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The Impacts of

Microfinance Institutions and Mobile Banking

on the Rise of Entrepreneurship

in West Africa:

The Case of Senegal

Tagan Horton

Advisor: Dr. Myoung-Shik Kim

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Why are microfinance institutions and mobile banking needed to stimulate entrepreneurship in West Africa?

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The dependency model as defined by Dos Santos

“ [...] assumes the form of dependence when some countries [the dominant ones] can expand and they can be self-sustaining, while other countries [the dependent ones] can do this only as a reflection of that expansion, which can have either a positive or a negative effect on their immediate development.”

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Why is entrepreneurship repressed in the West African Franc Zone?

Globalization

Colonial History

West African Franc Zone

Neoliberalism

Informal Sector

Entrepreneurship in West Africa

50%

Now we are going to look at 3 components that contributed to the repression of entrepreneurship

Entrepreneurship is repressed by neoliberalism that is perpetuated through globalization and the colonial history that created the West African Franc Zone.

What is neoliberalism? It is a benevolent guise that keeps the West African Franc Zone trapped in a cycle of debt. In the 1950s, just before the wave of independence began to grace the continent of Africa, the idea of development was first introduced.

-IMF and World Bank: short term assistance and no long term development

-Therefore, FZ countries rely on foreign investments to “mitigate imbalances between public budget deficits and private savings”.

But there is a reason for this as well.

Countries within the African Franc Zone recieve free convertibility of the CFA franc and the French Franc (FF). Initially, the CFA Franc was valued at 1 CFA to 0.02 FF. This was in exchange for two things:

(1) France gives guarantees to the African Franc Zone countries in case of a deficit in the balance of payments;

(2) African Franc Zone countries must deposit 65% of their exchange reserves with the French Treasury Fund.

- As a result, West African countries under France’s neo-colonial sphere of influence must negotiate their sovereignty in exchange for free convertibility. In other words, these countries surrender their state rights in order to have access to the international market.

The last point of repression I want to mention is the divide between the informal and formal sector

When I was studying abroad in Senegal on my walk to school I would see vendors selling NesCafe…..Maybe afterschool I would go to Marche HLM or Marche Sandagal… These entrepreneurs make up the “informal market”

-In Senegalese urban areas, the informal sector account for 50% of employment. Therefore, why is it considered the informal market?

-This is a difficult question because…

-This research uses the International Labor Organization’s definition: “ease of entry, reliance on indigenous resources, family ownership, small-scale operation, and unregulated and competitive market.”

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Theoretical Model

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Microfinance Institutions

“Micro” refers to the “level at which action is directed is that of the individual, or

in some programs, several individuals who form a small group for the purpose of obtaining

loans.”

Money lender
Rotating savings and credit groups (ROSCA)
Credit institutions with minimal requirements for entry and exit.

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L’Entente Féminine

Awa Tall (right)

The main purpose of L’Entente Féminine des Sicaps is to enable members to have income-generating activities that allow them to preserve their dignity and that of their families. It derives its resources from the membership fees of its members and those generated by the products of their activities.

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Mobile Banking

Increases access to capital and financial inclusion
Provides a safety net by increasing access to others

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M-Pesa

M-Pesa lifted 2% of Kenyan households out of poverty. (Suri and Jack)

Safaricom

After a year of partnering with M-Pesa, the service had over 2 million users.

Orange

Orange is an example of the collision between mobile banking and foreign influence in West Africa.

A report done by Tavneet Suri and William Jack of Science Magazine, found that the M-PESA mobile money platform brought 194,000 households out of poverty.

Suri and Jack surveyed Kenyan households on their spending, jobs and more between 2008 and 2014. They mapped each household and nmoved 2 percent of Kenyan households out of poverty. It notably helped 185,000 women shift from working as farmers to business or retail.

Safaricom used its existing network of sellers to also act as M-PESA agents. It took off immediately. More than 2 million people used M-PESA a year after its launch. This number increased to 8 million by the end of 2009.

From my research I found that mobile banking platforms can have a positive impact on financial inclusion. M-Pesa and Safaricom are Kenyan companies.

Orange is a French company that is the largest cellular service in Senegal. THey also have a mobile banking service that is widely used.

Mobile banking can increase financial inclusion but when it it is provided by a foreign entiry it works to support foreign investment over domestic growth it further deepens the Franc Zone’s dependence on France.

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Conclusion

Under the influence of neoliberalism, the global south has experienced extreme deregulation of their respective economies. This has made their land and labor vulnerable to foreign capital that undermines state-led development. Neoliberalism has created the environment for foreign companies to profit in the global south through systems that reflect the cultural norms of the global north while the global south is forced to assimilate. As a result, economic systems and processes in the global south are not designed to empower individual entrepreneurs and stimulate domestic economic growth.

Microfinance institutions and mobile banking are community-based solutions that align with the socioeconomic culture of Senegalese people. Particularly, ROSCAs and domestic-based foreign services can increase access to capital and financial inclusion. As a result, they have a positive impact on entrepreneurs.

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Thank You!