The GDP of Burundi is one of the lowest in the Africa region since the country is dependent on agriculture as the mainstay of the economy. The banking sector covers most of the transactions in Burundi, accounting for around 80% of all transactions in the country. However, the financial systems in the country also portray microfinance and mobile money structures with the majority of the citizens in the country. Consequently, financial technology in the country is not well developed. However, in recent years, the trends promise better financial innovations, which are the predicted future for the financial world.
Fintech in Burundi is still in its early stages compared to their fellow countries such as Kenya, Nigeria, and South Africa. The financial technology of Burundi is still a growing prospect that cannot be compared to their neighbor Kenya who enjoys a vast of financial technology models from Mobile banking services to the latest cryptocurrency technology. Although there are a few mobile banking technologies in Burundi, the country is still miles behind its neighbors, who have established digital banking systems such as Mpesa and Equitel, among the leading technologies in Africa. The country attracts foreign aid to set up such digital financial platforms; an example is a collaboration between TagPay and Interbank Burundi (IBB) in 2020.
The country’s development is less affected by the financial sector. The banks have been prevented from involving long-term investment and lending due to high economic and political risks. The financial industry is non-conducive to lending because it is not used as development finance but as a source of rent. This has made it unable to address the needs of the primary drivers of growth; agriculture and industry.
Burundi’s financial sector has had a negligible impact on the country’s progress. Banks have been unable to engage in long-term loans due to high political and economic risks, limiting long-term investment. Furthermore, because the banking sector is employed more as a source of rent than development finance, its industrial organization is not conducive to development lending; as a result, Burundi’s financial industry has been unable to meet the needs of the country’s main drivers of growth, agriculture and industry. As a result, enhancing the financial sector’s engagement in Burundi’s economic development will necessitate improved political and microeconomic stability and increased long-term resources for financial institutions. Growth banking, in particular, should play a role in promoting agricultural and rural economic development. Furthermore, increased financial sector competition should be upgraded to diversify financial services and expand the sector’s limits beyond the typical urban market to include the rural economy, which accounts for the majority of economic activity.
Burundi’s digital finance sector is still underdeveloped, but attempts are underway to turn it into a growth engine. The Central Bank has released regulatory texts on payment institution services and operations and the role of commercial agents in bank transactions as part of its regulation and supervision of digital financial services. As part of the fund transfer service offer, the Central Bank approved two (2) Instant Money Transfer Institutions (ETIA) in 2017. Two microfinance organizations have teamed together with telecom providers to provide digital financial services.
A new banking law, No. 1/17, enacted on August 22, 2017, broadened the extent of the Central Bank’s regulatory and supervisory powers. New measures in the law improve the framework for monitoring financial stability, including specific prudential protection for systemically important banks. The Central Bank now has complete jurisdiction over the management of failing financial institutions, including liquidations and nonperforming asset recovery. The new legislation is a significant revamp of existing regulatory frameworks for all institutions reporting to the Central Bank, and it mirrors the Basel Committee’s good supervision standards. In 2018, a law governing the national payment system was passed.
The Central bank has issued regulatory laws on payment activities and the function of the financial agents in banks. The Central bank approved two Instant Money Transfer Institutions. Also, two microfinance.
In terms of scale and depth, Burundi’s financial sector is undeveloped. Between 2013 and 2017, the banking sector was the backbone of the financial system, accounting for an average of 83.4 percent of total assets. In 2016, bank loans to the private sector accounted for 15.1 percent of GDP, far below the 21.3 percent average for Sub-Saharan Africa. In 2016, bank assets accounted for 22.3 percent of GDP. In 2016, non-banking financial institutions’ assets were less than 2% of GDP.
Burundi currently lacks a stock exchange. Regardless of residency status, natural and legal people can participate in the money market (bills and debentures). Nonetheless, their activities must adhere to anti-money laundering and anti-terrorism financing legislation, as well as foreign exchange rules. Treasury bills are issued for a nominal value of BIF 10,000 (USD 5.53) for each security and have maturities of 13, 26, and 52 weeks. Accounts were having maturities of 2 to 5 years, and longer are sold for BIF 100,000 (USD 55.3) each.
Ken is a Quantitative Trader with experience in investments, quantitative finance, financial modelling and algorithmic trading in Global Investable Markets (GIM). He enjoys using Bayesian Statistics, Time Series and Machine Learning in developing Robust consistent Alphas in Equities Market, FX, ETPs and Derivatives instruments. He enjoys deep dives in understanding High Frequency Trading infrastructures and improving how the African financial markets work. He holds a Bachelor's in Actuarial Science from Strathmore Institute of Mathematical Sciences : An Executive Program in Algorithmic Trading (EPAT) certificate in Algo Trading from QuantInsti : A current MSc student in Financial Engineering at World Quant University.