Burundi is the world’s poorest nation, according to gross national income (GNI) per capita. Could fintech boost financial inclusion to the East African landlocked country?
The low-income nation of Burundi, formally colonised by Germany and later Belgium, is officially the world’s poorest nation with GNI per capita at only $270. In comparison, Qatar is the highest in the Middle East and Africa (MEA) – and one of the world’s highest, Qatar – at $92,080.
Burundi’s second largest city, Gitega, became the country’s political capital city in 2019. While the former, Bujumbura, is still the country’s largest and main commercial city. Due to the legacy of the Belgians, the country’s official language is French (joining other African nations in the Francophone circle), alongside Kirundi (a local Bantu-origin language). In 2014, English also became an official language.
The economy of Burundi comprises mainly of financial aid and agriculture. With the latter, the country’s primary exports are coffee and tea, which accounts for 90 per cent of foreign exchange earnings. Other goods the country produces include stones and metals, blankets, shoes, assembly of imported components for instance.
With regards to financial aid, since 2015 much of that has suffered due to its political situation. Nonetheless, the country receives it from various sources such as the USA, which reported earlier this year that it would be giving Burundi $400million in aid after it lifted sanctions.
Burundi is poor and much of it is underdeveloped. Burundi still ranks among the world’s least developed countries (it was ranked at 185th place out of 189 countries on the Human Development Index (HDI) in 2019), and over 70 per cent of its population lives below the poverty line.
As of April this year, less than one per cent of the population has been vaccinated against Covid-19. It is also estimated that over half of the population is chronically food insecure. Much of this can be attributed to a lack of adequate access to health care, clean water and overall extreme poverty. According to the World Bank, less than 12 per cent of the country’s population has access to electricity.
Burundi is currently home to 1.74 million people requiring humanitarian assistance, of which 53 per cent are women, 58 per cent are children, and 15 per cent are people living with disabilities. Ninety per cent of the popular rely on agriculture for their livelihoods.
While not unique to African as a whole when it comes to the unbanked, in Burundi there are particularly low figures. One source puts the figure of the adult population being banked as low as seven per cent.
Despite being overshadowed by its agriculture sector, financial services still plays a part in the economy of the country. Some of the major banks include Banque Commerciale du Burundi, Banque de Gestion et de Financement and Banque de Credit de Bujumbura. The central bank is Banque de la République du Burundi (or in English the Central Bank of Burundi).
In January 2022, the number of mobile connections in Burundi stood at almost seven million – equivalent to 59 per cent of the total population of almost 12 million people. Nonetheless, the mobile money ecosystem in Burundi is nascent, according to the Global System for Mobile Communications (GSMA).
The Burundian Agence de Regulation et de Controle des Telecoms requires all SIM cards to be registered and owning multiple SIMs requires authorisation as generally it is forbidden. Also, mobile money penetration is only at over one per cent in the country.
According to the same source, mobile phone penetration is at 31 per cent for basic and feature phones and over 25 per cent for smartphones. In the developing world, studies show that many people will often use their relative or friend’s mobile device for payments or even conducting basic services like making a phone call.
For general economic development to happen anywhere, there should be political stability and policies in place to promote businesses and economic growth (including attracting foreign direct investment (FDI) and boosting international trade capabilities).
Unfortunately, the country has had its own challenges hampering its development, such as civil war. Until recently the country faced a sanctions list, implemented in 2015 by the US and the European Union after Burundi’s then president Pierre Nkurunziza sought to change the constitution to hand him a third term. Violence also later erupted in the country.
Despite its challenges there have been positive developments in the country. For instance, since the introduction of free primary education in 2005, the gross enrollment rate in primary education reached 115 per cent during the 2020/21 school year without significant variation between provinces, gender or wealth levels.
Also, the country has implemented its own economic development strategy called Vision Burundi 2025.
Vision Burundi 2025 is described an ambitious plan for ensuring that the people of Burundi can disengage themselves from the vicious circles of conflict and poverty, transforming the country into a haven of peace and prosperity.
So could fintech thrive in the country?
Compared to much of the rest of the world, fintech in Burundi is still in its early stages. However, its potential and value can still be seen.
Due to many in the population requiring humanitarian aid, cash and voucher assistance (CVA) could further play a role in the country, as well as mobile money generally. CVAs have doubled since 2016, and in 2019 totaled $5.6billion globally. However, a large percentage are digitally illiterate (as well as with reading and writing) and there is a low mobile rate of ownership.
There are at least 350,000 Burundians who live abroad and remittances present another opportunity for fintech to show its value for the population. This year, transaction value in the digital remittances segment is projected to reach $0.98million in Burundi.
As with all of MEA, payments and paytech, as well as mobile transfers and remittances, see the biggest opportunity and this includes Burundi.
What are some of the solutions in the country?
There is IBB Mobile Plus by Interbank Burundi (IBB). Created in 1993, Interbank Burundi is the first 100 per cent private Burundian bank in a market dominated by institutions whose capital was once primarily owned by the State of Burundi. Last year, IBB chose Skaleet’s core banking platform to launch its digital bank – IBB M+, offering a range of digital banking services of individuals, companies and institutions.
With humanitarian aid, Concern Worldwide has sent CVAs via mobile money. GSMA’s Mobile for Humanitarian Innovation programme partnered up with Ground Truth Solutions to apply a human-centred design approach to understand the user journeys of Concern Worldwide’s cash recipients in Burundi and published its findings in a report called Mobile Money Enabled Cash Assistance: User Journeys in Burundi.
The report provides insights into how humanitarian organisations and mobile money providers can optimise their cash programming, enhance the user experience, and unlock the wide-ranging benefits of digital and financial inclusion with focusing on Burundi. Therefore, aid as a whole and the digitalisation of it, which the pandemic further highlighted its importance, can further show opportunities in Burundi.
There is also Burundi fintech iHelá, which is a one-stop platform to manage one’s bank accounts from anywhere on the globe. IHelá gives people access to all their bank accounts online – from checking balances to making payments as well as international money transfers – to name a few.
Despite the early-stage fintech environment in the country, the sector can help the nation across many verticals as the country aspires to one day leave its current situation and grow economically.
Yes, there is a lack of infrastructure and challenges to overcome, but fintech has begun helping bring wider financial inclusion to the country. Its further economic development – both direct and indirect – and wider digital transformation can hopefully play a role in alleviating the country from its low-income ranking.