Access for all: New services will help increase penetration rates

Successful diversification of Gabon’s economy depends on greater bank intermediation in the real economy: expanding financial access for its people and facilitating access to retail credit. While a small consumer finance sector has developed to cater to the limited cadre of formally employed workers, banks are increasingly testing mobile money services to entice the majority of the population that remains unbanked.

LIMITED REACH: With 266,345 accounts in April 2013, out of a population estimated at 1.5m (the new census is in 2013), Gabon’s banking penetration is low by any standard. The bankable market of formal sector employees consists of roughly 200,000 workers. According to the Professional Association of Credit Institutions of Gabon (Association Professionnelle des Etablissements de Crédits du Gabon, APEC), four banks account for nearly 94% of all accounts: Banque Internationale pour le Commerce et l’Industrie du Gabon (BICIG, 38.08%), UGB (36.34%), BGFI (10.09%) and Ecobank (9.28%). While these banks have started to expand to secondary towns, the main banking market is centred on the two main cities, where banks are building new branches. Alongside around 100 ATMs (45 by BICIG alone), the four main banks run a network of a few hundred sales points, in urban areas, charging 2-3% per transaction. New competition from Morocco-based Attijariwafa’s UGB, Ecobank and Nigeria’s United Bank for Africa has also centred on potential clients lower on the pyramid, earning monthly minimum wages of CFA150,000 (€225). Of the 3942 accounts created in April 2013 alone, some 1889 are at Ecobank and 1128 at UGB. “Banks face major challenges in terms of potential clients’ addresses. They try to circumvent this by asking for utility bills, but banking penetration remains low,” Rick Tsouck Ibounde, the World Bank’s Gabon country economist, told OBG.

CONSUMER FINANCE: Three financial institutions have emerged alongside the 10 deposit banks to cater to the demand for consumer finance. Stimulated by a growing government payroll and increasing private employment, the three provide both payday advances and leasing for corporates. Retail financing rates can reach 20%, with maturities of five years. Yet higher turnover in the private sector creates risk. “The risks of consumer credit to private sector employees is much higher than for civil servants given the high turnover,” Faissal Chahrour, the director-general of Alios Finance Gabon, told OBG. “Our provisioning for private sector employees is seven times higher than for government.”

STAR PLAYERS: The largest financial institution is BGFI subsidiary Finatra, which held CFA70bn (€105m) in outstanding credit, including CFA20bn (€30m) in mortgages, by year-end 2012, according to APEC, which collected lending data for the first time in 2012. In second place is pan-African group Alios Finance, present in 10 African markets, whose lending grew 38% to CFA50bn (€75m) and its profits 18% to CFA6bn (€9m) in 2012. BICIG’s much smaller subsidiary BICI Bail held only CFA6bn (€9m) in outstanding credit by the end of 2012. Financial firms are looking to expand, including to Franceville, and to target more works in the private sector. While a refinancing (discount) facility at the level of the regional central bank exists at the Central Bank of the West African States, no such mechanism exists at its Central African counterpart.

Financial institutions typically finance in loans of up to three years at 6.5-7% with local banks, although Alios Finance, the only financial institution not affiliated with a bank, plans to issue a corporate bond on the regional stock exchange to secure longer-term financing. State-owned Banque Gabonaise de Développement has also traditionally extended payday advances and consumer finance to public sector staff.

MICROCREDIT: While 19 microfinance institutions (MFIs) have been licensed since 2005, the segment has remained marginal, with only seven of these institutions operational in 2013, according to the African Development Bank. A small population has potential for economies of scale, but a dependence on refinancing keeps interest rates high and two of the larger MFIs are linked to commercial banks. Typical MFI loans range from CFA50,000-4m (€75-6000), with monthly interest rates from 3% to 5%. There are three categories of MFIs: those that lend to their depositors; those that collect deposits and lend to third parties; and those that lend but do not collect deposits. Most are the second type.

The oldest and largest institution is Financière Africaine de Micro Projets, with CFA500m (€750,000) in equity and eight branches in five provinces. In 2010 BGFI launched the second-largest MFI, LOXIA Emf, with 18 branches, leveraging on its network. Average lending rates often exceed 30% annually, according to figures from the Fondation Sylvia Bongo Ondimba, which funds a product through LOXIA Emf, subsidised at an annual interest rate of 12.6%. Cameroon’s Express Union operates 11 branches in the country and has evolved from a money transfer platform to micro-credit. BICIG established the Gabonese Microfinance Association (Association Gabonaise de la Microfinance, GAMIFI) in partnership with Total, PetroGabon, French insurer Axa and Ascoma Group in 2009. With roughly CFA1bn (€1.5m) in loans in 2012, GAMIFI is the smallest of the four but aims to open its third branch in Oyem in 2013.

MOBILE CHANNELS: With banks, consumer finance lenders and MFIs all concentrated in four key provinces, financial institutions are seeking new ways to bridge the distribution gap without traditional investment in bricks and mortar. “Mobile money platforms have the potential of reducing banks’ cost-to-income ratios while extending the banked market,” Jean-Baptiste Siate, Ecobank Gabon’s managing director, told OBG. With some 1.64m SIM cards in circulation, the potential is significant. Several ventures have emerged, focusing first on remittance transfers and limited payment of bills with participating retailers, but the mobile money ecosystem stands on the cusp of significant growth in 2013. “Because of the high rate of urbanisation, out of the nine provinces, only four are actually banked,” Alain Fazili Bula, the vice-president of Citibank Gabon, told OBG. “This is where mobile banking will make a difference, by reaching remote areas and rural communities.”

MORE OPTIONS: In June 2012 BICIG launched its own platform, BICIG Cash, independent of any one telecoms operator. The main use thus far has been for domestic remittances, but BICIG is developing its system to drive adoption. Impetus for more Gabonese to adopt mobile money platforms is likely to come when utility companies start accepting mobile payment for bills or pre-paid electricity counters. Privatised water and power utility firm Société d'Electicité et d'Eau du Gabon (SEEG) has an ongoing tender in 2013 to select a mobile payments service provider. With SEEG branches often saturated – and with pent-up demand for night-time electricity recharges – bankers expect utilities payments to prove popular. “Utility bill payments could add to the attractiveness, and participating banks are investing in growing their agent networks,” PierreMarie Ntoko, APEC’s permanent secretary, told OBG.