CENTRAL AFRICAN REPUBLIC

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1 MFWA Partnership Overview Central African Republic (CAR) is a country with a long history of political instability and occasional con licts that have adversely affected the inancial sector. In March 2013, a coup triggered arguably the worst political, economic, and humanitarian crisis since independence in The election of a new President in February marked a major step towards recovery and is expected to create a favourable environment for the emergence of strong inancial institutions. Financial institutions At enddecember 201, the CAR's inancial system comprised four commercial banks with 22 branches, 2 insurance companies, and 2 micro inance institutions. There is no stock exchange, but the country has access to the regional stock exchange for Central African states (BVMAC) based in Gabon, as well as to the Douala Stock Exchange (DSE) in Cameroon. As a member of the Central African Economic and Monetary Community (CEMAC), CAR shares a common Central Bank the Bank of Central African States (BEAC) and a common bank and micro inance regulatory and supervisory authority the Central African Banking Commission (COBAC) with the other ive CEMAC countries (Cameroon, Chad, the Republic of Congo, Equatorial Guinea, and Gabon). Table 1: Number of Main Financial Institutions in CAR, Commercial bank branches Registered micro inance institutions Insurance companies Source: Bank of Central African States (BEAC). *Financial Access Surveys (FAS), Financial depth Financial depth in CAR is relatively shallow, particularly in terms of deposit mobilisation. According to the World Bank s Global Financial Development Data (GFDD, ), the share of inancial system deposits as a ratio of the country's GDP was 12.1 per cent in 2013, the secondlowest in Africa after Chad, and less than half subsaharan Africa's median of 2.6 per cent. Also, CAR's total bank assets were 18. per cent of GDP in 2013, close to ive percentage points below the subsaharan Africa median; and its ratio of private credit to GDP was 15.7 per cent, compared with the subcontinental median of 17 per cent. Note however that inancial depth increased between 2010 and 2013: the ratios of deposit money banks' assets and bank private credit to GDP both doubled, and the ratio of inancial system deposits to GDP increased by almost onehalf. Data are currently unavailable for the period since 2013 (see Table 2). 1

Table 2: Depth of Financial Institutions and Markets in CAR, 20102013 Financial system deposits 2010 2011 2012 2013 SSA*2013 8.3 8.7 8.8 12.1 2.6 18. 23.1 22.2 Private credit by banks and other FIs 7.

2 Table 2: Depth of Financial Institutions and Markets in CAR, Financial system deposits SSA* Private credit by banks and other FIs 7.5 Nonbank inancial institutions assets Deposit money banks' assets Stock market capitalisation to GDP (Per cent of GDP) Source: Global Financial Development Database, *Developing countries only Bank credit Domestic credit grew at an annual rate above 20 per cent between 2010 and 2012, and then dropped by 16.6 per cent between 2012 and 2013, probably as the result of the crisis triggered by the coup. However, domestic credit has recovered in the years since, exceeding its precrisis levels in 2015 (see Chart 1). At end 2015, total bank credit stood at million F CFA (26 million USD), from million F CFA in 2012 (256 million USD), and million F CFA (213.7 million USD) in The recovery of bank credit after 2013 was mainly driven by increases in credit to State, which has more than doubled in volume between 2013 and 2015, from million F CFA to million F CFA (from 28 million USD to 65.8 million USD). Credits to the economy grew by only 7 per cent over the same period. Nonetheless, they still accounted for the largest part of total bank credit (75 per cent in 2015). The bulk of total credit to the economy is short term (see Chart 2). In 2015, short term credit accounted for 68.5 per cent of the total; medium term credit accounted for 22 per cent and long term credit for 9.5 per cent. Note however that the shares of shortterm credit and mediumterm credit were down from 71 per cent and 27 per cent, respectively, in 201. In contrast, the share of longterm credit in 2015 was up by almost 8 percentage points (nearly a sixfold increase) compared to the previous year. Chart 1 Total bank credit Source: MFWA. Data from BEAC. 2

Chart 2 Bank credit to the economy Source: MFWA. Data from BEAC. For the allocation of credit to the various sectors of the economy, recent data are unavailable.

3 Chart 2 Bank credit to the economy Source: MFWA. Data from BEAC. For the allocation of credit to the various sectors of the economy, recent data are unavailable. A 2012 IMF report2 indicated that the share of loans to various economic sectors was roughly 20 per cent to trade and commerce, 16 per cent to transport and communication, 12 per cent to forestry, and 28 per cent to other services. Only per cent of bank credit in CAR was disbursed to the agriculture sector. Bank lending and deposits rates Since the inancial liberalization in the 1990s and until the 2008/09 iscal year, the regional Central Bank (BEAC) imposed a maximum lending rate and a minimum deposit rate. The maximum lending rate was 22 per cent between 1995 and 2001, 18 per cent between 2002 and 2005, 17 per cent in 2006, and 15 per cent over the following period until it was removed in October The minimum deposit rate was 5.5 per cent in 1995, 5 per cent between 1996 and 200,.75 per cent in 2005/2006,.25 per cent in 2007, and 3.25 per cent the following years until It is now set at 2.5 per cent. Recent data on CAR's bank lending and deposits rates or its bank lending spreads are not available. Financial access Access to formal inancial services in CAR is extremely low compared with other subsaharan African countries. According to the most recent applicable data from the 2011 Global Findex Survey, CAR recorded the secondlowest proportion of adults with an account at a formal inancial institution, 3.3 per cent, after Niger at 1.7 per cent. The average for the 39 subsaharan African countries in the survey was 2.1 per cent. CAR had the lowest share of adults who had borrowed from a inancial institution: 0.9 per cent compared to the average of.7 per cent in subsaharan Africa (developing only). Equally, only 2.5 per cent of adults in CAR held savings at a formal inancial institution, compared with the 1.2 per cent average for the subregion (see Table 3). Table 3: Financial access in CAR, 2011 CAR SSA* Financial institution account Saved at a inancial institution (% Adults, age 15+) Mobile money account Borrowed from a inancial institution Source: Global Findex Database (2012). *Developing only

4 Banking Sector CAR s banking sector comprised four commercial banks by 2012, the fewest in the CEMAC group. It also has the secondlowest number of banks per capita after Cameroon, but note that 30 per cent of CEMAC's total assets lie in Cameroon's banking system, compared with 1 per cent in CAR's.3 While CAR has the same number of banks today as it had in 2007, the number of bank branches has increased fourfold, from 5 in 2007 to 22 by 2013, although more than half of these are concentrated in the country's three largest cities. Three of the four commercial banks in CAR are majority foreignowned: Ecobank, Banque Populaire MarocoCentrafricaine, and Banque SahéloSaharienne pour l Investissement et le Commerce Centrafrique. The Government holds a 5 per cent minority stake in Ecobank, and a 37.5 per cent minority stake in Banque Populaire MarocoCentrafricaine. The state owns the majority of shares 57. per cent in the Commercial Bank Centrafrique, the fourth bank in the country.2 Assets and liabilities After years of continuous growth, total bank assets declined in 2013, ending the year 11.7 per cent lower than in 2012, probably as the result of the political and security crisis that erupted in March Total deposits and gross loans declined by 1.8 per cent and 16.6 per cent respectively between 2012 and However, growth in banks assets recovered in 201 and 2015 to about 7.5 per cent and 5.6 per cent respectively. Also, banks loans grew with a rate of 16.6 per cent in 201 and 5.9 per cent in And banks deposits grew with a rate of 17.8 per cent in 201 and 1.9 per cent in Chart 3 Total bank assets, loans and deposits Source: MFWA. Data from BEAC. Deposits constitute the banks' main source of funding, and up to 90 per cent of those deposits over the past decade were from the public. The remainder was made up of Government deposits. Demand deposits made between 58 per cent and 65 per cent of the total deposits from the public. Net loantodeposit ratio is high at more than 100 per cent since 2010, with a peak at 130 per cent in High net loantodeposit ratios exposes CAR's banking system to liquidity problems where banks may not be liquid enough to face withdrawals.

Financial soundness CAR's banking system is broadly sound. Only one commercial bank accounting for 17 per cent total deposits failed to meet liquidity requirements in the three years to 2013.

Nonperforming loans (NPL) remain high, and above the average for CEMAC countries, although the ratio of NPL to gross loans fell by 10 percentage points between 2009 and 2012, from 21.3 per cent to 11.

5 Financial soundness CAR's banking system is broadly sound. Only one commercial bank accounting for 17 per cent total deposits failed to meet liquidity requirements in the three years to In 2012 and 2013, all four banks complied with the prudential capital adequacy ratio, but two were undercapitalised and missed the minimum capital prudential requirements. Nonperforming loans (NPL) remain high, and above the average for CEMAC countries, although the ratio of NPL to gross loans fell by 10 percentage points between 2009 and 2012, from 21.3 per cent to 11.3 per cent. The ratio subsequently increased to 31.7 per cent in mid2013, again most likely as a result of the political and security crisis. Banks' pro itability, measured by return on assets (ROA) and return on equity (ROE), has contracted considerably since 2011, becoming negative by the end of ROA dropped from 1.7 per cent to 1 per cent between 2011 and 2012, while ROE went from 23.2 per cent to 6 per cent. The ratio of banks' noninterest income compared to total income has remained high, at 0 per cent in 2013, compared with 7 per cent two years earlier.5 Chart % of NPL in gross loans in CAR Chart 5 Pro itability of banks in CAR Source: MFWA. Raw data from BEAC. Source: MFWA. Data from Global Financial Development Database,

6 Table of selected inancial access indicators, CAR, * Number of loan accounts per 1000 adults Number of deposit accounts per 1000 adults Outstanding deposits (% of GDP) Outstanding loans (% of GDP) Number of branches per adults In the three largest cities Number of active accounts Active accounts per 1000 adults Number of transactions per 1000 adults Automated Teller Machines (ATM) Mobile banking Active accounts (% of registered accounts) Mobile banking agents per adults Value of transactions (% of GDP) Source: IMF Financial Access Survey, *Data unavailable after

References : 1 CAR Interim Assistance Paper for the Transition 201, African Development Bank (June 201) 2 IMF Country Report No. 12/238 (August 2012) 3 IMF Country Report No.

Acknowledgements Rights and Permissions Making Finance Work Partnership (MFWA). All rights reserved.

7 References : 1 CAR Interim Assistance Paper for the Transition 201, African Development Bank (June 201) 2 IMF Country Report No. 12/238 (August 2012) 3 IMF Country Report No. 16/106 (April ) Financial Access Survey, IMF, These data are from the Global Financial Development Database, Acknowledgements Rights and Permissions Making Finance Work Partnership (MFWA). All rights reserved. for Africa The text and data in this publication may be reproduced provided that the source is cited, and provided that full acknowledgment is given to the Making Finance Work for Africa (MFWA) Secretariat as the original publisher. Reproduction for commercial purposes is strictly forbidden. The Financial Sector Country Pro ile for Central African Republic was authored by Nketcha Nana P.V. (Research and Knowledge Manager, MFWA). The pro ile bene ited from comments from David Ashiagbor (Coordinator, MFWA), Boipelo Sekgororane (MFWA), and Hugues Kamewe Tsafack (Financial Sector Advisor, MFWA). Technical support was provided by Mohamed Agrebi (Senior Operation Of icer, MFWA), Abdelkader Benbrahim (Associate Financial Sector Advisor, MFWA), and Olivier Vidal (Research Of icer, MFWA). The report was edited by Mike P lanz, and designed by Arnaud Floris (MFWA) Dakoua JN Willie and Elie Oliko. Financial support was provided by the Italian Cooperation via the AfDB IRMA Fund. 7

Source: Central Bank of The Gambia. Note: VISACAS: Village Savings and Credit Associations.

Source: Central Bank of The Gambia. Note: VISACAS: Village Savings and Credit Associations. MFW4A Partnership Overview and Recent Developments The Gambia is the smallest country on mainland Africa. Its economy is limited and undiversi ied, relying primarily on tourism, agriculture, and remittances