Opportunities and Challenges for Expanding Financial Inclusion in Tunisia

October 13, 2015

Eric Fahrner l Shutterstock.com

Tunisia grabbed the world’s attention when it sparked the first revolution at the start of the Arab Spring in 2011. It has since made important transitions, adopting a new constitution and appointing a democratically elected government in late 2014. Its hard-fought political progress has been threatened, however, by ongoing economic stagnancy, high unemployment (15% for adults, 33% amongst youth), and domestic security issues.

The country’s Ministry of Finance is preparing a financial sector modernization plan for 2015–2020 that outlines more than 20 areas ripe for policy reform, including financial inclusion—defined as the access and use of financial services such as credit, savings, payment services and insurance by households and businesses.

In this regard, a recent analytical snapshot on financial inclusion, produced by the World Bank and Consultative Group to Assist the Poor (CGAP), provides important insights for Tunisian policymakers.

Despite these assets, financial inclusion remains limited. The 2011 national microfinance strategy estimated that around 30% to 40% of the adult population (i.e. 2.5 to 3.5 million individuals), and more than half the enterprises in Tunisia (i.e. 245,000 to 425,000 registered businesses) remained unserved or underserved by the mainstream financial sector. Two recent market studies corroborate these figures: the 2015 study by the World Bank and the Center of Arab Woman for Training and Research (CAWTAR), found that two-thirds of adults are excluded from or underserved by the formal financial sector and the 2014 Findex study[1], in which only 27% of adults reported holding an account with a formal financial institution. In addition, extensive qualitative research shows that low-income people have active financial lives but have to resort to informal financial services that may be both risky and costly.


Potential demand versus current supply of savings and credit in Tunisia

The total market is estimated as follows: 1) Savings: total = adult population or 8.4 million individuals; 2) Credit to individuals = estimate of 950,000 (2014 study); 3) Credit to enterprises = all businesses in the national registry RNE (654,200 in 2013). Further studies are required to better quantify the numbers and relevant amounts, especially for credit.

Existing supply has not adapted to existing demand, with many people using informal services for savings and credit. Banks have low portfolio quality: about 15% of loans are in arrears and the banks lend primarily to salaried workers; in 2013, there were about 16 billion TND (7,265 billion euros) in outstanding loans spread across 1.3 million borrowers, according to the Central Bank. About 338,000 businesses were financed in 2013.

The majority of financial institutions consider the very small, small, and medium enterprise (VSSME) segment of micro-financing, risky and opaque. A 2014 IFC survey found that people working in 29% of the VSSMEs it had examined had never attempted to open a bank account; 37% reported needing financing but never contacting a financial institution; 78% used cash to pay their suppliers, and 91% used cash to pay their employees

The postal savings account network is almost as extensive as that of the entire banking sector and far more evenly spread across Tunisia; in 2014, it had 1,051 branches. It is thus a key player when it comes to financial inclusion. But it has only 178 ATMs, and a quarter of its branches are not connected to a central server. They also have relatively limited opening hours and strict minimum payments, making the network difficult to use for micro-savings requiring regular withdrawals and very small deposits. Over 50% of the 5.5 million postal accounts are anyway inactive, with no transactions having been made for the past two years or longer.

In 2011, legal reform laid the foundation for the development of the microfinance sector, authorizing new actors as associations and limited liability companies, and creating a modern regulatory agency (the microfinance supervisory authority). In the past 12 months, authorizations have been granted to four newly-created companies (Taysir, Microcred Tunisia, Advans Tunisia, and the Entrepreneurship Financial Center). Given this sectoral expansion, Micro-Finance Institutions (MFIs) are set to play an important role in financial inclusion in Tunisia.

Other financial service providers, including leasing companies and insurance providers, comprise only a negligible part of Tunisia’s financial sector. Insurance company premiums represent less than 2% of the country’s GDP. Digital finance, the provision of financial services through electronic means, has seen some progress in recent years, with four services on the market. These products, however, offer limited services, lack inter-operability, and have seen limited uptake. Remarkably, less than 4% of Tunisians use mobile financial services.

Looking ahead, the opportunities for financial inclusion in Tunisia are significant. There remain, however, a number of structural and short-term challenges to overcome. Expanding beyond microcredit to develop savings, micro-insurance, and payment services would require:

  • identifying a high-level advocate for financial inclusion;
  • coordinating a national financial inclusion strategy;
  • conducting a thorough market study to obtain nationally-representative and up-to-date data on market characteristics;
  • clarifying the role of different public and private actors in the market (e.g., Tunisian Post, banks, microfinance institutions, mobile network operators, among others);
  • and finally, developing a robust consumer protection framework to manage sectoral growth and address ongoing challenges.

Overall, financial inclusion can be an important mechanism to promote economic growth and provide a better future for low-income Tunisians. Progress will require public and private actors to work together beyond their narrow institutional interests to pursue reform through concerted action. But—given the recent reforms in the microfinance industry, the reach of the Tunisia postal savings system, and recent opportunities to expand digital finance—Tunisia has the opportunity to set the example for other countries in the region, providing much needed hope for micro-financing in Tunisia and beyond.


[1] The Findex survey, developed by the World Bank with financing from the Gates Foundation, is based on representative surveys of the population covering 148 countries and comprising a series of indicators on the use of financial services.