Senegal
Senegal is a country located in West Africa, known for its rich cultural heritage and diverse economy. The country has made significant strides in various sectors, including employment, entrepreneurship, and banking. The official language is French.
General and sector information on Senegal
Increasing importance of microfinance: announced paradigm shift in sector policy
While Senegal enjoys a commendable level of political stability, it continues to face significant social and economic challenges. An estimated 40% of the population lives in poverty, and widespread educational gaps present major hurdles to development. These challenges particularly affect the country’s young population, limiting access to vocational training, employment, and sustainable income opportunities. According to the World Bank around 40% of adults are illiterate, a quarter of school-age children do not attend school, over 40% of primary school pupils drop out of school early and 40% of the population is under 15 years old (WB, 2022).
The Ministry of Microfinance and Social and Solidarity Economy is talking about a paradigm shift in sector policy. Financial inclusion for local employment and income is to be the new benchmark by which the microfinance sector must be measured and is the premise according to which it is to be promoted by the ministry and its agencies and departments in future. "Financement ciblé", targeted financing, is to be one of the central funding instruments.
The microfinance sector therefore plays a particularly important role in the implementation of the government's development goals. Important contributions to local economic development, employment and income, social security and solidarity are attributed to the sector. However, there is a lack of nationally recorded and evaluated data on the economic sectors and population groups served by the microfinance sector and its income and employment effects.
The Ministry of Microfinance and Social and Solidarity Economy is convinced of the socio-economic power of cooperative structures. However, the many so-called Mutuelles d'Epargne et de Crédit in the microfinance sector are said to not (or no longer) rigorously implement the cooperative principles in practice. In this context, reference is also often made to tried and tested traditional structures, such as the community-based savings and credit associations, known as tontine or calebasse, which, according to the ministry need to be strengthened as effective agents of change
The microfinance sector and its challenges
The microfinance sector in Senegal has grown strongly in recent years and is considered an important reference in the West African Monetary Union (WAMU). It ranks first in terms of the total amount of outstanding loans and savings deposits. Around 83 % of the population is considered financially included (BCEAO, 2023). Around 20 % are included in the microfinance market.
This growth is characterized by the emergence of new financial service providers, such as mobile money and FinTech companies in particular. However, these services bring with them new risks, particularly as regard the security of transactions and consumer protection.
The sector is very diverse in terms of legal form, affiliation and size. A few large structures make up most of the market, alongside a large number of small, often professionally weak structures, often registered as so-called Mutuelles d'Epargne et de Crédit (MEC) and which operate on a community basis in rural regions, some of which are severely underserved.
The sector, with 4.3 million clients, is made up of a total of 297 microfinance institutions (MFIs) of different legal forms, governance structures and sizes, with a total of 913 service points in the country (BCEAO, 2024). There are mutual associations, savings and credit cooperatives, credit unions, NGO MFIs and commercial MFIs in the form of limited companies.
There are among others four umbrella organizations (Fédération des Caisses du Crédit Mutuel du Sénégal, Union des Mutuelles du PAMECAS, Union des Mutuelles de l'ACEP, Union des IMCEC) and 12 individual microfinance institutions without umbrella organization (such as BAOBAB-Senegal, COFINA, MECAP, CAURIE-MF).
The sector's total outstanding loans are significantly higher than savings mobilization, at almost 32% (DRS-SFD, 09/2024). The sector is therefore dependent on (favorable) external refinancing for its lending business
Poor management, weak internal controls, low levels of competence among managers and board members and inadequate consumer protection are among the problems that still jeopardize the trustworthiness, performance and stability of the sector today.
On average, the microfinance sector does not comply with the key regulatory indicators and prudential ratios relating to liquidity, capital adequacy, profitability and the proportion of non-performing loans (portfolio at risk, PAR) (DRS-SFD, 12/2024).
The new microfinance regulation: strengthening the credit cooperative sector
At its meeting in December 2023, the Council of Ministers of the West African Monetary Union (WAMU) adopted the draft of a uniform law to regulate microfinance in the WAMU. The new law has been in force in Senegal since beginning of 2025.
In addition to stabilizing the sector by strengthening the governance of existing microfinance institutions as well as customer protection, this reform focuses on regulating and limiting respectively the credit interest rates in order to promote lending for productive purposes. The reform also aims to enable MFIs to offer new financial services and products, including leasing, factoring, mobile money and Islamic finance.
The introduction of minimum capital requirements and the reduction of possible legal forms to public limited companies and cooperatives will pose major challenges for a relatively large number of small mutual associations (so-called Mutuelles d'Epargne et de Crédit). These will have to transform themselves institutionally within a year into a duly registered cooperative company (société coopérative, SCOOP), which may also require the merger (so-called réseautage) of small associations to meet the revised capital requirements. The key stakeholders in the sector (among others: Ministry of Microfinance - MMESS, Directorate for Microfinance and Financial Inclusion - DMIF, National Association of Microfinance Institutions - APSFD, Central Bank - BCEAO, Regulatory and Supervisory Authority - DRS-SFD) are currently discussing adequate approaches to support the sector's compliance with the new regulation. The supervisory authority is planning to revise the supervisory indicators to better monitor compliance with the cooperative principles and the minimum criteria for effective board work, among other things.
Ongoing Project
Senegal has been integrated into the regional project since January 1, 2025.
BMZ Funded - "Sustainable transformation of the financial sector by strengthening the credit union sector and
promoting equal representation of women and youth in West Africa (regional project)"
Project work in Senegal will focus on the following activities:
- Facilitating the networking of partners in the regional project;
- Initiation and establishment of a sustainable project partnership in Senegal through a formal cooperation agreement;
- Establish sustainable working relationships with selected actors in the microfinance sector (such as the national association APSFD) in accordance with the cooperation agreement;
- Joint identification of areas of cooperation and intervention, taking into account the changed framework conditions resulting in particular from the new microfinance legislation, the new promotion strategy of the Ministry of Microfinance and Social and Solidarity Economy (MMESS) and its Directorate for Microfinance and Financial Inclusion (DMIF) and the new development strategy of the National Association of Microfinance Institutions (APSFD).
Completed Projects
BMZ Funded - "Securing livelihoods through employment and entrepreneurship in Senegal" 01.09.2023 - 31.12.2024
To address current challenges in a sustainable way, the National Association of Microfinance Institutions (APSFD-Senegal) launched a self-directed strategic initiative known as the Associative Project. This effort aimed to strengthen the association's overall performance. DSIK supported the process with an external consultant who provided methodological guidance and technical expertise. At the end of this consultancy APSFD determined seven strategic areas of improvement and intervention, each with determined actions to be taken, areas such as communication, internal collaboration, human resource development, innovation, refinancing, etc. It is expected that the resources and competencies of the association and its members will be used and exploited first to ensure ownership and sustain the Associative Project of APSFD.
One project measure in the area of basic financial education that deserves special mention was the pilot of a radio program. In cooperation with a structure of the Ministry of Finance, the Observatoire de la Qualité́ des Services Financiers (OQSF), and the social enterprise Jokalante, the radio program Sabablou was produced with 13 thematic episodes and broadcasted by five local radio stations in Wolof. The broadcast was accompanied by a Facebook-based advertising campaign, the establishment of listener clubs, decentralized broadcasts, and the setting up of a feedback telephone number. The broadcast potentially reached 4.9 million listeners. The evaluation of the project measures confirmed the intended positive results. For example, over 40% of those surveyed said that they now have a better understanding of the importance of saving. OQSF plans to continue this pilot project, for example by broadcasting the same radio program in other regions of the country and/or producing the program in another local language.
GIZ Funded - "Promoting Access to Finance for Micro, Small and Medium Sized Enterprises in Senegal"
The project aimed to promote access to finance for the target group in Senegal... Read More
Steffen Ulrich
Long-Term Expert-Regional Project
Senegal