Janine Kacou Diagou, Managing Director, Group NSIA: Interview

Interview: Janine Kacou Diagou

In what ways will the recent regulatory changes impact the financial sector?

JANINE KACOU DIAGOU: Ongoing reforms will inevitably have profound impacts on the regional banking system. Indeed, many banks are conducting stress tests to identify strengths and weaknesses as a first step in adapting to international standards. Adhering to Basel II and III guidelines will strengthen banks, since it requires them to increase capital buffers and respect stricter ratios that ensure resilience against market volatilities and risk. The refinancing cap at the level of the Central Bank of West African States ( Banque Centrale des Etat d’Afrique de l’Ouest, BCEAO) will, in time, develop the interbanking market by pushing banks to collaborate instead of seeking recourse from the BCEAO refinancing window. As a result, banks will increasingly have the means to intervene more effectively on short-term credit.

By raising the minimum social capital requirements, banks will be more capable of financing long-term projects, which has historically been a challenge in the region. This will positively impact all segments of our clientele, from small and medium-sized enterprises to large companies, providing more long-term resources to finance economic growth. We also expect that the strengthening of our financial establishments will lead to the consolidation of the financial market.

How could listing on the stock exchange benefit financial services companies?

DIAGOU: The regional stock exchange is of extreme importance to local and regional operators, yet are seldom utilised. In our opinion, the capital markets are the best means of raising funds to finance development plans, and hence the broader economy. Being listed has some of the same benefits as competition, with firms constantly seeking stronger returns on investment to satisfy stakeholders and boost dividends. Investors also expect higher levels of transparency and better governance, which gives companies clear incentives to improve processes and efficiency, in turn raising general competitiveness across the country.

In a region where we have a lot of family-owned companies, opening capital to outside investors could provide these firms with longer-term security. On a global scale, studies have suggested that one-third of family enterprises survive the transition from the first to second generation, and even fewer to third-generation ownership. There are several exemptions in Côte d’Ivoire, such as NSIA Participations; however, I believe that more companies would benefit from looking towards capital markets to reinvigorate their strategies and secure their future.

Which sectors of the economy hold the most potential for financial services companies?

DIAGOU: Given Côte d’Ivoire’s GDP growth, it is safe to say that multiple sectors have great potential, from agro-industry to ICT, hospitality and retail. Additionally, the current housing deficit presents opportunities at all stages of the value chain, encompassing developers, construction companies, homeowners and more. To help ease this pressure, banks recently increased the maturity of our mortgage loans – which now reach 20 years – thereby facilitating more individuals to acquire homes.

Despite the potential of the formal economy, it is notable that in Côte d’Ivoire, and most other sub-Saharan countries, the biggest potential stems from the large and dynamic informal sector, which remains unreachable. We recently commissioned a study to assess the potential of Adjamé, one of the country’s largest markets, which found that daily trade totalled almost CFA5bn ($7.5m); all of which was untapped by the formal sector. The amount of cash changing hands in the informal sector is inconceivable.