Ahmed Rjiba, CEO, Banque de l’Habitat: Interview

Interview: Ahmed Rjiba

Which measures can be taken to increase the volume of liquidity in the Tunisian banking sector and increase investor confidence?

AHMED RJIBA: Today, the lack of confidence on the back of the economic downturn and the security situation has resulted in a dearth of financial resources in the banking system. Under these circumstances, banks are trying to collect a maximum of savings by opening branches nationwide – a challenge since national savings represented only 15% of GDP in 2015, down from around 25% in 2010. To increase the volume of their customer base deposits, banks are also launching new savings products, but given the economic downturn it is not enough, and other means have to be mobilised if we want to see the volume of liquidity increase on the market. For instance, part of the liquidity on the informal market must return to the banking system. To that end, the 2016 Finance Act has put forth a fiscal and a foreign currency amnesty, to encourage people to inject money back into the formal system and decrease the share of the informal market in the economy.

The implications of the act for the banking sector are not confined to the fiscal amnesty and the foreign exchange amnesty, but also to the new banking law, which is attempting to reassure the population about their savings with clauses securing people’s deposits. All those measures are going to improve the business environment in Tunisia by instilling confidence to redirect liquidity to the banks.

How can banks become more involved in the development of the real estate sector?

RJIBA: The real estate sector is experiencing a bit of a slowdown, which differs from region to region. It can also be attributed to a scarcity of land on which to build. Despite this, on the supply side the situation is not as bad, since 2014 the number of new accommodations exceeded national demand. Also, several major projects will be launched in 2015, which should bolster the housing supply. This surplus in supply will be amplified as a result of the population composition in Tunisia. Those projects inject new life into the Tunisian housing market as non-Tunisian investors are now allowed to buy accommodation on Tunisian soil. However, foreign investors are only able to derive a maximum 10% of their own funds from the Tunisian banking market, while the rest of the funding must come from external financial institutions. Tunisian financial institutions encourage real estate operators with the implementation of measures to facilitate the completion of real estate project. These include the reduction of the paperwork needed to submit a record, a shortening of the records processing time and the allowance of a cost overruns of 20% instead of 10%. Overall, Tunisian banks today are careful with mortgages, but they are still able to finance major housing projects.

How could banks better support financing for small and medium-sized (SME)?

RJIBA: Overall, banks are financing all sectors of the economy but it is true that, in the case of SMEs, banks are facing difficulties with respect to funding. There is a need to review the mechanisms already created so as to encourage banks to finance SMEs, and the solution will come from a common effort from both banks and authorities.

The problem is that in Tunisia, SMEs are lacking the resources, thus banks would have to apply high interest rates to cover their risk. The Tunisian regulatory framework, however, prevents them from doing so because there is a maximum legal interest rate in place. If we want to increase SME funding, a first step would be the liberalisation of interest rates. Specific credit lines, which are granted to banks can encourage them to become significantly more involved in the SME financing market in Tunisia.