Hervé Boyer, Director General, Stanbic Bank Côte d’Ivoire, on the potential for improved banking penetration

What are Côte d’Ivoire’s comparative advantages as a banking market?

HERVÉ BOYER: Although there are certainly challenges that need to be addressed – particularly in terms of competition and concentration – Côte d’Ivoire offers one of the most sophisticated financial sectors in the region and enjoys a number of benefits that some of the larger economies in West Africa do not.

For starters, the country is more than a standalone market. As a member of the West African Economic and Monetary Union – a bloc of eight economies, including some of the region’s most dynamic markets – it presents a range of opportunities for financial investors. This is due in large part to the stability of the bloc’s single currency, its favourable legal environment, and its fast-growing and high-consuming population.

Furthermore, unlike the Ghanaian cedi and the Nigerian naira, the West African CFA franc used in Côte d’Ivoire is pegged to the euro, which mitigates some of the risks associated with currency fluctuations. Lastly, as part of the monetary union, the local market enjoys a number of other attractive features, such as political stability and low inflation.

The country is also West Africa’s fastest-growing economy, with GDP growth of somewhere between 7% and 8% per year, a rate that is expected to be maintained over the next three to five years. It is also widely seen as a gateway into the region. Frankly, any bank aiming to play a major role on the continent must have a strong footprint in francophone Africa.

What are the biggest challenges the market presents potential investors?

BOYER: Having listed various advantages, it is worth highlighting that there is still plenty of room for improvement in the local market.

For example, one must not overlook that Côte d’Ivoire’s banking sector is quite saturated. In a country of 23m people, there are 26 established banks, five of which together represent over 60% of the market. This level of competition, with 21 banks fighting for only 40% of the market, is putting great strains on margins, making the viability of projects questionable for new entrants.

On top of this, banking penetration in Côte d’Ivoire remains lacklustre, with only about 15% of the population possessing a bank account. Traditionally, banking services were reserved for the middle or upper classes, but as new products and services are developed to target the lower segments of the income spectrum, we should see penetration levels rise. I personally witnessed this with the mobile banking boom in Kenya – a country where the financial inclusion rate is much higher, at closer to two-thirds – so it is likely we will see more partnerships between banks and telecom companies in an effort to access this market. Mobile banking is a solution for people who do not have access to a bank, and therefore it cannot be ignored in Africa.

As a well-diversified economy, the small and medium-sized enterprise (SME) segment is critical for the development of Côte d’Ivoire, and it displays great potential. Much like in other African countries, SMEs here still face headwinds when accessing credit. High interest rates and uneasy terms are both the result of a lack of transparency in the market. Today, no real credit bureau exists in Côte d’Ivoire, making it very difficult to assess a potential client’s solvency, thus increasing risks.

How do you see the market evolving in the short-term?

BOYER: Recent developments at the Central Bank of West African States have led to minimum capital requirements being raised from CFA5bn (€7.5m) to CFA10bn (€15m). This large increase may result in a degree of market consolidation, as smaller banks look to merge with each other or are absorbed by larger players. A shift towards fewer banks with stronger capital and healthier balance sheets is a positive trend for consumers and for the country, as it seeks to reach emerging market status by 2020.