Although Tunisia is home to a large number of locally and foreign-backed banks from the public and private spheres, access to financial services remains difficult for many. The World Bank describes inclusive financial services in the country as “fragmented, incomplete and difficult to access”, and the proportion of Tunisians formally involved in the financial system is low in comparison to neighbouring states. The World Bank’s Financial Inclusion Index found that 27.3% of adults held accounts at a formal financial institution in 2014 (28% of whom had neither deposited nor withdrawn money from it over the previous year). This compared to 50.5% of adults in Algeria the same year and 39.1% in Morocco 2011 (2014 data for Morocco is not available) – though the figure was substantially better than the 14.2% recorded across developing countries in the Middle East as a whole.
A key building block of improved financial inclusion is proximity to financial services, and on this metric the country performs reasonably well by regional standards – Tunisia had 18.2 commercial bank branches per 100,000 adults in 2013, below the figure of 24.1 in Morocco, but well above Algeria on 5.1. However, banks are concentrated in the coastal areas, leaving Tunisians in interior regions underserved.
Post Office
In this and other respects, the country’s post office is an important player as regards financial inclusion. Tunisians can open and access savings accounts at the institution’s network of 1051 branches, more than two-thirds as many as the combined size of Tunisian banks’ branch network. Furthermore, the network is more broadly spread out over the country compared to the banking branch network, providing Tunisians in rural and under-developed areas of the interior of the country with access to a financial institution.
The post office is developing technology to further boost its clients’ access to services. While it does not offer credit, the institution provides payments and electronic money services and is moving to develop these following an agreement in October 2015 with local tech start-up DigitUs and Swiss firm Monetas to build a payment platform and smartphone application that will allow its clients to pay bills and merchants as well as transfer money and send remittances using an existing national electronic currency, the e-Dinar. Fees for the service will be capped at TD1 (€0.46) and will usually be substantially lower.
Boosting Networks
Financial inclusion polices are one of 20 areas identified as in need of reform by a plan to modernise the financial sector being implemented by the Ministry of Finance between 2015 and 2020, and the authorities are taking further measures to boost the availability of financial services in underserved regions. In late 2015 the authorities announced plans to launch a new “Banque des Régions” (regional bank) that will provide financing for development projects, via loan guarantees, in under-developed interior regions. Other state-backed banks are expanding their branch networks. “Our expansion programme was put on hold until 2013, but we will be opening new branches steadily over the next three to four years and developing a presence in areas where we were previously absent,” Kmar Zawedi, director of planning and management control at Banque de l’Habitat, told OBG.
Microfinance
The microfinance sector, for which the World Bank estimates there is demand from between 30% and 40% of the population, is emerging as a key route to financial inclusion for poorer Tunisians, especially as microcredit associations are concentrated in interior regions of the country. “Microfinance and mobile banking are key tools for increasing the penetration rate of the banking sector in Tunisia,” Ahmed El Karm, chairman of the executive board of Amen Bank, told OBG.
Thus, the authorities have made the development of the segment a priority, and 2011 saw the launch of a new government vision for microfinance and, later the same year, the passage of a law on microcredit allowing private companies to enter the market. The law also established a regulatory body for the segment, the Microfinance Supervisory Authority.
Prior to the passage of the regulations the market was made up of one national-level provider, namely a microfinance association known a ENDA, as well as 289 (as of 2011) small local microcredit associations. The number of active borrowers stood at around 240,000, according to World Bank figures.
At least four private companies now offer micro-credit, while the number of microcredit associations has fallen to around 150 after many were unable to lend due to new regulatory requirements imposed in 2011. ENDA remains a key player, with nearly 250,000 clients and assets of over TD240m (€110.1m), according to a recent World Bank report on the segment.
Charlotte Beck, project officer at the French Development Agency, praised the regulatory framework that has been put in place for the segment. “The sector developed quite late, which allowed the authorities to identify problems affecting microcredit in other countries, learn from them and put in place regulations to prevent them from occurring in Tunisia,” she said. “Everything was done to make sure microcredit developed in a controlled and well-supervised manner,” she told OBG, citing for example the creation of a micro-lending risk register (rarely found in the segment) and noting that the regulatory framework was conservative enough to prevent excessively rapid growth and risk of over-indebtedness from bringing about a crisis in the segment, as has occurred in other countries in the region.
Examples of regulatory restrictions on activity in the segment include a cap on loan values of TD20,000 (€9170) – a limit that Hassen Zargouni, chairman of the board at local firm MicroCred, said both micro-lenders and clients would like to see raised (due to inflation growth and the specific needs of some SMEs) – while the interest rate chargeable for loans refinanced by public funds is capped at 5% (plus 2.5% commission), and an as yet unspecified rate cap is also due to be introduced for other loans.
Challenges
The segment does, however, face several challenges, prominent among which is the issue of financing. The 2011 regulations do not permit microfinance institutions to take savings and, as with the leasing segment, bank lending to the segment is not refinanceable by the central bank, reducing its attractiveness to banks as a borrowing client.
“The sector is fighting to be able to offer micro-savings accounts in order to diversify and bring down the cost of financing,” Zargouni told OBG. “MicroCred has been able to obtain reasonable bank lending rates thanks to exceeding our business plan’s targets and our membership of an international group, but some other firms are finding financing difficult,” he said.
Given the limited bank credit available to the sector, a number of micro-lenders remain mainly reliant on funding from international institutions, which is not sustainable in the long term. Some institutions are also looking into the possibility of issuing bonds to support their financing needs.
Zargouni said mobile banking was another avenue that could represent a major opportunity for the industry, but that the country’s infrastructure and legal framework were not ready for it. “Tunisia’s entire e-commerce system is stalled,” he told OBG, citing the lack of e-signatures as an example. “The central bank hasn’t looked properly at the issue, though the Ministry of Finance is now starting to work on it.”
Expansion Plans
While IMF figures put microcredit at just 0.3% of total bank lending currently, firms in the sector have ambitious growth plans. For example, Zargouni told OBG that MicroCred intends to expand its branch network, in particular in the country’s interior regions, and increase its client base from around 2000 to 200,000 within the next five years.
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