A new "Uniform Banking Law" ("Loi Bancaire Uniforme") ("Uniform Banking Law") has been adopted to unify banking law by the Monetary Union ("Union Monétaire Ouest Africaine") ("UMOA") which controls the FCFA-XOF currency, in all its Member-States, and includes Benin, Burkina Faso, Guinea-Bissau, Ivory Coast, Mali, Niger, Senegal and Togo.
The UMOA ministers responsible for the Finance of UMOA Member States adopted this Uniform Law on banking regulations in the UMOA by Decision No. 15 of 16 June 2023.
This Uniform Banking Law relating to banking regulation in the UMOA must be transposed into the national legislation of each of the Member States of the UMOA.
For the time being, this Law has been endorsed and approved on 29 April 2024 as national legislation in Benin but is not yet promulgated. The Law is still in the process of being endorsed and enacted by national parliaments of the UMOA zone.
Compared to the legal framework governing banking regulation and applicable prior to Decision No. 15 of 16 June 2023, the Uniform Banking Law provides for a more harmonised and consolidated regulation regime.
This is achieved by defining a legal regime applicable to "regulated entities", which will include not only banks and financial establishments (as already classified) but also electronic money institutions, bank holding companies, finance companies and fintechs.
The New Uniform Banking Law provides as follows:
"Article 31: Prior approval
No one may, without having first been approved and registered on one of the lists referred to in Article 42 :
(a) carry out a banking activity;
(b) avail themselves of the status of a bank, banker, financial credit institution, payment institution or electronic money institution, or create the appearance of such status, in particular by using terms such as bank, banker, financial credit establishment, payment establishment or electronic money establishment in their corporate name, commercial name, advertising or, in any way whatsoever, in their activity."
This prohibition set out in Article 31 applies to financial technology companies which carry out one or more of the banking operations.
Pursuant to article 32, "a financial technology company may not, without prior approval or authorization :
(a) carry out a banking activity;
(b) claim to be a FinTech, or create the appearance of such status, in particular by using the term FinTech in its corporate name, trade name, advertising or, in any way whatsoever, in its business.
The BCEAO determines the specific regulations applicable to FinTech."
This confirms that a large class of financial technology companies defined as "Fintechs" will fall into the scope of application of the Uniform Banking Law, under specific regulations that are in the process of being issued by the BCEAO, which is the Central Bank governing the FCFA-XOF currency of the UMOA.
The first regulation that has a significant impact is Instruction No. 001-01-2024, which was adopted in line with Decision no. 15 of 16/06/2023/CM/UMOA on the Uniform Banking Law in UMOA Member States, and which provides for a more homogenized application of the law to the stakeholders of the banking and financial sector.
In particular, under this Instruction, any fintech company will be required to apply for a license, if it intends to provide all or part of the following payment services:
- the payment or withdrawal of cash and account management operations;
- the execution of the following payment transactions:
- single or permanent transfers and direct debits;
- payment transactions carried out with a payment card or similar device;
- transfer of funds operations; and
- payment transactions carried out by any means of communication, which includes therefore payment services delivered electronically.
However, Article 11 of this New Uniform Banking Law further vests the BCEAO with the power to set up a financial innovation laboratory in order to promote the digitalisation of financial services and digital innovation in the UMOA zone. The regulatory mechanism applicable to that financial innovation laboratory will be designed to enable authorised institutions and financial technology companies to test their innovative solutions, products or services, under the supervision of the BCEAO, for a fixed period and within a streamlined regulatory framework. This streamlined regulatory framework is yet to be defined or circumscribed. However, this streamlined regulatory framework leads the way for businesses to promote their activity based on foreseeable legal implications, where the existing scope of definition attached to each different role as per the New Uniform Banking Law might prove restrictive. Moreover, businesses will be directly dealing with the BCEAO which has a regional approach. This may facilitate the organisation of operations under a licensing or permitting regime consolidated at the regional UMOA level.
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