice, MTOs, because their activities do not fall under banking and financial regulations and are not subject to BCEAO supervision, create a subsidiary which will have an EMI status and will manage the license that allows it to issue and distribute electronic money. This is also the approach taken by Wave.
III. EMI License
An entity wishing to operate in the Mobile Money sector and offer financial solutions and products directly to its customers, without entering into a partnership with a bank, must first apply for an EMI license with the BCEAO. In addition, it must secure BCEAO’s authorization before starting its electronic money issuance activities.
The entity must have its registered office in one of the UEMOA member states. Instruction 008/2015 does not impose any particular legal form for the entity, but obviously, it must comply with one of the legal forms provided for by OHADA legislation, which governs corporate law in the UEMOA Region. However, the instruction indicates that the share capital of the company must be at least 300 million CFA Francs (about 440,000 USD). It must be fully subscribed and fully paid up in cash, before the EMI license is granted. However, the instruction states that BCEAO has the right to assess the adequacy of the legal form of an entity to the activities it intends to carry out.
Instruction 008/2015 provides the list of documents, and information that must be included in an EMI license application package, and other required authorizations where applicable, as well as the processing time.
BCEAO relies on Mobile Money to boost access to financial solutions in the UEMOA Region. It has been favorable to the adoption of adequate regulations that will enable Mobile Money operators to develop and improve the variety and quality of mobile financial solutions offered to individuals and SMEs within the UEMOA Region. Efforts remain to be made, in particular to ease some restrictions imposed on EMIs, and prevent that certain initiatives by Member States, particularly on the fiscal level, hamper the development of the sector and, in turn, the financial inclusion sought by BCEAO.
This article was written with the assistance of M.r Emmaüs Paul Axel Kouakou, Financial legal consultant from Côte d'Ivoire, and Ms Dieynaba Niang, law student currently pursuing an LLM. in European Business Law at the University of Luxembourg.