Tunisian Finance Days 2021 TunFin#21 - "Finance. Digitalization and Data", November 19 & 20; 2021

1. UNLOCKING TUNISIA’S
ECONOMIC POTENTIAL
MAHMOUD-SAMI NABI
Tunisian Finance Days 2021 TunFin#21 - "Finance. Digitalization and Data"
November. 19 & 20

2. 2
« Hannibal reformed the tax system
and stabilized the economy. enabling
Carthage to reinvent itself from an
imperial capital into a flourishing
commercial hub.»
Source : Mulligan. B. (2015) Edited. Life of Hannibal.
Cornélius Népos (110 BC– 25 BC). Open Book Publishers.
"Hamilcar and Hannibal" by Giovanni Battista Pittoni (1723)
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3. 3
OUTLINE
1. CONSTRAINED ECONOMIC SYSTEM
2. DIGITAL TRANSFORMATION : THE LEAPFROGGING OPPORTUNITY
3. DEVELOPING THE FINANCIAL SYSTEM THROUGH DIGITAL
TECHNOLOGIES
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4. 4
What are the common international characteristics of high and sustained growth ?
Leadership
and
governance
Future
orientation
Efficient
functioning of
the markets
Macro-
economic
stability
Openess to
the global
economy
Sources : Commission on Growth and Development (2008)
Credible commitment to
growth. inclusion with
capable administration.
Resources allocation
based on prices and
incentives.
Higher saving and
investments (physical and
human capital)
Knowledge transfer and
tapping into the global
marked demand
Low inflation. sustainable
public finances..
1. CONSTRAINED ECONOMIC SYSTEM
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5. 5
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
10000
11000
12000
13000
14000
15000
16000
17000
18000
19000
20000
21000
22000
23000
24000
25000
26000
27000
28000
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Tunisia
Korea, Rep.
GDP per capita
(constant 2010 US$)
Source: World Development Indicators
x 3.86
x 22.35
Difference in output
due to Total Factor
Productivity (TFP)
growth
(~ 2.5% per year )
Difference in
output due to
the
accumulation of
labor and capital
What explains the long-term divergence of the per capita income of Tunisia and South Korea ?
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6. 6
TFP is the dominant factor
accounting for the
difference in development
levels.
Sources : Aghion and Howitt (2009). Hulten and Isaksson (2007)
Kim and Loayza (2019) "Productivtiy Growth: Pattenrs and determinants
across the World." Policy Research Working Paper 8852. The World Bank.
Factor-driven
economies
efficiency-driven
economies
Innovation-driven
economies
Market
Efficiency
Quality of
the
Education
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The three stages of economic development and the determinants of TFP
‒ Negative Productivity of the
tunisian firms > 2013: -4.5%
& 2019: -5.1% (World Bank,
2020).
‒ At the macroeconomic level :
TFP > 2001-2010 : 1.7% &
2011-2018: -1% (Nabi, 2019)

7. 7
1,7%
5,2%
16,0%
36,6%
20,0%
-5,3%
5,1% 5,7%
9,0%
18,0%
16,4%
-1,0%
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
35%
40%
GDP growth (%) Inflation (%) Unemployment rate
(%)
External debt (%GDP) Domestic debt
(%GDP)
Overall Fiscal Balance
(%GDP)
Real average TFP : -1%
Simulated avearage TFP
1.7% (2001-2010)
Source: Nabi (2021) "Tunisia after the 2011’s revolution: Economic deterioration should. and
could have been avoided." Journal of Policy Modeling
What if the TFP evolved during 2011-2018 with the same average growth rate as in 2001-2010 ?
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8. 8
Sources: Economic Freedom Index 2021; Global Innovation Index 2021;
World Bank Logistic Performance Indicators 2018
57 54
50
45 42
30 33
28
23
14
73
22
87
40
29
21
27
0
10
20
30
40
50
60
70
80
90
100 Economic
freedom
Property
Rights
Labor
Freedom
Investment
Freedom
Judicical
effectiveness
Financial
freedom
Customs
International
shipments
Logistic
competence
Business
sophistication
Human
capital
and
research
University/industry
research
collaboration
Domestic
credit
to
private
sector
(%GDP)
Financing
of
SMEs
Venture
capital
availability
Market
capitalization
(%GDP)
Insurance
premium
(/GDP)
Higher transactions costs and unfavourable ecosystem to favour an efficient/innovative driven growth…
Including insufficient development of the institutional environment and of the financial system
Restrcited foreign exchange transactions
Unfair fiscal regime
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9. ‒ The importance of the rule of law, low taxation,
security and division of labour and specialization for an
effective impact of finance on economic growth has
been identified by Ibn Khaldun (1332-1406) in the
Muqaddimah (1377).
‒ “…Restoring finance to its role as a productive force in the
economy will require new institutions and modes of
compensation, as part of a general overhaul of the relation
between finance and the real economy”. (Freeman, 2010)
‒ Finance has an impact on the degree of inclusiveness of
economic development : “Financial system influences
who can start a business and who cannot, who can pay for
education and who cannot, who can attempt to realize
one's economic aspirations and who cannot. Thus, finance
can shape the gap between the rich and the poor and the
degree to which that gap persists across generations.”
(Demirgüç-Kunt and Levine, 2009).
9
Wealth
Saving
Invest-
ment
Develop
ment
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Catalysing the financial system development is a prerequisite of the socioeconomic development

10. 10
Sources: Economic Freedom Index 2021; Global Competitiveness Report 2019
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87
40
29
21
27
0
10
20
30
40
50
60
70
80
90
100
Economic
freedom
Property
Rights
Labor
Freedom
Investment
Freedom
Judicical
effectiveness
Financial
freedom
Customs
International
shipments
Logistic
competence
Business
sophistication
Human
capital
and
research
University/industry
research
collaboration
Domestic
credit
to
private
sector
(%GDP)
Financing
of
SMEs
Venture
capital
availability
Market
capitalization
(%GDP)
Insurance
premium
(/GDP)
20
30
40
50
60
70
80
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
Financial
freedom
score Tunisia Morocco Jordan
Egypt Kenya
A stationary unfree/underdeveloped financial system
i. Government regulation of financial services,
ii. State intervention in banks and other financial firms through direct and indirect ownership
iii. Government influence on the allocation of credit
iv. Financial and capital market development
v. Openness to foreign competition.
Financial development comprises “factors, policies, and institutions that lead to effective financial intermediation
and markets, as well as deep and broad access to capital and financial services.” (WEF, Financial Development
Report,2012).

11. 11
‒ Failure to reallocate the production resources to
high-return activities and escape the low-
productivity trap  Relatively low rate of GDP
growth and insufficient and low quality jobs
creation.
‒ More than 50% of Tunisia's highly educated
workers are employed in the public sector, mainly in
health and education. Around 16 % of employees of
the private sector had a high level of education.
‒ FDIs are concentrated in labor-intensive and low-
value added activities (textile, tourism, call centers)
which do not require high skills (despite the
presence of many foreign firms in electronics,
aerospace activities)
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Brain Drain - A World Overview – Source : OECD
>>> An economy trapped in the low-productivity level
> Acceleration of the pace of emigration of qualified Tunisians to Europe.
> Higher unemployment (increasing with the education level (30% among the university graduates in 2020).
> Informal economy and poverty.

12. INCLUSION
EFFICIENCY
INNOVATION
12
Digital capital : source of ~1/3
of global GDP growth :
Intangible digital assets (2/3)
Tangible digital capital (1/3)
Digital economy contribution
to World GDP :
> 15.5% (2016)
> 25% (2026)
2. DIGITAL TRANSFORMATION : THE LEAPFROGGING OPPORTUNITY
Human
capital
Knowledge &
R&D
Labor
Physical
capital
Sources: “The Digital Dividends”). Rossotto et al. (2018).; McKinsey (2013); World Development Report (2016)
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Exports of ICT services in total exports
increased from 6.1% in 2010 to 9.2% in 2017.
Tunisia’s top ICT occupations (Online Labour
Index):
> Software development and technology
> Creative and multimedia
> Sales and marketing support

13. Tunisia’s Strategic Plan for Digital Economy (2016-2020)
‒ Guarantee social Inclusion and reducing digital disparities
‒ Promoting the “digital” culture
‒ E-Government
‒ Job creation, entrepreneurship and Innovation
‒ Improve enterprise competitiveness
‒ Transition Tunisia’s economy to encompass all things Digital
July 2020: Vision for the “Plan National Stratégique 2025”
‒ Prosperous, democratic and inclusive Tunisia
‒ A creative economy through innovation and talents
‒ Affordable and cashless digital services
‒ Client-centred E-administration
‒ Smart and modern cities
>> START-UP ACT
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14
Ambition, strategic plans and many digital transformation projects are there since many years..
‒ Système d’information « Amen »,
‒ SI Cnam -Smart Card,
‒ Registre National des Entreprises,
‒ Identification Unique du Citoyen,
Interopérabilité des SI (connected -Gov),
‒ Cloud Computing National,
‒ ERP (SI) de l'Etat,
‒ Justice connectée,
‒ Edunet 10,
‒ Gestion électronique des
correspondances, Code du numérique,
‒ Aménagement numérique du territoire,
‒ Loi cybercriminalité
Smart Capital / Caisse des Dépôts et Consignations
(CDC) ANAVAFund of Fund (200 millions EUR) to
strengthen the role of VC in financing Startups' growth.

14. 14
Economic
Growth
Jobs
Quality of
Services
Impact
Digital
transformation
of
public
sector
Digital
transformation
of
private
sector
Digital
Citizens
/
Consumers
Digital Sector of the Economy
Digital Foundations
Non-digital Foundations
(policy and strategic planning. leadership
and institutions. regulatory framework.
human capital. innovations. business
environment. trust and security)
(Digital infrastructure. digital platforms. digital
finance. digital competencies and
entrepreneurship)
(ICT sector and the content and media sector)
Preliminary (1)
Excellent (5)
Developed (4)
Moderate (3)
Emergent (2)
IMPACT 2.4
USAGE 2.4
FOUNDATIONS 2.5
..but the maturity of the Tunisian digital economy is still far (2.4) from the international frontier (5)
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Source : MTCEN & DECA (2020)

15. 15
FOUNDATIONS 2.5
I.1. Public policy and strategic planning 2.7
I.2. Leadership and Institutions 2.6
I.3. Laws. regulations & standards 2.4
I.4. Digital skills of the citizens 3.2
I.5. R&D and digital innovation 2.0
I.6. Business environment 3.2
I.7. Trust and security in the digital economy 3.0
II.1. Digital skills availability (Macro) 2.4
II.2. Digital platforms 2.4
II.3. Digital Infrastructure 3.2
II.4. Digital financial services 2.6
II.5. Digital entrepreneurship 2.5
III.1. Enabling Environment for Digital Sector 2.6
III.2. ICT sector 2.0
III.3. Content and media sector 1.8
USAGE 2.4
IV.1. Digital government (Human capital. Digital infrastructure.
Digital government services. Open government)
2.6
IV.2. Digital transformation of the public services 2.3
V.1. Government policy and regulation of digital transformation of
private sector
2.1
V.2. Digital competenciesin the private sector 2.7
V.3. Other non-digital factors affectingdigital transformation of
private sector (R&D and innovations. Business environment.
Trust and security...)
2.2
V.4. Digital foundations for digital transformation of private sector
(Broadband access to the Internet. Data centers and cloud
computing services. Data analytics. Shared digital platforms)
2.5
V.5. E-commerce and use of digital technologies by private sector 2.2
IMPACT 2.4
VI.1. Accessof citizens/Customers to digital technologies 2.6
VI.2. Use of digital technologies 2.0
VII.1. Economic impacts of the digital transformation 2.3
VII.2. Social impactsof the digital transformation 2.5
Detailed maturity of the foundations, the usage and the impact
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Source : MTCEN & DECA (2020)

16. Recommended priority actions to unlock the potential of the Tunisian digital economy
Governance
of the digital
strategy
Digital
sector
(H)
Digital
compe-
tences
Digital
financial
services
Digital
platforms
Innovative
digital
entrepreneu
rship and
R&D
Source : MTCEN & DECA (2020)
17
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1. Optimize the governance of the digital strategy (Priority : High)
2. Reinforcing the competitiveness of the digital sector (Priority : High)
3. Developing and retaining the digital competences (Priority : Very high)
4. Accelerating the developing of the digital financing services (Priority :
Very high)
5. Favouring the emergence of digital platforms (Priority : High)
6. Favouring the digital entrepreneurship and R&D (Priority : Moderate)

17. ‒ Improved financial development and better access to loans are highliy correlated woth the availability of the
recent digital technolgies in MENA.
J
ordan
M
orocco
O
man
S
audi
Arabia
T
urkey
A
lgeria
B
ahrain
Egypt
K
uwait
I
ran
L
ebanon
Q
atar
Tunisia
U
nited
Arab
Emirates
Y
emen
y = 0,98x + 5,12
R² = 0,73
0
20
40
60
80
100
120
140
160
0 10 20 30 40 50 60 70 80 90 100 110 120 130 140
Financial
Market
Development
&
Ease
of
access
to
loans
(Rank
over
155)
Availability of last technologies
17
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Source : Nabi (2018)

18. More channels/tools for social & financial inclusion
‒ Emergence of alternative vectors and modes of finance: APIs (Application Programs Interfaces);
Digital Wallets; Maturing of the mobile money infrastructure; Distributed Ledger Technologies
(blockchain) >> crowdfunding platforms, P2P loans, online markets, cryptocurrencies and crypto
assets.
Improved efficiency of the financial intermediation &the financial markets
‒ Cryptography, Biometric, smart contracts >> Automatic transactions, Security Identity protection.
Innovative Fintech solutions
‒ Big data on individuals and firms, advances in artificial intelligence; machine learning; predictive
analytics >> innovative tools for Investment advice (robots), Credit decisions, Fraud detection,
Asset trading.
>> Acceleration of the investment in Fintech : from 9 billions USD in 2010 to 25 billions USD in 2016 and
120 billions dollars (1/3 of the world finance of venture capital) in 2018.
18
The digital disruption of the financial system
3. Developing the financial system through digital technologies
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19. ‒ High penetration of the mobile phone : ~ 70 % of the 20% the most poor of the developing countries
have mobile phones (>clean water and electricity) :
• M-payment: payment services via the mobile phone/device > Sub-Saharan Africa: In 2017, 21%
of adults with an e-money/m-money account (x2 relatively to 2014) .
• Money transfers (domestic and remittances)
• M-banking: access to financial services via the mobile channel. In 2018, there was 866 million of M-
banking accounts (300 millions in 2014) operated by 272 institutions among 90 countries (GSMA,
2019).
‒ Positive and significant correlation between the adoption digital financial services
& i) Women participation in the labor market; ii) unemployment in the developing countries
(Lederman, 2019).
‒ DFS played an important role during the COVID-19 crisis:
• Rapid support of the vulnerable groups
• Extension of the social protection systems 19
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The mobile financial services : efficient tool of financial inclusion of the rural population of developing countries

20. ‒ Ecuador : Dinero electonico/mobile payment services : online opening of a bank account (downloading
an app, national identity, security question)
‒ China: P2P platforms : from 1 in 2007 to more than 2,000.
‒ Kenya: M-PESA, founded in 2007 mobile phone-based money transfer service, payments and micro-
financing service.
‒ Zimbabwe : short-term microlan via EcoCashLoan offered by Econet and Steward Bank:
► To request a loan an eligible borrower enters a USSD code on his/her mobile phone.
► Estimation of the applicant’s credit risk by an automated decision trees using different sources of
data (mobile money transactions, mobile wallet balance, age of the applicant, previous loan status,
mobile airtime, data top-ups). (Source: Hwang et Tellez, 2016)
Digital financial services : some examples
21
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21. 21
‒ Brazil: G2P transfers enabled new channels
(Conditional Cash Transfer programs -CCTs-) to
overcome poverty and reduce income inequality .
Non-banks financial services providers offer
payment and saving services with direct access to
central bank settlement system.
‒ Mexico: private financial institutions contribute to
the social G2P.
‒ Tunisia: Emergence of an ambitious Digital portfolio
(…BCT circular n°2020-11 mobile payment services,
G2P), Flouci (m-banking)

22. ‒ Acceleration of the crowdfunding since the global financial crisis of 2008-2009 in reaction to the
difficulties of fund raising by the firms in seed stage .
► From 16,2 milliards USD (2014) to 34 milliards USD (2015) [ P2P Lending (25 Billion USD) + Reward and Donation
(5.5 Billion USD) + Equity (2.5 Billion USD)].
► France : from 152 millions EUR (2014) to 628.8 millions EUR (2016).
‒ Contribution of crowdfunding to the developing countries’ economies :
► Improve the access to finance to the MSMEs.
► Contribute to the emergence of new generation of innovative entrepreneurs and the financing of R&D
► Support the access to the global markets by provide trade financing (exporters).
► Enabling financial channels for social solidarity and charity
Sources: KPMG, 2017; Nabi, 2019 ; WorldBank, 2015 ; http://crowdexpert.com/crowdfunding-industry-statistics
Acceleration of the crowdfunding’s contribution to better access to finance for individuals and MSMEs
especially in developing countries
22
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23. 23
Source : BIS (2021)
Source : Nabi (2018)
Jordanie
Maroc
Oman
Arabie
Saoudite
Turquie
Algerie
Bahrein
Iran
Kuwait
Liban
Qatar
Tunise
EAU
Egypte
R² = 0,6271
0
20
40
60
80
100
120
140
160
0 10 20 30 40 50 60 70 80 90 100 110 120 130 140
Efficiency
in
using
public
funds
and
level
of
irrigular
payments
and
bribes
(Rank
over
155
countries)
Availability of last technologies (rank)
‒Digital technologies/payments are highly correlaed with efficient use of public funds and less corruption/informality.
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24. 24
Poverty rate by delegation
Source : INS (2020)
Access to mobile phone,
internet, smartphones, … and
Usage.
Sources : MTCEN and WorldBank
(2020) based on l'Indice de
Digitalisation 2018 - TT-DI de l'IACE)
“E-money can be conveniently stored on and exchanged from a
mobile phone or online and funds can be transferred through
digital channels as well as physical agent locations. This is
better suited for many consumers in EMDEs, particularly for
those who live in remote areas.
Countries with digital infrastructure gap, low level of financial inclusion and extensive use of cash, developed the
Cash-in Cash-out (CICO) Networks
Branchless banking
‒ ATM
‒ Cash merchants
and retail agents
‒ Point-of-sale
terminals
Bank branches
‒ Bank tellers
Cash to electronic money and vice-versa
Source : EPAR (2018)
Sources : BIS (2021) ; CGAP (2019)
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25. Sources : Gévaudan et Lederman (2020) & BIS (2021)
% population
endowed with
banking account,
% population having
realized a digital
payment transaction
using a payment card.
% population having
realized m-payment
or prepaid card.
25
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Recent progresses and strong engagement of the Central Bank of Tunisia…. DFS are still weakly used in Tunisia
► Emergence of the digital portfolio, financial inclusion strategy with a digital financial services driver (Central Bank of
Tunisia, MF, MTCEN), willing of the CBT to develop the digital payment and fintech ecosystem (regulatory sandbox,
decashing, interoperability, G2P).
► Main constraints : i) unsuffisient development of the legal framework, ii) limited and expensive offers, iii) luck of trust..
37%
19%
2%
0%
25%
50%
75%
100%
6 7 8 9 10 11 12
Ln (GDP) per capita, PPP (current USD)
7%

26. Source : Ministère du Commerce et du Développement des Exportations/ Direction du développement du Commerce électronique et de l'économie Immatérielle
26
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140 160 188 231 255
380
811
1042
1235
1417
1609
1800
2015 2016 2017 2018 2019 2020
Number of merchant websites
e-Dinar ClicToPay
699 726
1 721 746
989 087
1 577 775
805 121
2 290 433 2 875 053
4 868 929
2015 2016 2017 2018 2019 2020
Number of e-commerce transactions
e-Dinar ClicToPay
0,13%
0,21%
0,24%
0,31%
2015 2016 2017 2018 2019 2020
Volume of e-transactions / GDP
UK: 9.9%
Malta: 0.8%

27. 27
Sources : MTCEN & World Bank (2020)
Example: Digital financial services by La Poste Tunisienne
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28. 28
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Accelerating the developing of the digital financing services as one of the drivers of the
modernisation of the tunisian economy
1. Improve the access and utilization of a financial transaction account to improve the financial
inclusion.
2. Diversify the offer of the digital financial services (including the e-money/m-money by
payments institutions) and the Fintech innovative solutions to satisfy the citizens and firms’
needs >> incentive the private sector and the administration.
3. Develop the CICO Networks given the digital infrastructure gap, the low level of financial
inclusion, the large informal sector and the extensive use of cash.
4. Reinforce the trust in digital payment and financial services >> developing the necessary
regulatory framework for the protection of personal data, users in case of conflicts, non-
biased third party mecanisms (escrow accounts, labelling and trust).
Sources : Author; MTCEN & DECA (2020) & Nabi (2019)

29. 29
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5. Increase the utilization of the digital payment by the State to catalyze the demand for digital
payments; reduce the misue of public funds, corruption and tax evasion >> G2P (Government
to Person) and P2G (Person to Government).
6. Accelerate the emergence of crowdfunding platforms >> Application of the Law n° 2020-37.
7. CBDC coupled with Targeted Quantitative Easing (TQE) especially for SVSEs and
deprived households.
8. Regional payment System, based on T-SDRs incentivizing intra-Maghreb trade and
investment
Sources : MTCEN & DECA (2020) , Nabi (2019), Nabi et al. (2014)

30. 30
CURRENT SOCIO-
ECONOMIC
SITUATION
KNOWLEDGE-BASED
& INCLUSIVE COUNTRY
The current situation of Tunisia requires an integrated development
strategy embedding institutions, politics, economics and individuals in an
interlinked framework.
>> Unlock the dynamism, creativity and solidarity.
>> Break out the post-revolution vicious circle
>> Transform Tunisia to a knowledge-based and inclusive country.
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31. 31
"Tunisia is well positioned to become a regional champion in
innovation and entrepreneurship if it recognizes the potential of young
aspiring businesswomen and businessmen.”
Thank you
msaminabi@ept.ucar.tn
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