By Thierno Seydou Nourou SY, President and Founder of Nourou Financial Consulting (NFC) Dakar-Senegal.
Despite a satisfactory evolution of the main indicators of the microfinance sector in the WAEMU over the past two (2) decades, marked notably by a predominance of large institutions representing nearly 90% of the sector’s assets by the end of 2024, a significant portion of our population, especially the most vulnerable groups, remains excluded from access to financial services. The promotion of a new type of microfinance institution called Participatory Microfinance Cooperative Companies (SCMP) could be a relevant first step in addressing this issue.
For two (2) decades, the financial landscape of the West African Monetary Union (WAEMU) has gradually diversified with the emergence and development of new actors. Decentralized financial systems (SFDs), now called Microfinance Institutions (MFIs) following the entry into force of the Microfinance Regulation Law adopted in December 2023 by the WAEMU Council of Ministers, have contributed to expanding the range of financial services and to healthy financing of economies.
These actors, benefiting from a regulatory and prudential framework more flexible than that applicable to banking institutions, were for many years mainly constituted in the form of cooperatives and mutuals, but also associations or credit projects set up by NGOs. Their social purpose mainly consisted of offering microcredit or savings products and services to a target group generally excluded from traditional financial systems.
This regulatory flexibility, which aimed more to promote microfinance initiatives towards the most vulnerable groups, attracted the interest of large international groups that have developed within the WAEMU through the establishment of several subsidiaries in the form of joint-stock companies (S.A).
With strong equity, sometimes as much as certain credit institutions, they practice regulatory optimization by operating as banks without bearing the regulatory and prudential requirements. They have certainly contributed to the professionalization of the microfinance sector, to expanding access to credit, and to financial inclusion, but it must be noted that this inclusion is selective and the social mission entrusted to MFIs has been distorted. Ultimately, the arrival of these MFIs in the form of Joint-Stock Companies has significantly contributed to the consolidation of the financial and prudential indicators of the sector while moving it away from its initial objectives. In other words, it has contributed to the establishment of a strong finance, but not a fairer one.
The dilemma of the gap: financial strength versus social mission
The dominant model, structured around large MFIs constituted as joint-stock companies (SA), has deeply transformed microfinance in the WAEMU – but at the cost of a major strategic shift: priority has been given to meso-finance, i.e., small urban traders and already formalized micro-enterprises.
This choice, rational from a prudential perspective and attractive to investors, has had a direct consequence: the maintenance of rural populations; precarious women, young people without capital, and actors in the informal economy; on the margins of the system.
Their needs – adapted agricultural loans, secure local savings, support, training – have become the blind spot of a system more oriented towards financial performance than social transformation.
This distant governance, where the beneficiary has no say, and this standardized product offering have emptied microfinance of its original mission: empowering the excluded and creating capabilities within communities. We have gained stability but lost social impact.
The imperative of a new paradigm: the commons-based approach
Faced with this impasse, it is urgent to innovate by drawing inspiration from a deeply African solution, already implemented in several countries: the MC2 model (Means and Competencies of the Community) based on an effective and profitable cooperative model.
An origin rooted in African practices
MC2 finds its origin in:
● traditions of mutual aid and solidarity (tontines, village associations),
● community mechanisms for social regulation,
● Elinor Ostrom’s principles on common goods, which demonstrate that a self-organized community can manage a collective resource better than a private market or a distant bureaucracy,
● Amartya Sen’s capabilities development theories, for whom finance is only an instrument in the service of expanding life choices,
● empowerment microfinance oriented towards dignity rather than profit.
Clear and deeply transformative objectives based on the cooperative principles of the International Cooperative Alliance.
● Total local ownership: members are owners, managers, and controllers of the institution.
● Democratic governance: “1 member = 1 vote.”
● Mobilization of savings before credit.
● Continuous support: financial education, monitoring, skills reinforcement.
● Endogenous development: decisions and investments are made locally.
The ambition is not simply to finance projects but to transform individuals, to create agency and strengthen the economic and social resilience of communities coming together around a common bond.
Already observed results
MC2 experiences implemented in Africa have shown:
● a tangible reduction in monetary and multidimensional poverty,
● strong empowerment of women,
● a resurgence of entrepreneurial spirit,
● high social discipline,
● institutional resilience superior to traditional MFIs.
This model has proven itself: it creates deep inclusion, where most joint-stock microfinance companies only create surface-level inclusion or focus on mesofinance.
The missing link in WAEMU public policies
The strategic advantage of MC2 is its unique ability to become the operational receptacle for national financial inclusion programs.
Throughout the WAEMU, states are deploying funds to support youth and women entrepreneurship, guarantee mechanisms, and economic inclusion programs – such as the DER/FJ in Senegal, Youth Insertion Funds, agricultural financing programs, or digital inclusion initiatives.
However, these programs often face three (3) major obstacles:
1. fragmentation and inefficiency of distribution channels,
2. low proximity to beneficiaries,
3. lack of local monitoring and accountability.
Cooperative companies under the OHADA Uniform Act on cooperative society rights are a continuum of the concept of mutualistic or credit cooperative institutions, as it was retained in the regulation of SFDs. This type of structure serves as a vector for popularizing public policies towards vulnerable groups (women, youth, rural populations) in terms of their territorial coverage. Indeed, they make an effort to establish themselves outside urban centers and to get closer to beneficiaries.
The governance system practically relies on peer control, as it is the cooperative members (clients) who are the shareholders of the institution by releasing a social share, and naturally constitute the governance bodies (Board of Directors, supervisory body, etc).
Furthermore, credit and savings cooperative companies create multiplier effects through internal savings and solidarity and anchor programs in a durable social infrastructure close to local realities.
To concretize this vision without weakening the financial system, it is proposed to put in place incentives to encourage Participatory Microfinance Cooperative Companies (SCMP) and, if necessary, reward them based on objective criteria articulated around their social mission.
While governance by members and cooperators can be a weakness as they may not be equipped to assume responsibilities within the financial structure and may not be familiar with the complexities of financial regulations, alternatives can be put in place. These include establishing a strong and effective internal control system, reviewing accounting by auditors, and providing regular training to strengthen the capacities of leaders.
Within networks of cooperative companies led by an umbrella structure, a delegated supervision could be put in place that would confer strong responsibilities on this central structure in terms of internal control.
The delegated supervision would focus on audit, information systems, elected officials’ training, and risk consolidation.
The regulator would thus benefit from a unique and reliable interface, representing a major innovation compared to the current hierarchical model, while respecting the fundamental principles of stability. This model is perfectly compatible with the principle of proportionality already encouraged by the BCEAO.
A model perfectly aligned with the strategic priorities of the WAEMU
As part of the ongoing regulatory transition with the upcoming adoption of implementing texts for the Microfinance Regulation Law, some of which relate to governance frameworks, defining relevant criteria to measure social impact and the level of achievement of the social mission would be timely. This would help complement and address structural gaps to achieve its most pressing strategic objectives:
● Empowerment of women and youth,
● Rural development,
● Digital inclusion (phygital communities),
● Reduction of multidimensional poverty,
● Increased effectiveness of public policies.
Conclusion: towards an anchored and regulated commons finance
The WAEMU is at a crossroads. It can be satisfied with a numbers-based inclusion policy, driven by strong but socially limited institutions, or it can dare to leap towards transformative inclusion.
The cooperative company model provided by the new Microfinance Law and the addition of a series of criteria related to the social mission, combined with a set of incentives, offer this new and realistic path: finance rooted in territories, regulated, inclusive, and carrying local economic sovereignty. This proposal complements the existing framework by building on its legal and prudential foundations but goes beyond by creating a pillar dedicated to “deep inclusion.”
It is time to make communities not just customers but the owners and actors of their financial destiny. For the regulator, supporting this innovation is strengthening the resilience of the financial system as a whole by integrating the power of organized communities. The challenge is no longer just access to credit: it is about building a regulated economy of the commons for the future of the people of the WAEMU.
(1) The MC2 model is an innovation “made in Africa” born in Cameroon from the vision of Dr. Paul K. Fokam. It proposes a synthesis between formal finance and traditional community practices, placing autonomy, economic democracy, and local development at the heart of the microfinance process.
This article was also inspired by the doctoral thesis of Mr. Guy Laurent Fondjo, President of Afriland First Holding (AFH) of the Afriland First Group.
