The mobile money sector in Madagascar is at a critical juncture following debates over a new proposed tax bill that many experts, businesses, and stakeholders are labeling as inefficient and dangerous for the country’s growing digital economy. Mobile money services are a lifeline for millions of Malagasy citizens, providing financial inclusion in a country where traditional banking services are scarce.

Key Players in Madagascar’s Mobile Money Industry

Madagascar has three major mobile money providers:

1. Orange Money Madagascar: A leader in providing nano-loans and cashless payment services. They’ve heavily invested in reaching underserved rural areas.
2. Telma’s Mvola: Another significant player, focusing on bill payments and savings platforms.
3. Airtel Money Madagascar: Known for its accessibility and ease of use for simple money transfers.

Additionally, microfinance institutions like Première Agence de Microfinance (PAMF) are integrating mobile technologies into their platforms, allowing users to apply for loans or open accounts directly through apps like Facebook Messenger.

Challenges Ahead

The government’s tax proposal aims to impose higher levies on mobile money transactions, which has sparked fear among stakeholders. The tax is seen as a disincentive for low-income users and could potentially slow down Madagascar’s impressive growth in mobile money adoption, where transaction values doubled between 2016 and 2020 to $639 million.

Adding to the complexity are Madagascar’s broader challenges, such as low mobile penetration (54% of the population lacks mobile access), weak internet infrastructure, and limited financial literacy. The new tax could exacerbate these issues, potentially cutting off millions from digital financial services.

Economic Context

Madagascar’s reliance on mobile money is crucial for financial inclusion, with over 10 million mobile money accounts outnumbering traditional bank accounts. The digital finance ecosystem also supports essential services, from agriculture payments to government tax collection. However, without improved regulations, the sector risks losing its momentum.

Conclusion

The IMF and the African Development Bank have been called upon to intervene and offer guidance to ensure that Madagascar’s mobile money growth is not stifled by policies that may harm both businesses and consumers. These institutions could play a vital role in balancing government revenue needs with sustainable financial inclusion.