Military Coups and Financial Inclusion in West Africa

Military coups have become more frequent in some parts of the West African sub-region in recent years. This has created an atmosphere of uncertainty, insecurity, and mistrust, which has impeded the progress of financial inclusion efforts. In this post, we will examine some of the challenges and opportunities for financial inclusion in five West African countries that have experienced coups in recent times: Mali, Burkina Faso, Guinea, Niger, and Gabon.

Mali 🇲🇱: Mali has been experiencing political turmoil and unrest since 2012, causing significant economic challenges. The country has faced two coups in 2020 and 2021, further weakening the government's legitimacy and effectiveness. This instability has had a mixed impact on financial inclusion. On one hand, the coups have disrupted the banking system, resulting in liquidity shortages, reduced lending activity, increased credit risk, and lower depositor and investor confidence. On the other hand, this situation has created demand for alternative financial solutions such as mobile money. Mobile money accounts for 80% of accounts used for payments, transfers, savings, and insurance, showing its effectiveness as an alternative financial solution.

Burkina Faso 🇧🇫: Burkina Faso has been experiencing political instability and security challenges, leading to two coups in 2022, resulting in significant economic setbacks. These factors have had an adverse effect on financial inclusion, particularly in formal banking services. However, despite these challenges, mobile money services remain resilient in the country.

Guinea 🇬🇳: In 2021, the military in Guinea staged a coup and took President Alpha Conde into custody. Despite the political unrest, mobile money has played a crucial role in facilitating remittances, which contribute to approximately 6% of Guinea's GDP. However, financial inclusion in Guinea still faces significant challenges, including low financial literacy, weak regulatory policies, high informality, and low trust in the financial system.

Niger 🇳🇪: Niger, one of the world's poorest and most vulnerable nations, has faced several challenges recently, including a coup in 2023. These setbacks have had a negative impact on financial inclusion, which is already at a low level in the country, especially compared to other West African nations. The people of Niger face several barriers to accessing formal financial services, such as low financial literacy, weak regulatory framework, high informality, and low trust in the financial system.

Gabon 🇬🇦: Despite having a high GDP per capita due to natural resources, such as oil, Gabon is currently facing political instability. The country has experienced controversial elections and a coup in August 2023, which have disrupted the normal way of life. Although the full impact of the coup is yet to be determined, Gabon faces many challenges in achieving greater financial inclusion, such as low financial literacy, a weak regulatory framework, and high informality. Despite these challenges, I believe that mobile money can still provide access to essential financial services, including remittances, utility bill payments, savings, and insurance, during these turbulent times.

Military coups can have devastating effects on the financial sector. The government institutions that oversee financial regulation, such as the Central Bank, the Ministry of Finance, and the Financial Intelligence Unit, are often suspended or dissolved, creating a void of authority and accountability. This can lead to a loss of trust in the financial system by both the public and private sectors. Additionally, coups may result in curfews, states of emergency, internet shutdowns, and other restrictions on movement and communication. These measures can significantly disrupt the normal functioning of financial service providers like banks, microfinance institutions, mobile money operators, and fintech companies, further destabilizing and undermining the credibility of the financial system.

The stability of the financial system is vital. Therefore, it is crucial to resolve military conflicts through peaceful means while adhering to democratic and good governance commitments. In addition, affected countries must create a supportive environment for financial inclusion by improving their legal and regulatory frameworks, strengthening their financial infrastructure and literacy, encouraging innovation and competition in the financial sector, and safeguarding the rights and interests of their people.

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