Open banking in São Tomé and Príncipe

São Tomé and Príncipe

Overview

São Tomé and Príncipe (STP), a small island nation in the Gulf of Guinea, is Africa’s second-smallest country by both area and population. São Tomé and Príncipe consists of two main islands—São Tomé (the larger and the political and economic hub) and Príncipe (the smaller)—and several islets. Its economy is primarily based on agriculture, with cocoa as the dominant export. However, like many small island states, it faces significant challenges, including economic vulnerabilities and a reliance on external aid.

Current Status of Open Banking

As of 2024, open banking has not yet been introduced in São Tomé and Príncipe, and there are no formal frameworks or regulatory initiatives in place to facilitate its implementation. The country’s financial sector remains largely underdeveloped, with limited digitization and low penetration of digital financial services. While mobile money and digital payment systems are gaining traction across Africa, their adoption in São Tomé and Príncipe is still in its infancy.

Despite the absence of open banking initiatives, several opportunities could arise from its eventual adoption should the country take advantage of it.

The Central Bank

The Central Bank of São Tomé and Príncipe (Banco Central de São Tomé e Príncipe, BCSTP) is a cornerstone of the nation’s financial sector. The BCSTP plays a vital role in maintaining monetary stability, regulating financial institutions, and fostering economic growth. Despite São Tomé and Príncipe’s small economy, the Central Bank’s functions are pivotal in addressing the unique challenges faced by this island nation, including its reliance on imports, low financial inclusion, and vulnerability to external shocks.

While the BCSTP plays a crucial role in the economy, it operates within a context of significant challenges:

Low Financial Penetration: With less than 25% of the population having access to formal banking services, increasing financial inclusion remains a key challenge.
Limited Financial Infrastructure: The country’s small and fragmented financial market makes it difficult to achieve economies of scale in banking services.

Future Outlook

The financial sector in São Tomé and Príncipe is small but developing. There are a handful of commercial banks, including local and foreign institutions, such as Banco Internacional de São Tomé e Príncipe (BISTP) and EcoBank São Tomé.

Banking penetration is low, with less than 25% of the population having access to formal financial services. Much of the economy operates in the informal sector, where cash transactions dominate. However, the government and private sector are exploring ways to expand financial inclusion, particularly through digital solutions.

Efforts to strengthen the financial sector include:

Microfinance Initiatives: Microfinance institutions play a critical role in providing credit to small businesses and individuals.
Mobile Money Services: Although still in the early stages, mobile money platforms have the potential to boost financial inclusion, especially in rural areas.
Regulatory Reforms: The Central Bank of São Tomé and Príncipe is working to modernize banking regulations and promote transparency.