Access to finance and payment services that are fast, secure and affordable are crucial for promoting financial inclusion and supporting private sector investment. However recent surveys in Tunisia have consistently shown that approximately two‑thirds of the population lack current accounts, and limited access to finance remains a major obstacle for businesses. This has resulted in a low share of bank credit compared to international standards.

This report investigates the state of competition in Tunisia’s retail banking sector and, where relevant, provides suggestions to improve it. The report focuses on three broad sectors:

Tunisians’ standard of living has improved and the country’s poverty rate has declined in recent decades. However, the COVID‑19 pandemic, and the economic crisis it ushered in, has deeply affected tourism, industrial activity and exports, and has had a severe impact on Tunisia’s economic and social fabric. As part of the European Union’s Programme d’Appui à la Gouvernance Economique, the OECD was invited in 2021 to conduct a market study and competition assessment of the country’s retail banking sector, jointly with the Competition Council. The programme has also included a Peer Review of Competition Law and Policy, published in 2022, and a Competition Assessment of the Tourism Sector, published in 2023. In 2019 the OECD conducted a competition assessment of wholesale and retail trade, and road and maritime transport. This chapter describes the services in the scope of the review and the approach and the sources used.

Banks in Tunisia are the cornerstone of financial intermediation, and bank loans are the main source of financing for Tunisian companies. Twenty-two domestic banks account for 96% of banks’ assets, including five state‑owned lenders, five banks whose largest shareholder is a Tunisian private investor, nine banks controlled by non-Tunisian investors, and three mixed banks jointly controlled by the Tunisian state and another Arab country. The overall profitability of listed banks, which account for more than 80% of the country’s banking assets, increased in the years leading up to the onset of the COVID‑19 pandemic. This chapter describes the economic environment in which this review was carried out. It also provides an overview of Tunisia’s retail banking sector, including a description of the main players, the overall profitability of listed banks, and the institutional and regulatory framework.

Several factors weaken banks’ incentives to compete in the markets on which this study focuses. Common shareholders and indirect interlocking directorates reduce banks’ incentives to compete and increase the risks of co‑ordination. This is exacerbated by legal provisions and market practices that facilitate the sharing of commercially sensitive information among members of the banking association. State‑owned banks seem unable to vigorously compete with other lenders. Stakeholders indicated that state‑owned banks remain subject to political influence, and that they are used to provide finance to state‑owned enterprises.

Competition in Tunisia’s current account segment is not working as well as it could. Given the limited use of online banking services, banks rely on their branches to serve and attract customers, which limits consumers’ choice of suppliers, especially in rural areas. Market shares have been stable since at least 2015, and very few consumers and small businesses shop around for current accounts, compare services across providers, or know how much they pay. Very few switch providers. This is partly due to bank practices that prevent consumers from easily accessing information and making informed decisions about the products they buy. Market outcomes are also affected by the factors described in Chapter 3, which weaken banks’ incentives to compete. As a result, revenues from current accounts – a proxy for fees – and the overall profitability of banks have increased significantly in the past decade, and two‑thirds of Tunisians do not have personal current accounts; one in five say that high fees are one of the reasons for this.

Competition in Tunisia’s market for bank loans to small businesses does not work as well as it could. The market for business loans is concentrated, with the five largest banks accounting for between 70% and 75% of all lending in 2021. Micro, small and medium-sized enterprises – 45% of which hold finance products only with their current account providers, and more than half of which do not compare offers among banks – tend to obtain finance from their current account providers and face significant barriers to shopping around. While aiming to protect vulnerable customers, the cap on lending interest rates has negative effects on lending markets, and historically Tunisian banks have imposed very high collateral requirements on borrowers – almost 300% of the value of loans, according to the World Bank. The lack of a private credit information bureau exacerbates larger banks’ credit information advantage and increases the cost of shopping around for credit, especially among small businesses, which has the effect of limiting their ability to do so. Finally, the influence of large industrial groups over banks increases small businesses’ barriers to access finance.

Tunisia’s existing licensing process for payment services providers has favoured providers with ties to traditional banks. As a result, consumers are missing out on innovative services that could significantly increase competition.

Significant barriers to entry and expansion exist in Tunisia’s retail banking sector. One of the main challenges for new and smaller banks is acquiring new customers. The weak customer responses observed in the current account and micro, small and medium-sized enterprise lending markets make attracting new customers difficult and expensive. The cost of expanding branch networks is another significant barrier to entry. The limited use of online banking services makes branches essential for attracting and serving customers, but opening new branches is expensive and branch network growth rates have fallen during the past decade.

Although Tunisia’s retail banking sector delivers vital services to consumers and businesses, this report identifies several areas in which competition is not working as well as it could. The report finds several features of the market that weaken competition, limiting the ability of banks to compete and the ability of consumers and small businesses to exert competitive demand-side pressure on banks. The report also identifies several regulatory provisions that reduce banks’ incentives to compete.

The OECD proposes four packages of recommendations. First, a package of measures to strengthen incentives for banks to compete. This includes recommendations to reform the banking association, to strengthen the role of the Conseil de la Concurrence, to increase the independence of banks’ board members and to reconsider the role of the state in the retail banking sector. Second, a package of measures to increase customer engagement. This includes recommendations to empower customers to access, assess and act on information, and to reform the mediation mechanism to provide consumers and businesses with an effective means of making complaints. Third, a package of measures to improve competition in the market for MSME finance. This includes recommendations to increase MSMEs’ ability to make informed decisions about loan products and to increase banks’ ability to assess and price risk, reducing risk aversion. Finally, the OECD proposes a package of measures to eliminate unnecessary regulatory provisions that stifle competition in the payment services sector.

This chapter quantifies the benefits that would arise from the implementation of the OECD’s recommendations. It is only possible to quantify benefits for a subset of recommendations, but the OECD estimates that implementing these would generate around EUR 325 million annually by lowering prices and interest rates for consumers and businesses, corresponding to 0.8% of Tunisia’s 2021 GDP. This figure is likely an underestimate of the actual resulting benefits because it was not possible to quantify the effects of all individual recommendations due to the limited availability of detailed data. It also excludes the dynamic benefits of competition, which can be substantial, but which are difficult to estimate.