Mobile Payment Technologies and Services
Mobile Payment Technologies and Services
Business Model Description
Develop online payment services, including digital mobile money platforms, for facilitating cash management, and offer e-payment services on mobile phones to improve financial inclusion of excluded populations.
Expected Impact
Enhance access to financial services and e-commerce for unbanked populations and small businesses.
How is this information gathered?
Investment opportunities with potential to contribute to sustainable development are based on country-level SDG Investor Maps.
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Country & Regions
- Djibouti: Countrywide
Sector Classification
Financials
Development need
The majority of Djibouti's banking and economic activity is concentrated in big-ticket activities, resulting in a sizeable unbanked population. Djibouti has one of the lowest levels of financial inclusion in the Middle East and North Africa region, with 12% of the working age population owning a bank account. Bank account ownership falls to 5% for the 15-24 year-old category (1).
Policy priority
To stimulate private sector development, the Government has taken steps to improve the business climate of Djibouti. Its measures include adoption of a commercial code, reductions in the cost to register a business, amendments to the fiscal code and the draft law on the privatization of state-owned enterprises (2).
Gender inequalities and marginalization issues
A large share of Djibouti's micro-enterprises operate in the informal sector, which means that funding through formal borrowing practices is low. Most micro-enterprises, female and youth-owned businesses acquire their early-stage funding through individual savings, the tontine system or their families (3).
Investment opportunities introduction
Opportunities exist in digitizing cash transfer programmes, financial education measures, automating the registry maintained by the Central Bank of Djibouti, incorporating information on MSMEs and providing credit risk information, diversifying financial instruments and collaborations between banks and microfinance institutions.
Key bottlenecks introduction
Challenges include the lack of administrative capacity; geographic and cost constraints limiting the participation of women, youth and vulnerable population's participation in financial markets; high interest rate requirements; and limited range of financial products available to customers.
Corporate and Retail Banking
Development need
The financial sector in Djibouti is dominated by banks, representing 94% of total assets of the financial system and 80% of total loans to the economy (4). Other than the banking sector, Djibouti's financial sector remains underdeveloped. Its market mainly operates with cash payments due to low bank account ownership.
Policy priority
Policy priority: Promoting a single regional and inter-connected digital market, including digital payment facilitation, is one of the priority areas defined in the Horn of Africa Imitative (6). The Djibouti Vision 2035 defines increasing financial inclusion as one of the key financial goals for the country (7).
Gender inequalities and marginalization issues
Only 54% of Djibouti's women-owned businesses have a bank account as opposed to 71% of male-owned businesses (8). Gender inequality in the labor market is substantial: less than one-third of women aged 15-64 is active in the labor market, and unemployment rates stand at 50% for women compared to 34% for (10).
Investment opportunities introduction
Opportunities exist regarding digitizing cash transfer programmes, investments in e-commerce platforms and investments in mobile payment services, which are a good alternative to cash and easy for the market to adopt.
Key bottlenecks introduction
Challenges in digital banking relate to limited mobile and internet penetration, insufficient institutional and technical capacity, and users' reluctance to use mobile payment services because of security concerns (9).
Consumer Finance
Pipeline Opportunity
Mobile Payment Technologies and Services
Develop online payment services, including digital mobile money platforms, for facilitating cash management, and offer e-payment services on mobile phones to improve financial inclusion of excluded populations.
Business Case
Market Size and Environment
10% - 15%
The mobile payment system M-Pesa by Safaricom, Kenya's largest mobile network operator, recorded a compound annual growth rate of 10.9% during FY16 and FY19, in 30 day active customers (27).
In 2020, East Africa recorded a transaction value of USD 273 billion from mobile payment services. The region features 57 mobile money line services, 293 million registered accounts and 94 million active accounts (13).
Indicative Return
15% - 20%
M-Pesa, Kenya's mobile payment system, recorded a year-to-year growth rate of 19.2% (27).
Investment Timeframe
Short Term (0–5 years)
The cashflow breakdown of Safaricom, the parent company of M-Pesa in Kenya, demonstrates the investment timeframe as short-term (27).
Ticket Size
USD 1 million - USD 10 million
Market Risks & Scale Obstacles
Market - Highly Regulated
Business - Supply Chain Constraints
Business - Supply Chain Constraints
Impact Case
Sustainable Development Need
Djibouti's economic growth has not been inclusive and had low effectiveness in eradicating poverty and unemployment. One out of six people lived on less than USD 1.90 per day in 2019 (11).
Djibouti's market mainly operates with cash and physical exchanges of paper instruments. It lacks the basic infrastructure to support the development of the financial sector and foster financial inclusion (15).
The only interbank system in Djibouti is the manual check clearing house operated by the Central Bank of Djibouti. The lack of efficient payment products impedes efforts to modernize the financial sector and limits access by the population to non-cash payment instruments (15).
Djibouti has a financial exclusion rate of 87.7%, meaning that the majority of the one million citizens are unbanked or underbanked (25).
Gender & Marginalisation
Djiboutian women suffer more from the effects of poverty; only 19% of women are employed compared to 81% of men (11).
Women's access to income-generating activities is limited due to low literacy rates, which stand at 39.5% compared to 60.1% for men, falling to 9% in rural areas (11).
Only 54% of women-owned businesses in Djibouti have a bank account compared to 71% of male-owned businesses (16).
Expected Development Outcome
Mobile payment systems support equal access to transparent, affordable and technology backed platforms for low-income households and in underserved regions in Djibouti. It allows sending money directly to Djibouti's extreme poor in the most remote regions (14).
Digital platforms enhance access to payment and financial services for small businesses and reduce operational costs. It leads to increased revenues for businesses by facilitating access to e-commerce platforms through online payment schemes.
Mobile money payment systems increase economic and trade integration in the Horn of Africa due to the scaling up of the online money market through digital solutions.
Gender & Marginalisation
Mobile payment systems improve the financial inclusion of the relatively higher population of unbanked women in Djibouti.
Digital platforms financially empower women-owned businesses, which are primarily micro enterprises operating in informal markets.
Primary SDGs addressed
1.1.1 Proportion of the population living below the international poverty line by sex, age, employment status and geographic location (urban/rural)
Percentage of the population living below USD 1.90 a day stands at 13.12% (2021) (18).
0% (18).
8.10.2 Proportion of adults (15 years and older) with an account at a bank or other financial institution or with a mobile-money-service provider
8.5.2 Unemployment rate, by sex, age and persons with disabilities
12.27 % overall; 8.76% for women and 16.63% for men (2011) (17).
11.57% (2020) (18).
N/A
0.5% (18).
10.1.1 Growth rates of household expenditure or income per capita among the bottom 40 per cent of the population and the total population
Palma ratio, namely the share of income by the 10% of the population with the highest disposable income divided by the share of income received by the bottom 40% of the population, stands at 2.04 (2018) (18).
0.9 (18).
Secondary SDGs addressed
Directly impacted stakeholders
People
Gender inequality and/or marginalization
Planet
Corporates
Public sector
Indirectly impacted stakeholders
People
Gender inequality and/or marginalization
Public sector
Outcome Risks
If not managed well, the mobile payment system may carry security and data privacy risks associated with the insufficiently developed ICT infrastructure.
If rural and low-income households do not gain access to the payment systems due to lower internet penetration, the platform may reinforce existing inequalities for financial inclusion.
Impact Risks
User reluctance and limited institutional and technical capacity for the payment system may disrupt the ability to deliver impact at scale and where it is most needed (11).
Impact Classification
What
Mobile payment technologies and services provide access to financial services and digital business opportunities, including through e-commerce platforms.
Who
Unbanked populations and small businesses benefit from digital payment options and online marketplaces.
Risk
While the model of mobile payment technologies and services is proven, cybersecurity, data and technology risks, and accessibility for marginalized groups require consideration.
Impact Thesis
Enhance access to financial services and e-commerce for unbanked populations and small businesses.
Enabling Environment
Policy Environment
Strategy for Accelerated Growth and Employment Promotion (SCAPE) 2015-2019, 2014: Identifies the upgrade of the profile of the economy with modernized infrastructure and reformed sectors, including advances in telecommunications and ICT, as the main goal under the first phase of the strategy (19).
Vision Djibouti 2035, 2014: Aims to develop a diversified and competitive private sector driven economy, including an inclusive digital economy (20).
National Strategy for ICT Development, 2014: Sets an ambitious strategy for ICT development and adopts a ten-year ICT roadmap, which aims to develop and generalize access to ICT across the country (11, 21).
Financial Environment
Financial incentives: The Horn of Africa Initiative implements projects in digital infrastructure with, which include the Festoon Cable and Terrestrial Links; Regional Data Market Infrastructure and Cybersecurity; and Data Services Market: E-Government and Cross-Border Digital Payments (30).
Regulatory Environment
Law No. 80, 2014: Outlines the adoption of the Integrated Strategic Plan, the Government's ten-year ICT development roadmap covering 2014-2024 (21).
Law No. 80, 2004: Aims to reform the ICT sector and calls for the establishment of the regulatory authority Djiboutian Agency for the Regulation of Telecommunications (ADRT) (22).
Law No. 74, 2019: Establishes the Djiboutian Multisector Regulatory Authority (ARMD) to cover the telecommunications, post and energy sectors (11, 23).
Law No. 118, 2016: Covers the creation of a national payments system, its legislation and surveillance (24).
Press Release of the Parliamentary Session, 2021: Presents the draft law relating to the terms and conditions for the sale of state holdings in the capital of public enterprises; amends 1997 law relating to the conditions and modalities of privatization (31).
Marketplace Participants
Private Sector
D-Money (Djibouti Telecom), M-Pesa (Safaricom, Kenya), Telebirr (Ethio Telecom, Ethiopia), Vodafone Group, EXIM Bank, MasterCard, East Africa Bank.
Government
Ministry of Communications, Ministry of Economy and Finance, Djiboutian Multisector Regulatory Authority (ARMD), Central Bank of Djibouti, National Agency for State Information Systems (ANSIE).
Multilaterals
World Bank, International Monetary Fund (IMF), GSM Association (GSMA).
Non-Profit
German Investment Corporation (DEG), Djibouti Chamber of Commerce, Center for Leadership and Entrepreneurship (CLE).
Public-Private Partnership
Djibouti Telecom and Exim Bank partnership (29).
Target Locations
Djibouti: Countrywide
References
- (1) Oxford Business Group. 2016. Growing participation in Djibouti's financial services sector due to greater competition. https://oxfordbusinessgroup.com/analysis/lending-opportunities-increased-competition-leads-increased-participation.
- (2) World Bank. 2020. Doing Business Indicator. https://www.doingbusiness.org/en/data/exploreeconomies/djibouti.
- (3) World Bank. March 2021. Djibouti - MSME Finance Needs Assessment and Policy Recommendations. https://documents1.worldbank.org/curated/en/289941616568791338/pdf/Djibouti-MSME-Finance-Needs-Assessment-and-Policy-Recommendations.pdf.
- (4) International Monetary Fund (IMF). October 2018. Technical Assistance Report - Financial Soundness Indicators Mission. https://www.imf.org/external/pubs/ft/scr/2016/cr16249.pdf.
- (5) World Bank. March 2021. Djibouti - MSME Finance Needs Assessment and Policy Recommendations.
- (6) Horn of Africa Initiative. 2020. Key Priority Projects to Deepen Regional Integration. https://hoainitiative.org/wp-content/uploads/2020/11/HoA-Initiative-KEY-PRIORITY-PILLARS-Brochure_FINAL.pdf.
- (7) Republic of Djibouti. 2014. Vision Djibouti 2035. http://ccd.dj/w2017/wp-content/uploads/2016/01/Vision-Nationale.pdf.
- (8) World Bank. March 2021. Djibouti - MSME Finance Needs Assessment and Policy Recommendations.
- (9) World Bank. October 2020. Djibouti Digital Foundations Project Information Document. https://documents1.worldbank.org/curated/en/854401603922890710/text/Concept-Project-Information-Document-PID-Djibouti-Digital-Foundations-Project-P174461.txt.
- (10) World Bank. January 2019. E-Commerce: Helping Djiboutian Women Entrepreneurs Reach the World. https://www.worldbank.org/en/news/feature/2019/01/14/e-commerce-helping-djiboutian-women-entrepreneurs-reach-the-world.
- (11) World Bank. October 2020. Djibouti Digital Foundations Project Information Document.
- (12) Vodafone Group. 2021. What is M-Pesa? https://www.vodafone.com/about-vodafone/what-we-do/consumer-products-and-services/m-pesa.
- (13) GSM Alliance (GSMA). 2021. State of the Industry Report on Mobile Money. https://www.gsma.com/mobilefordevelopment/wp-content/uploads/2021/03/GSMA_State-of-the-Industry-Report-on-Mobile-Money-2021_Full-report.pdf.
- (14) Brookings Institution. July 2016. Ending Poverty with Electronic Payments. https://www.brookings.edu/wp-content/uploads/2016/07/FayeNiehausEndingPovertywithElectronicPayments.pdf.
- (15) First Initiative. 2021. Djibouti: Upgrading the Financial Sector Infrastructure. https://www.firstinitiative.org/stories/djibouti-upgrading-financial-sector-infrastructure.
- (16) World Bank. March 2021. Djibouti - MSME Finance Needs Assessment and Policy Recommendations.
- (17) UN Global SDG Database. 2021. SDG Indicators. https://unstats.un.org/sdgs/indicators/database.
- (18) Sustainable Development Report. 2021. Country Profiles: Djibouti. https://dashboards.sdgindex.org/profiles/djibouti.
- (19) Government of Djibouti. 2015. Strategie de Croissance Accélérée et de Promotion de l'Emploi. https://economie.gouv.dj/wp-content/uploads/de95d383afef8bcbe0a3bc609a7f5c76.pdf.
- (20) Republic of Djibouti. 2014. Vision Djibouti 2035. http://ccd.dj/w2017/wp-content/uploads/2016/01/Vision-Nationale.pdf.
- (21) Government of Djibouti, Ministry of Communications. 2021. Djibouti Numérique. https://communication.gouv.dj/pages/DetailPages/76.
- (22) Government of Djibouti, Ministry of Communications. Présentation du secteur des Postes et des Télécommunications. https://communication.gouv.dj/pages/DetailPages/48.
- (23) Presidency of the Republic of Djibouti. Loi N° 74/AN/20/8ème L portant création de l'autorité de régulation multisectorielle de Djibouti (ARMD). https://www.presidence.dj/texte.php?ID=74&ID2=2020-02-13&ID3=Loi&ID4=3&ID5=2020-02-13&ID6=n.
- (24) Presidency of the Republic of Djibouti. Loi N° 118/AN/15/7ème L portant création d'un Système de Paiement National, sa Réglementation et sa Surveillance. https://www.presidence.dj/texte.php?ID=118&ID2=2016-07-16&ID3=Loi&ID4=14&ID5=2016-07-31&ID6=n.
- (25) MasterCard, 2015. East Africa Bank Partners with MasterCard in Djibouti to Introduce the Benefits of Electronic Payments. https://newsroom.mastercard.com/mea/press-releases/east-africa-bank-partners-with-mastercard-in-djibouti-to-introduce-the-benefits-of-electronic-payments.
- (26) Developing Telecoms. July 2021. Ethio Telecom reports a 22% jump in subscribers to 56.2 m. https://developingtelecoms.com/telecom-technology/consumer-ecosystems/11518-ethio-telecom-reports-a-22-jump-in-subscribers-to-56-2m.html.
- (27) Safaricom. May 2019. 2019 Full Year Results Presentation. https://www.safaricom.co.ke/images/Downloads/Resources_Downloads/FY2019/FY2019_Results_Presentation.pdf.
- (28) Business Insider. August 2017. The World's 2 Billion Unbanked, in 6 Charts. https://www.businessinsider.com/the-worlds-unbanked-population-in-6-charts-2017-8.
- (29) Republic of Djibouti, Ministry of Communications, Accord de Partenariat entre Djibouti Telecom et l'Exim Bank. https://communication.gouv.dj/Articles/DetailArticles/132.
- (30) Horn of Africa Initiative. February 2021. Description of Priority Projects and Readiness. https://hoainitiative.org/wp-content/uploads/2021/03/HoAI-Project-Profiles.pdf.
- (31) Presidency of Djibouti. 2021. Communiqué de la 11ème Séance du Dimanche 11/07/2021. https://www.presidence.dj/conseilministresuite.php?ID=11&ID2=2021-07-11.