Summary:

In mid-December 2023, the Organization for Economic Cooperation and Development (OECD) released a report on Tunisia’s retail banking market. It highlighted weaknesses in regulation and competition, and it assessed that poor customer service was restricting the market. 

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The report highlights the following challenges in the retail banking market that likely limit competition and discourage participation in the financial system by many Tunisians: 

• Customer engagement at the personal and small- and medium-sized business level is low, with many finding it prohibitively costly, time-consuming and confusing to access reliable and easily understood information about the banking products that are available. 

• Micro- and small-business lending remain difficult to access for many, with banks having a high level of risk aversion and consumers lacking clarity about their options to pursue financing from institutions other than the one at which they bank. 

• The regulatory environment creates barriers to new and innovative technical solutions, with high licensing fees and minimum capital requirements for new fintech firms surpassing other countries by “between 12 and 76 times.” 

• The market also risks exposure to coordinated price-fixing and the “sharing of commercially sensitive information” between entities, which can limit competition and further disincentivize consumers from engaging the financial system altogether. 

The report makes four broad recommendations for the retail banking sector in Tunisia: 

• Empower consumers with access to information and the ability to make complaints 
• Increase the ability of small businesses to make informed decisions about credit 
• Adopt a risk-based approach to new providers thereby lowering the regulatory barriers to entry and innovation 
• Strategic reforms of oversight of the sector that would increase independence and competition in the banking market 

Outlook: 

Tunisia’s banking sector continues to face challenges that discourage financial inclusion and fail to effectively service customers due to lack of competition in the marketplace. In many cases, customers are either convinced that banks will not serve them well and so avoid the banking system altogether, or they are forced to navigate a complex system that is not typically motivated toward excellence in customer service nor creative approaches to risk management that might empower innovative entrepreneurs in Tunisia.

Meanwhile, despite the lagging financial system and administrative infrastructure, Tunisian consumers remain interested in modern digital payment options that can connect them to the international economy. Merchants who navigate this space creatively and strive to include the unbanked population have substantial market potential, but are restrained by regulation and market practices that discourage innovation.  

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