Drivers of Subsidiaries’ Performance in West African Economic and Monetary Region, In Digital Financial Services’ Industry: A case Study of Orange Finances Mobiles (Subsidiaries of Orange Group) in Senegal and Mali: [Essay Example], 4745 words GradesFixer

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Drivers of Subsidiaries’ Performance in West African Economic and Monetary Region, in Digital Financial Services’ Industry: a Case Study of Orange Finances Mobiles (subsidiaries of Orange Group) in Senegal and Mali

  • Category: Health
  • Subcategory: Addiction
  • Topic: Drivers
  • Pages: 10
  • Words: 4745
  • Published: 02 October 2018
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This research project has been submitted in the partial fulfillment needed in for the degree of (State your course) through the coursework as well as the Research report of the Faculty of (State the faculty). I declare the report is my own work and does not have the work of any writer. The report has not been submitted in the past for this degree or any other field, part of degree or examination in the university or any other institution.

The paper challenged the view that the multinational companies explain the business strategy of the subsidiary as well as the operations in accordance with the framework of integration responsiveness. The paper incorporates the theory of contingency with the IR framework to argue that a subsidiary requires discretion for the crafting of its individual effective business strategy in regard to the environment exigencies that face the subsidiary in the host country. It mainly looks at the drivers of the performance of the WAEMU region. The main industry focused on is the digital finance industry. The paper narrows its research by researching the Orange Finance Mobiles case study.

West Africa is a good and unique opportunity for most of the developments of the multinational companies where there are many and diverse sources, political systems, economic structures, growth opportunities and development challenges. The most successful multinationals cut across various sectors where they are based in different countries across various regions. The multinationals have subsidiaries that are in other parts of the world apart from the country of origin. In this paper, there will be the study of the drivers of the performance of subsidiaries in West African Economic Monetary region, in the industry of digital financial services. The study will be narrowed by looking at Orange Finances Mobiles in Mali and Senegal as the case study.
It was in 2006 when Banque Centrale des Etats de l’Afrique de l’Ouest (Central Bank of West African States) (BCEAO) made the issue of the first regulators in the entire world for allowing the issuance of the e-money through the non-bank institutions.

BCEAO is the central bank of a couple of countries who are members of West African Economic and Monetary Union that is; Senegal, Mali, Guinea-Bissau, Cote d’Ivoire, Benin, Togo, Niger, and Benin. The WAEMU countries usually share a central bank, a monetary policy and one currency which is CFA. In WAEMU the digital financial services development has had a crucial effect on accessing financial services. The central bank can authorize two kinds of models for e-money issuance that is the non-bank model and the banking model. In the banking model, the issuance of e-money is the work of a microfinance institution that might be in the partnership of a technical operator. The model that is non-bank is usually implemented in the framework of an institution that is nonbank referred to as an electronic money institution that is then approved for the issuing of e-money (Alliance for Financial Inclusion, 2016).

There was a subsequent development of the nonbank institutions making the way mostly with the mobile network operators (MNOs) in partnership with the banks making developments in the mobile money offers together with many other nonbank institutions having a license of e-money issuer. By September 2015 there was the registration of a total of 33 e-money deployments that was inclusive of 29 partnerships between banks and mobile network operators, two institutions of non-bank e-money and two microfinance institutions. Since all the member countries of West African Economic and Monetary Union share the same policies and regulations of the e-money as well as the services of mobile money in the area that had been launched around 2010; there is an uneven development across the various markets. Every market shows a varying dynamic such as financial access structure, telecom penetration rates, customer needs, different digital financial service (DFS) providers and products and the uptake of DFS.

The West African states’ Central Bank gave new guidelines that governed the distribution and issuance of e-money that highlighted the possibility that already existed in the past framework. This is for the mobile network operators to give e-money themselves through the creation of a distinct entity for the issuance of e-money. As much as in they are in the new framework there is the need to go on with the partnership with the financial institutions for DFS products’ second generation like credit, savings, and insurance. This has a high chance of shifting the partnership’s nature between banks and the MNOs in their activities of mobile money where the MNOs will come directly more under the supervision of BCEAO. Offered with such developments the Consultative Group to Assist the Poor (CGAP) have looked to make an update of the understanding that is between the DFS market in WAEMU where there should be the sharing of learning with the main stakeholders.

The study aimed to cover the following

The mapping of the market system for the DFS in WAEMU that is inclusive of the main actors in demand and supply, policies such as the regulations of e-money, competition, and telecommunication as well as the functions for support like providers of information and agent networks. The identification of the opportunities that trigger changes in the system levels. The study also aimed at identifying the root causes or systemic constraints that give more explanation to the reason the DFS market fails to serve the populations with low-income needs. Between the months January and September of 2015 the users of e-money who were part of the WAEMU made a total of 346.9 million transactions that were worth FCFA 5.121 billion which is equivalent of USD 8.5 billion. This was an increase of 33 percent in transactions and 36 percent in value when compared to 2014. This was a sign of the great performance and the trend went on (Alliance for Financial Inclusion, 2016).

Globally there is a total of 2 billion people who are still unbanked but the good thing is that digital financial services are offering many people with low incomes with an opportunity for accessing the affordable and basic financial services. A DFS ecosystem that is properly functioning needs crucial elements such as business models that might profitably deal with the transactions of low value, a good understanding of the behaviors, drivers, and needs of the customer as well as a regulatory framework which promotes a competitive and healthy marketplace. The regulation of DFS is, however, challenging especially in the developing countries. Considering the fact that DFS is an evolving and fast industry with many players like retailers, there are alternative payment service providers and telecommunications that till date are not part of the main mix of financial services. Most of the current definitions and rules were formulated for an industry that has undergone major changes due to the technical innovation and financial crisis.

The new players need a different approach to regulations. To be able to build the required framework as well as guidelines, the regulators have to develop a good understanding of the different risks associated with both the end users and financial systems. To correctly assess and identify risks, experience and data are needed. Having access to the right regulators, statistics could be much more specific on the frequency and size of the risk as well as the creation of more refined models of risk. Getting the right balance is necessary. Over-regulation can lead to the limitation of innovations that would, in turn, put an end to any industry before even getting the opportunity to mature and develop as under regulation can result in excessive risk-taking and abuses. The international setting bodies on the standard have the remit, ability as well as reach to draw on the best experiences and practices internationally.

The Basel Committee on Banking Supervision, the International Association of Deposit Insurers and the Financial Action Task Force have looked at the integration of financial inclusion. The World Bank, as well as the Committee on Payments and Market Infrastructure who are from the Bank for International Settlements (BIS) together, published a joined report looking at the ways through which payment systems can enhance the access to the basic financial services. Looking from the non-financial perspective, the International Group of International Telecommunications Union on DFS for Financial Inclusion has been part of the main DFS stakeholders and has worked on the practical toolkits and guidelines that can be used by regulators in the emerging markets for the fast track of policy reforms.

There are crucial initiatives that can offer material support to the local decision makers. They need to, however, be focused on the activities that are purposed to collect building capacity and data. Financial inclusion is a big challenge that has affected more than a quarter of the global population. DFS has delivered promising and tangible results but to get scalable changes, the regulators depend on getting enough data as well as experience in addressing the high risk of the new generation of financial services and products. There is still much that needs to be done and all this can be left in hands of the World Bank, ITU, and BIS. The establishment of appropriate practices as well as building the required international frameworks requires collaboration, commitment and consistent dialogue. It is through this that the world will acquire the needed institutional mechanisms to get the real changes at scale (African Business Magazine, 2016).

The WAEMU region

The region of WAEMU has gone through major growth in the last five years where there has been an increase of vulnerabilities. The member countries of WAEMU need to be properly equipped to get the benefits of globalization and in turn avoid the marginalization risks. There is the rise of public debt as well as the shrinking of external buffers. There has been great progress in the upgrade of the framework of the financial sector but there are still major signs of vulnerability. There is the positive outlook that has remained where it has offered macroeconomic stability as well as a strong resolve for improving the environment of the business; promoting the private investments. The downside risks come from slow economic growth, delays in the implementation of fiscal consolidation, tight conditions in international financing, the sluggish structural reforms and a decline in the prices of cocoa. There is the threat of security.

The economy in the region rapidly grew on an average of 6.3 annually being driven by the high public investment. There was the suppression of inflation that was maintained below the 3 percent criterion of convergence. There was however the rise of public debt as there was the shrinking of external buffers. There was a decline in reserve coverage in 2016 that fell below the 4 months of imports. As much as the environment for macroeconomics has maintained a stability for a couple of years, the slow progress in the structural reforms as well as regional integration has slowed the private investments keeping unemployment and poverty at a high rate. The environment has remained to be unattractive where there is low intra-regional trade and the region has been quite slow for the integration and diversification into the global value chains.

The policies have been in line with the previous Fund advice as much as there has been lagging in some parts. The BCEAO undertook measures for the activation of the interbank market as well as enhance the mechanisms of monetary transmissions. The Central bank increased the rate of the lending facility from a spread of 3.5 to 4.5 where it made the announcement that the recourse of the lending facility will be capped at the capital of the bank twice that begun in 2017 June. There were crucial measures that were taken to promote the financial stability such as adopting capital standards of Basel II and III as well as the introduction of a consolidated supervision. The conditions in the banking sector have remained challenging. The risks of concentration and credit are necessary whereby the ratio of total loans to NPL remains high as the situation in most troubled banks remains unresolved. The strengthening of the capacity of WAEMU Commission to help countries in improving collection of revenue as well as the management of public finances.

There is the tightening of monetary policy where the credit given to public sector became much bigger and much more as compared to the private sector credit. There was the moderation of the growth of money at 10.2 percent but a decline in the foreign assets. It was in December of 2016 when BCEAO made the decision of widening the spread that was between the least bid rate for opening market refinancing operations as well as the rate of credit facility to a 200 points basis. The minimum rate of bid remained unchanged at a percentage of 2.5 but the rate of lending facility increased from 4.5% to 3.5%. The BCEAO made the decision of limiting the access to the rate of lending that has tightened the conditions monetary that led to a higher activity in interbank. There has been the tightening of monetary conditions due to the increase in the rate of lending which has further resulted in higher activity in interbank. On 1st March 2017, the Monetary Policy Committee made the decision of reducing the ratio of reserve requirement to 3% of deposits from the 5%. The reduction in the ratio of reserve requirement needs to offer more liquidity as well as reduce the refinancing need but weakens the expected benefits (International Monetary Fund, 2017).
Insight into the Orange Group with emphasis on Senegal and Mali

Regardless of the places where activities are developed, the philosophy of Orange has remained to be the same that is to make the access of technology to many people. There is the adaptation of every requirement that offers customers the best experiences in all of the 29 countries where they have their operations in all of the 220 countries as well as terrorists where they operate as Orange Business Services. The group has an international strategy that offers an experience that is technically unmatched to its customers all over the world.

The main objectives of Orange Group include:

  • The consolidation of the markets through the company operates
  • The diversifying and combining of activities for taking advantage of the mobile technology in the new markets like finance and banking.

Orange Group plans to promote the diversification and convergence of its activities in Europe where they try to make investments for the deployment of Fiber and 4G. Above the deployment of the network the service convergence is a great catalyst for growth. This is the reason for the development of offers in combining access to broadband as well as the mobile tariff that is a minimum in the countries of operation. The organization is still exploring the new territories for the anticipation of the needs of the customers as well as prepare for the drivers of future growth. This is the sole reason for the continued diversification of the solutions of mobile banking in Europe.

Orange presence in the Middle East and Africa is making its services easily accessible to great masses. Orange is a big partner of Africa’s digital transformation as well as the Middle East. The organization has the presence in 21 countries in the Middle East and Africa where the markets are considered in their particular features. To be able to put across an offer which is in line with the lifestyles, consumptions, expectations as well as with the needs of other customers together with offering services that offer relevant answers. In 1 of 10 Africans are the Orange customers were in 2016 Africa and the Orange Middle East of revenue of € 5.2 billion with an increase of 2.6 percent in serving over 120 million customers. There was $14.5 billion of the total Orange Money transactions in the year 2016 as it launched 4G in 10 countries (Orange, 2017).

Purpose of Study

Bearing in mind a large number of multinationals especially in WAEMU region, this study looks at the main reasons for the performance of subsidiaries in WAEMU in the industry of digital financial services. The study will further use Orange finances mobiles as the case study in WAEMU. The findings that will be from the research is meant to add to the existing research on the main drivers of the international performance of the rankings of the drivers in the WAEMU region as well as including the precisions on the factors of the drivers that are needed for the demote or motive performance in WAEMU in the industry.

Objectives of the Study

By knowing the performance of the Orange Finances Mobiles in WAEMU countries, the study purposes to complement the strategy management and international studies through covering particular objectives:

  • The establishments of the main drivers of the performance of subsidiaries for multinational companies in the DFS industry in WAEMU.
  • The classification of the drivers in terms of their efficiency and impact for the amending of the existing findings on drivers of the international performance.
  • The trends of the digital financial services industry especially in WAEMU region.

Value of the Study

The research study will contribute largely to the body of knowledge that is already in existence. The study’s findings are necessary for the different stakeholders as there will be a better understanding of the main drivers of the performance in subsidiaries and highlighting the most important as opposed to the belief and highlight of the few given drivers. The different multinationals as well as researchers will get a deeper insight of the drivers of performance in WAEMU on the performance of operations as well as the standardization of the processes of various multinationals.

The results of the study will play a big role in the enlightenment of the management of other multinationals with subsidiaries in the member countries of WAEMU on the best practices needed by the leaders that are associated with the industry of digital financial services. The study’s recommendations will help the majority of the managers and leaders in the multinationals in decision making as well as come up with various policies that cater best for the performance of the MNCs to improve the overall performance.

The study will help other researchers since the findings will play an important part in the research undertakings of getting more research in the field together with deeper discussions in the subsidiaries.

The Research Plan

The study has been conducted in two different countries in a period of over 3 months who are members of WAEMU region. The information and data were gathered from different sources for instance the companies’ involved sources and the external sources. The first month was focused on getting information and data on the already existing literature on the concerned topics. The second months was dedicated to analyzing the information and data gathered as well as analyzing the findings of other researchers. The final month which was the third, was used to compile and to do the redaction of the study.

Chapter Two: Literature Review

This chapter will be comprised of the documented literature that is associated with the impact of the drivers of performance on the MNCs on the ways through which the major multinationals have been able to perform while looking at Orange Finances Mobiles. The section offers details of the empirical and theoretical literature that is relevant to the study. Bearing in mind this fact, there is a review of the documented literature on various concepts that are associated with the interests of the topic and there is also the identification of the research gaps that need to be addressed.

Theoretical Background

Transaction costs theory, expatriate staffing as well as the cultural distance

Williamson (1975, 1979) and Coase (1937) suggests that the minimization of the costs of transaction is associated with the exchange that is between the two parties is the main determinant of the structure of the organization. When dealing with the subsidiaries in the MNC relations the multinational companies usually strive in configuring the structure of its subsidiaries in a way that the transaction costs are linked with the control and internalization of the operations. The control of operations in the host regions is reduced. The costs are related with (Rugman and Verbeke 2003) searching for the needed information in the location, enforcement of the performance of the employees of the subsidiary as well as the monitoring and control of the operations of the subsidiary. Considering that any multinational company is made up of a number of geographically dispersed and organizations that are goal disparate that are inclusive of the MNC’s headquarters together with the various operations of the subsidiary that are controlled by national subsidiaries to be in line with the objectives of the multinational company altogether, is a core issue for the optimization of the costs of transaction of internalization (Ghoshal and Bartlett 1990, p. 603).

Jaeger and Balgia (1984) explain that multinational companies mostly use two kinds of control over their subsidiaries that is the cultural and bureaucratic control. The bureaucratic control makes use of an extensive set of regulations, procedures and rules that usually limits the autonomy and role of the subsidiaries. The cultural control makes use of a set of shared norms and values for work behaviors and processes. The control of culture might be gotten through placing different expatriates who have either direct control on the operations of the subsidiary through acting as the mini headquarters or have indirect control through the subsidiary that is based on socialization. Therefore the expatriate's number that is present in the subsidiary is a reflection of the cultural control level that multinational companies need to exert on the particular subsidiary.

The cultural control need is mostly perceived to be more in those subsidiaries where there is great national cultural distance or differences. A greater distance of culture will lead to greater asymmetry information between the subsidiary and the headquarters, reduction of the knowledge of the environment of the subsidiary, performance and actions. According to Gong (2003a, p. 729) as there is the increase of cultural distance, accurate and complete information on the subsidiary performance and actions it gets much more challenging and costly to acquire together with the activities of the subsidiary hence making it harder for interpretation. There are also the challenges involved with the outcome and behavioral controls in the headquarters. To add to this, the cultural distance can be said to be an important factor when managing the transaction costs in various subsidiaries. The distances in culture enhance the risk, information asymmetry and uncertainty between the host country and the home country hence increasing the costs of the transaction of the operations in the environment.

Looking at the theory of transaction cost the more the cultural distance the more the need to get cultural control. Putting in mind that the expatriates are used as a method of cultural control that is consistent with the theory of transaction cost, it explains the cultural distance that needs to be related to more usage of the expatriates. The previous forms of research have discovered that the greater cultural distance between host and home countries enhances the multinational companies’ propensity of using more expatriates from the host subsidiaries.

WAEMU State with Branchless Banking

The access for finance for WAEMU is quite low even though comparisons with other parts of Africa. The bancarization rate that was announced by BCEAO by 2010 was at 9.5 percent were 12.7% of the total population had an MFI account. Surprisingly, the region of WAEMU has seen a major activity in the private sector in the branchless banking. The BCEAO regulatory framework helps the private sector to have a leverage of the regional investments at an affordable cost. the regional diversity offers the opportunity of understanding the influence that the market aspects have on the branchless banking that is in an environment where there is constant regulation. For such reasons solely, WAEMU is a distinguished place for pushing branchless banking as well as a region where the enhanced access need for financial services is among the greatest globally.

The WAEMU opportunities for branchless banking

Regulations permit the issuers of nonbank money resulting in unique and different BCE business models. The BCEAO was among the first regulators worldwide for the passing of regulations expressly allowing the non-bank e-money issuers in 2006 where it has remained among the few central banks that permits such kind of a role in the non-banks. Interestingly, there was no Multinational Organization (MNO) that opted for the license as the MNOs in other parts of the globe would like such an opportunity. The regulation expands the possibility realm in regards to the actors who are part of the branchless banking as well as the various types of services which are provided.

The players of the region are big and usually leverage their investments resulting in a greater scale and outreach. The players of the region have the ability for dominating the region of WAEMU. There are approximately 17 MNOs that operate in the region having 53 percent of the mobile penetration. Four of the MNCs are present in the region having 53 percent of mobile penetration where four of the MNCs are in two countries or more that is Airtel, MTN, Orange among others who are in the WAEMU telco market. The big regional African banks are also in a number of the member countries such as Bank of Africa. The companies are able to have the leverage of an investment that has an initial high up-front in a particular country and expand to other parts of the region.

The remittances in the region show a big monetary flow that serves as an adoption driver. The remittances flow that is internationally and within the region of WAEMU offers a big portion of the money movement which is a good place for the branchless banking services that adds value in regard to security, convenience and cost. The dominant country is Côte d’Ivoire that sends money to other parts of the sub-region while it concentrates on a third of the flows. The international flows that are from and to Europe together with the United States are necessary. The estimation of the World Bank gives an estimate that the remittance of the bilateral flows from France to the member countries of WAEMU totaled in 2010 to $ 531million.

It is necessary to note that Orange is the biggest player in branchless banking in the region where it launched Orange money in Senegal, Mali, Niger and Côte d’Ivoire. Yoban’tel is a mobile account that is prepaid in Senegal and it is offered by Societe General through the use of Obopay’s platform as it leverages the MFI distribution of CMS branches. A Senegalese technology company, FERLO, was the first to get the nonbank license of e-money issuer from BCEAO where it started offering prepaid cards in all the member countries of WAEMU. All the major MFIs in Senegal that is; ACEP, CMS and PAMECAS are part of some kind of branchless activity in banking where they appear much more active as compared to the banks themselves.

The African multinational companies

The region of sub-Saharan Africa is usually a unique ecosystem that results in the development of the MNCs and there is no other part of the world that has the kind of diversity of economic structures, growth opportunities, resources, developmental challenges and political systems. Unsurprisingly, the MNCs with the highest levels of success in the region are in various ranges of sectors where they are based in different countries in all parts of the region. The MNCs in the sub-Saharan are explained as homegrown home-grown companies that are solidly part of the private sector as the headquarters are in the sub-Saharan part of Africa where the states’ ownership takes the minority stakes. For the analysis of the features of MNCs that are most successful, there is the need to look at the top countries that are in major business sectors in Africa. Most of them are the mature companies that have a significant expansion in the most recent wave of the opening of the economy. The companies that are from Arab South Africa and North Africa were not included since the distinct economic features of North Africa as well as South Africa high levels of financial and economic development differentiates the regions from the sub-Saharan Africa.

The highest 30 revenues of MNCs outdid the growth in the major emerging part of the world as well as in the Organization for Economic Cooperation and Development (OECD). The edge most likely comes from the ability of the chief executive to make a plan for the long-term as well as the relative insulation of the region from the 2008 financial crisis.

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Drivers of Subsidiaries’ Performance in West African Economic and Monetary Region, In Digital Financial Services’ Industry: A case Study of Orange Finances Mobiles (Subsidiaries of Orange Group) in Senegal and Mali. (2018, October 02). GradesFixer. Retrieved October 28, 2020, from
“Drivers of Subsidiaries’ Performance in West African Economic and Monetary Region, In Digital Financial Services’ Industry: A case Study of Orange Finances Mobiles (Subsidiaries of Orange Group) in Senegal and Mali.” GradesFixer, 02 Oct. 2018,
Drivers of Subsidiaries’ Performance in West African Economic and Monetary Region, In Digital Financial Services’ Industry: A case Study of Orange Finances Mobiles (Subsidiaries of Orange Group) in Senegal and Mali. [online]. Available at: <> [Accessed 28 Oct. 2020].
Drivers of Subsidiaries’ Performance in West African Economic and Monetary Region, In Digital Financial Services’ Industry: A case Study of Orange Finances Mobiles (Subsidiaries of Orange Group) in Senegal and Mali [Internet]. GradesFixer. 2018 Oct 02 [cited 2020 Oct 28]. Available from:
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