On the horizon: Expected growth in institutional capacity as the sector recovers

After decades of turbulence, the Ivoirian banking sector is experiencing something of a renaissance. Like the economy, Côte d’Ivoire’s banking sector was growing robustly until a crisis brought on by enthusiastic lending struck in the early 1980s. Bank defaults during this period cast a long shadow, paving the way for a steady increase over the years in cash transactions. The subsequent unrest of the early millennium slowed banking growth, and in the beginning of 2011, during the most acute period of upheaval, banks closed for several months, with a number of banks temporarily nationalised by the government at the time. This was compounded by financial complications, with balance sheets deteriorating as the economy contracted.

LOOKING AHEAD: However, as with much of the country and its economy, the situation of the banks has stabilised, with recovery and expansion under way. All seized banking assets were returned to their rightful owners by President Alassane Dramane Ouattara’s incoming government after the resolution of the electoral crisis in 2011. Bank branches are reopening in the north, and new entrants, particularly from the African continent, have helped increase diversity in a sector long dominated by subsidiaries of French commercial banks. Even the postal service stands to boost recovery efforts. “La Poste is currently implementing a recovery plan, with a major part being to establish its financial services offering,” Mamadou Konaté, CEO of La Poste Côte d’Ivoire, told OBG. “We are interested in developing payment cards for salary transfers, and that would work in all banks in the West African Economic and Monetary Union (Union Économique et Monétaire OuestAfricaine, UEMOA) area.” Côte d’Ivoire’s banking sector, which remains the largest in Francophone West Africa, is thus increasingly wide and competitive.

However, challenges remain. Even by sub-Saharan African standards, banking penetration is low, as is lending as a proportion of GDP, which according to the IMF’s figures is at around 17.7%. Historically, as with many economies in the region, banks have concentrated on large corporates, providing lending at relatively attractive rates. By contrast, small and medium-sized enterprises (SMEs) face chronic challenges in accessing credit, while governance issues have plagued the microfinance sector, ensuring it has not been able to play the dynamic role it has in some other developing economies. With the return of political stability and robust economic growth, however, there is ample scope for organic expansion in the sector as the country develops, and privatisation and consolidation are likely to be important themes in the years to come.

RECOVERING FROM CRISIS: The propitious and remarkably rapid recovery somewhat disguises the extent to which the business of Ivoirian banks was disrupted by more than a decade of political turmoil and particularly the crisis of 2010-11. The Central Bank of West African States (Banque Centrale des États de l’Afrique de l'Ouest, BCEAO) closed its Ivoirian branches and Abidjan headquarters in early 2011. Seven large international banks operating in the country temporarily suspended operations, and other banks were faced with significant challenges as people sought to withdraw savings when violence escalated. Several bank branches, including a number of the major players like BNP Paribas and Citigroup, were closed across the country, with those in the north and in the west being most severely affected. The French subsidiaries Société Générale and BNP Paribas were nationalised by the outgoing government during the height of the crisis. Unsurprisingly, the sharp economic contraction induced by political instability increased the incidence of loan defaults, reducing the quality of banks’ lending portfolios and impacting their bottom line.

Yet even amidst the turbulence of the electoral crisis and preceding years of unrest, the sector’s fundamentals remained fairly solid. They showed steady growth, albeit unspectacular and from a relatively low base, and managed to justify operating in such a risky environment by generating large profit margins. As a result, while banks suffered net losses in 2011, the stabilisation of the economy by 2013 should indicate that an immediate return to robust profitability is likely. Fears of widespread withdrawals of deposits after the banks reopened in 2011 proved to be unfounded. In fact, money quickly returned and deposits had surged by year-end. If the economy continues to grow strongly, and if the institutional framework is developed to facilitate increased lending, it can be expected that the sector will expand strongly over the coming years.

DIVERSITY OF PLAYERS: By early 2013 the Ivoirian banking system counted 24 banks and one additional financial institution that focused on leasing, up from as few as 12 banks in 2000. For a country of 21m, this shows a wide diversity of financial service providers, roughly on par with neighbouring Ghana and Nigeria. Certainly, these banks may be attracted to a retail banking sector with untapped potential in a rapidly developing economy, although given Côte d’Ivoire’s outsized presence in the regional market, it attracts a large number of institutions with ambitions elsewhere in the UEMOA zone.

Indeed, Côte d’Ivoire accounts for 27.5% of all banking assets in the UEMOA region, followed by Senegal with 21.9%. Lending rates in Côte d’Ivoire and Senegal are typically the lowest in the region, ranging from a very competitive 6% to 8% between 2006 and 2010, whereas those in the other six nations ranged from 9% to 12% over the same timeframe. Despite having a significantly higher population and bigger economy than Senegal, total credit outstanding is only marginally higher in Côte d’Ivoire due to the faster rate of credit growth in the former since the turn of the century. The government is active in the sector, holding full or partial control of a number of banks, including Banque Nationale d’ Investissement (BNI), Caisse Nationale des Caisses d’Epargne, Banque pour le Financement de l’ Agriculture, Versus Bank and Banque de l’Habitat de Côte d'Ivoire (BHCI). While BHCI is 50% state-owned, all others listed are 100% state-owned. The government also owns a minority 10% stake in Banque Internationale pour l’Afrique Occidentale (BIAO).

PAN-AFRICAN BANKING ON THE RISE: In the decades since the country secured independence from France in 1960, French banks have had a sizeable presence in the Ivoirian banking sector (see analysis). Société Générale and BNP Paribas are both present through their respective national subsidiaries, Société Générale de Banques en Côte d’Ivoire (SGBCI) and Banque Internationale Pour le Commerce et l’Industrie de la Côte d’Ivoire (BICICI), while Credit Lyonnais was majority owner of Société Ivoirienne de Banque (SIB) before selling its shareholding to Attijariwafa Bank of Morocco in 2009.

The Attijariwafa acquisition is part of a broader trend of African banks establishing operations in the country, a development that is being mirrored elsewhere in West and Central Africa. The transition began years ago but has been increasingly picking up pace. Ecobank, founded in Togo and the largest of the 20 banking groups involved in cross-border operations in the UEMOA region, with 15% of the regional market share, first commenced operations in Côte d’Ivoire in 1989, having acquired the local subsidiary of Chase Manhattan. By 2013, it had established itself as the second-largest bank in the country in terms of resources.

MORE ENTRANTS: Attijariwafa’s arrival was preceded by the entrance of Nigeria’s Union Bank for Africa in 2008. These were followed by Nigeria’s Access Bank, which acquired Omnifinance in 2009, Libya’s Banque Sahélo-Saharienne pour l’Investissement et le Commerce, which set up a subsidiary in 2009, and Nigeria’s Diamond Bank, which commenced activities in 2010. Two other Moroccan banks joined Attijariwafa in the country, with Banque Marocaine du Commerce Exterieur (BMCE) acquiring Bank of Africa Côte d’Ivoire in 2010, while Banque Centrale Populaire teamed up with Banque Atlantique, an Ivoirian institution with a regional presence, in 2012 to create Atlantic Bank International, a new financial holding company. Nigeria’s Guaranty Trust Bank opened its doors in Côte d’Ivoire in 2012, as did Gabon’s Banque Gabonaise et Française Internationale and Credit Libanais from Lebanon.

There are few formal restrictions on market access for foreign banks, so initial entry is relatively straightforward. Despite the increased tendency towards regionalism in West African banking, most banking operations are in practice still conducted within national borders and cross-border capital flows are limited, accounting for only 1.6% of total lending in 2012. Moreover, there remain sharp differences in lending and deposit rates across the region. This reflects not only the limited extent of true integration of the region’s banking system, in spite of a common currency and capital markets, but also a lack of economic integration, credit transparency and the residual importance of local knowledge in influencing lending decisions.

WIDE BUT SHALLOW SECTOR: If the diversity of players in Ivoirian banking is striking, the other notable characteristic of the sector is its lack of depth. According to the World Bank’s Global Financial Development Database, total liquid liabilities as a proportion of GDP stagnated in the early 2000s before growing slowly but steadily from 33.5% in 2005 to 41.2% in 2011.

However, this latter increase must be viewed in the context of a sharp contraction in GDP that year. Similarly, Ivoirian banks’ assets as a proportion of GDP had been in slow decline until 2004, reaching a nadir of 16.2% before growing steadily to 20.9% in 2010 and – subject to the same caveat as above – jumping to 24.8% in 2011. More recently, by year-end 2012 total resources in the banking system had reached CFA4trn (€6bn), an estimated 32.4% of GDP, representing a 9.3% increase on year-end 2011 as growth accelerated in the second half of 2012.

With the return of political stability and confidence in the banking system, customer deposits surged by 39.3% to reach CFA2.9trn (€4.35bn) by year-end 2011. By the end of 2011, total assets in the Ivoirian banking system stood at CFA4.2trn (€6.3bn), and total capital was CFA2.7trn (€4.05bn), of which CFA99.2bn (€148.8m) was foreign and a further CFA67.3bn (€101m) was state-owned. In addition to strong credit growth, the 2010 and 2011 increases of 16.7% and 15.8%, respectively, of total assets in the banking system were also underpinned by strong investment growth, with total investments doubling over the 2009-11 period to stand at CFA692.7bn (€1.04bn). The total number of bank accounts was 3.15m, up from only 1.15m in 2009, while the banking sector employed 5543 people, of which half were at management level. Some 1.6m accounts were held at the state-owned savings bank, Caisse Nationale des Caisses d’Epargne.

HIGH RISK, HIGH RETURN: In 2011, according to the BCEAO, some 64% of Ivoirian banks reported a profit, up from 37% in 2010. SGBCI led the pack, recording profits of CFA16bn (€24m), while Banque Atlantique came at the other end of the spectrum, with losses of CFA30bn (€45m). The banking system as a whole recorded losses in 2008 of CFA2.8bn (€4.2m), in 2010 of CFA45bn (€67.5m) and in 2011 of CFA5.5bn (€8.25m), only reporting profits in 2009 of CFA21.8bn (€32.7m).

The preponderance of losses can largely be explained by high costs and the need to make provisions against losses resulting from the crisis. Return on equity has proved volatile in recent years, falling from 22.3% in 2009 to -9.4% in 2010 before recovering to a relatively modest 1.6% in 2011. The interest rate margin, the difference between what banks earn on loans and their cost of capital, has been under pressure in recent years, but remains high, having fallen from 8.6% in 2009 to 7.8% in 2010 and 7.4% in 2011. The net margin fell as the reduction in average interest receivable – from 8.6% in 2009 to 7.8% in 2010 and 7.4% in 2011 – outstripped the fall in the banks’ cost of capital – from 2.7% to 2.3% and further still to 2.2% over the same period.

Interest rates charged to borrowers can vary widely, from as low as 5-6% for big multinationals, a rate lower than the government’s own cost of financing; 6-10% for subsidised mortgages; 11-12% for unsubsidised mortgages; 8-13% for smaller businesses; up to the maximum “usury” rate of 17% – in all circumstances falling well below the interest rates charged in neighbouring Ghana, where commercial lending rates can reach as high as 25%.

CREDIT GROWTH: In 1961 private sector credit stood at 18.5% of GDP, while in 2010 it stood at 17.2% before growing to 19.3% of GDP in 2011. Although this puts into stark relief an apparent lack of financial deepening in the country over the course of half a century, it conceals the fact that lending had reached as high as 41.2% of GDP by 1983, before the excesses of that exuberance led to a slowdown in activity. In fact, the evolution of private sector credit mirrors the changing fortunes of the economy at large and underlines the potential for future recovery and growth. By comparison, private sector credit in 2011 stood at 13.2% of GDP in Ghana, 22.9% in Nigeria and 27% in Senegal.

Between 2009 and 2011, credit growth accelerated to an annual average of 22.8%, reaching CFA3.1trn (€4.65bn) by year-end 2011. This credit growth rate was far in excess of the GDP growth rate for the period, and occurred in spite of the prevailing political climate. It should be noted, however, that this aggregate credit growth was driven in large part by inter-bank lending and Treasury operations, which almost doubled to CFA1.02trn (€1.53bn) over the 2009-11 period. Lending to clients was more subdued, rising 11.4% in 2010, but growing only marginally by 0.2% in 2011 during the crisis.

LOAN SPREAD: Bank lending is concentrated in the construction and civil works (33.1%) and industrial manufacturing (30.1%) sectors, with transport representing a further 14.4%. Overall, the primary sector accounts for 4.2% of all lending; the secondary sector 69%; and the tertiary sector, 26.1%. Short-term loans predominate, and increasingly so, having grown from 75.4% of all lending in 2009 to 79.8% in 2011. While the largest category of loans – “other short-term credits”, representing a third of all loans to clients – rose strongly by 23.5% in 2010 and grew by a further 8.4% in 2011, the next two largest categories of loans – “ordinary debit accounts” and “medium-term credit”, representing 26% and 27.2% of all loans to clients, respectively – went into reverse in 2011, falling back 8.2% and 4.3%, respectively.

Besides the general political and economic environment, the biggest obstacles to credit growth in Côte d’Ivoire are the prevalence of short-term deposits, which the government is addressing by loosening tight regulations on prudential ratios since the beginning of 2013, and a weak institutional environment, a problem that plagues many West African banking sectors. For instance, given the paucity of identity cards and formalised billing, potential borrowers may not even be able to overcome the initial hurdle of proving their identity and address. This is exacerbated by the size of the informal economy, as employers may not be in a position to vouch for their workers or to pay wages through the banking system. Traditionally, contract enforcement has also been uneven, though this may begin to change as the commercial court, established in 2012, becomes more firmly entrenched.

MISSING PIECES: There is as of yet no credit bureau or registry in the country, and the extent of collateral registration is highly limited. Historically, the BCEAO oversaw the creditworthiness of the largest firms, providing banks with a modicum of certainty for these accounts. While this approach may have served the purposes of larger corporates and a banking system focused on serving them, it did little to support credit growth in the wider economy. Households, small businesses and even many mediumsized corporates still face chronic challenges in accessing credit, relying largely on internal funding sources to meet their financing needs.

Following extensive stakeholder consultation, a draft law for licensing a credit bureau was published in early 2013 with a view to passing the legislation by the end of the year. Although the process was led by the Ministry of Economy and Finance, the International Finance Corporation was heavily involved in developing the proposals, which are understood to be in line with international best practices from both developed and developing economies. While operational details were not yet available at the time of writing, it was expected that the eventual legal framework would be adopted across the UEMOA region so as to ensure a consistent approach across the banking union. It was not yet clear whether one central, regional credit bureau or registry would be established or whether each country would have its own, or whether the public or private sectors would operate the institution. Private sector operators have expressed interest in entering the market, and it is hoped that there will be multiple operators and a competitive dynamic over the longer term. The final legal framework is expected to contain requirements for compulsory information sharing balanced with protections of confidentiality. It will also set out relevant procedures for managing and disseminating the database of borrowers. It is envisaged that the new credit bureau will be operating in 2014.

NON-PERFORMING LOANS: Unsurprisingly, the political crisis impacted negatively on the quality of the loan portfolios of Ivoirian banks. Having experienced a decline of 2.7% in 2010, non-performing loans (NPLs) jumped by 37% to CFA114.4bn (€171.6m) in 2011 as recession took hold. The net aggregate rate of NPLs across the system grew from 3.8% in 2010 to 5.2% in 2011, while gross NPLs increased from 16.3% to 17% over the same period, up from 15% in 2009. This sees the country ranked third worst for NPLs in the UEMOA region, behind only Mali and Niger. Although aggregate provisions against impaired loans fell marginally in 2011, by 5.2% from CFA328.5bn (€492.75m) to CFA311.4bn (€467.1m), these still comfortably outstripped NPLs, implying a coverage ratio of 2.72:1.

The extent to which banks are required to set aside provisions depends on the nature of the loan and its underlying collateral. For example, for mortgages with a duration of longer than two years, 50% of the amount must be set aside as a provision against possible losses if repayments have not been made for a period of three months.

EXPANDING FOOTPRINTS: The combination of strong economic growth, multiple new market entrants and the return of political stability has contributed to a surge in new bank branches. Banks are eagerly expanding their networks and offering new products, both in Abidjan and around the country, in order to grab market share by increasing their client base from among the many unbanked and under-banked Ivoirians.

Most of the branches which were destroyed during the crisis had been refurbished and reopened by 2013, while the total number of branches had increased from 313 in 2009 to reach 550 by June 2012. As a result, the number of inhabitants per bank teller fell from 70,300 to 40,000 in three years. Automatic teller machines (ATMs) are now relatively common in Abidjan, where they had been a rarity even 10 years ago, and the country boasted 527 ATMs in total by year-end 2011, an increase of 100 machines on the previous year.

However, the banks’ footprints are still relatively sparse outside Abidjan – which alone accounts for 80% of all bank tellers – and the number of inhabitants per bank teller is far above international norms. There remains much scope for further development of banks’ retail branch networks. “Revenue in the sector is primarily from corporate banking, though with the banking penetration rate hovering at around 8%, increasing retail banking is certainly a priority. For this to happen, a larger middle class is needed,” Fabien Riguet, the CEO of BICICI, told OBG.

CASHLIGHT: Unsurprisingly, given both the low rate of banking penetration and the high level of labour market informality, Côte d’Ivoire is a predominantly cash-based economy and is likely to remain so for the foreseeable future. Although they are still far from ubiquitous, and there is limited data to track expansion, there has been heavy investment in payment terminals for credit cards and these are likely to become increasingly widespread over the coming years. At the UEMOA level, the Groupe Interbancaire Monétique (GIM) was founded in 2003 to promote and coordinate the use of bank cards throughout the region. The GIM, which is private and part-owned by the central bank, brings together 104 banks from across the region, including 19 Ivoirian banks. Cards issued by participating banks can be used at their counterparts across the region. This has been an important development in both improving access to finance and facilitating intra-regional travel. Across the UEMOA region, less than 10% of individuals currently have access to financial services, while only 2% use bank cards of any description. In May 2013 GIM launched a new pre-paid card called “GIM prepaid”, which was to enable users to top up credit, transfer funds from card to card, make withdrawals, get cash advances, and make purchases and payments at all participating banks and at 3000 other points of acceptance throughout the region.

PREPARING FOR PRIVATISATION: The state is still an important player in Ivoirian banking, owning full or partial shareholdings in a range of banks.

President Ouattara, who served in government in the 1990s during the last sustained privatisation effort, is on record as saying that he would like to see the state take a step back from the banking sector so as to depoliticise lending, improve efficiency and spur economic growth.

It is not yet clear which institutions will be privatised, when they will be privatised, or whether the state will dispose of its stakes in full or in part. BNI, BHCI, Versus Bank and the Caisse d’Epargne have all been slated for privatisation following an announcement made by President Ouattara in January 2012, but it is understood that no final decisions have been made in this regard. If and when the privatisations occur, they will be one of the most promising avenues for bringing new life to the Abidjan-based regional stock exchange, depending on the manner of their sale, i.e., whether they will happen via an initial public offering or a negotiated sale.

It is likely that the government’s privatisation plans will be made clear with or shortly after the completion of the banking sector’s restructuring plan, which is being prepared in collaboration with the World Bank and expected to be published in the second half of 2013. In addition to securing the maximum financial return for the state, the government must take into consideration issues such as the desired structure and concentration of the banking sector, the impact on employment as well as on other socioeconomic objectives, like expanding access to credit. State-owned Versus Bank, for instance, is the only SME-dedicated bank in a country where this segment is faced with chronic challenges in accessing credit. The desire for a speedy disposal and a high sale price may have to be balanced against the need to ensure this SME focus is maintained.

REGIONAL REGULATION: All eight members of the UEMOA are subject to the same banking regulation administered by the BCEAO and its Banking Commission. Innovations in banking regulations often move at a snail’s pace given the necessity of securing unanimous agreement in advance. All new banks are required by law not only to obtain a banking licence, but also to join the sector’s professional organisation for the region, the Professional Association of Banks and Financial Establishments (l’Association Professionnelle des Banques et Éstablissements Financiers, APBEF). Prudential norms and standards apply across the region, although in some circumstances they are not respected in practice. There have been several notable instances where regulatory ratios have evolved or been suspended to reflect the impracticality of enforcement.

While banks across the region appear to be well capitalised on aggregate, this masks a wide dispersion between countries, with the capital adequacy ratio (CAR) ranging as high as 17% in Guinea-Bissau in mid-2012, but as low as 6% in Côte d’Ivoire, below the internationally accepted minimum of 8%. Of the 23 banks operating in that country, only 13 respected the minimum CAR, while adherence to other solvency and prudential ratios was little better. Given the current dynamics in Ivoirian banking, Basel III is not an immediate priority. The Basel II framework is of more salience, although the calculation of riskweighted assets is a challenge for some of the region’s licensed institutions, which makes the implementation of Basel II in full rather complicated.

NEW REGULATORY DEVELOPMENTS: One of the most significant regulatory changes in recent times relates to the so-called transformation ratio. Until December 2012, 75% of all long-term lending had to be backed by liabilities of a similarly long duration, greatly limiting the extent to which banks could extend credit. This ratio was reduced to 50% at this time, thereby alleviating some of the pressure on banks in issuing long-term loans. However, the ratio had not been strictly applied, with the effective ratios in the banking system having been significantly lower in recent years, at 50% in 2009, 65% in 2010 and 54.5% in 2011. In a sense, regulation was brought into line with prevailing practice. The implementation of this regulatory change was to be validated by a technical group in mid-2013 after the banks provided the relevant statistical data to the BCEAO.

In December 2012 the regional authorities also suspended the stipulation that 60% of all clients must benefit from the pass-through of discounted BCEAO funding, which the banks use to re-finance their lending. This was a rule honoured in the breach, so once again its suspension brought the regulatory framework into line with prevailing practice.

Finally, although in 2007 the UEMOA authorities announced their intention to increase the minimum capital requirement to operate in the region from CFA1bn (€1.5m) to CFA10bn (€15m), this has only been incrementally increased to CFA5bn (€7.5m), and a date has not been set by the regulator to enforce the CFA10bn (€15m) minimum.

ISSUE OF ACCESS: Estimated figures for banking penetration vary widely, which is partly attributable to the uncertainty that was wrought by the 2010-11 crisis, the effects of which are still being sorted out. By some measures, however, the figures for Côte d’Ivoire are roughly comparable to those of other countries in the region. Between 2009 and the end of May 2012, the number of bank clients, both private and commercial, increased from 710,428 to 1.2m, giving rise to an apparent rate of bank account penetration of 19%, one of the highest in the UEMOA. However, given that clients may have multiple accounts, it is estimated that the real level of account penetration is significantly lower.

What is clear is that overall financial services usage by the broader population is on the increase. APBEF estimates that between 2008 and 2010 the actual rate of account penetration increased from 7% to 11% (as opposed to estimates that start with a higher market penetration rate). Although this is not the lowest rate of banking penetration in the sub-region, it lags behind the average for sub-Saharan Africa and for countries at a similar stage of development. Between new market entrants and the aggressive expansion of existing players, this rate should continue growing over the coming years.

MOBILE BANKING ON THE MOVE: As in many other African and emerging economies, mobile phone penetration is far higher than banking penetration in Côte d’Ivoire. This has given rise to hopes and expectations that mobile banking will increase retail banking activity in the country, much as it has done in Kenya through Safaricom’s M-Pesa programme (which has since been replicated by a number of other mobile operators throughout the continent). While mobile phone penetration is higher in Côte d’Ivoire (95%) than in Kenya, Ivoirian mobile banking is still in its infancy (partly due to the fee structure adopted by mobile operators), but the authorities are encouraging the expansion of financial services as banks try to grab market share.

In Côte d’Ivoire, French telecoms company Orange partners with BICICI, for instance. E-money issuer Celpaid is also active in the market, ensuring a degree of competition. Moov, a subsidiary of Atlantique Telecom, also operates a mobile banking platform, Flooz, in partnership with BIAO.

By the end of September 2012 there were 2.6m mobile banking subscribers in the country, with each of the three services holding a roughly equal market share. All three offer standard mobile banking services, including lodgements, withdrawals, transfers, bill payments, wage payments and insurance. Between them, Orange and MTN have more than 3000 agents and transaction points, a number that has nearly doubled since 2012. Moov has also transitioned into mobile financial services. In late 2012 it signed an agreement with Stamvie insurance to provide microinsurance via mobile phone. This new product, “Moovprevoyance”, is to be targeted at lowincome people in rural areas.

ISSUES: Activity levels are still relatively low, and distribution networks are limited in rural areas. One reason for the slower development of mobile banking in West Africa is the higher charges for larger transactions. Approximate averages in terms of fees in Côte d’Ivoire range from a minimum of $0.21 per transaction up to $10, whereas similar transaction sizes attract charges ranging from $0.03 to $0.34 in Kenya. The charge for a $200 transaction in Côte d’Ivoire is roughly $2, but only $0.34 for a similarly sized transaction in Kenya. Mobile banking operators in Côte d’Ivoire do not allow transfers outside of their own network, thereby limiting the potential scope of a client’s activity, unlike in Kenya. While the opportunity for growth in this market segment is clear, it will likely remain limited until the range of services on offer and their costs adjust to demand.

The BCEAO organised a regional consultation on mobile banking in 2011, and then subsequently introduced a new legal framework to facilitate financial mobile transactions among UEOMA member countries, and boost the security and licensing process for both bank and non-bank actors in mobile money operations. At a national level, the government has more recently undertaken efforts to further improve the regulatory framework governing mobile banking, but this is still a work in progress.

MORTGAGE LENDING: Unsurprisingly, as with many emerging markets, mortgage penetration is minimal, although the Housing Support Fund (Fond de Soutien de l’Habitat, FSH) heavily subsidises homes for those on low incomes. Typically, a mortgage lasting 15 to 17 years will attract a rate of 9.5% if it is eligible for an FSH subsidy. Shorter-term seven-year mortgages for “social housing”, which finance homes up to CFA10m (€15,000) in value, attract an interest rate of only 6%. For mortgages that are ineligible for FSH subsidies, a duration of over 10 years is unusual, and interest rates are typically 11-12%. New laws governing construction and home loans have been under consideration since late 2012, when the APBEF brought stakeholders together to make proposals as to how the flow of credit can be improved in these areas. In particular, market players are lobbying for the further relaxation of requirements for providing long-term credit.

“Sources of long-term housing financing are being encouraged, especially through social public funds. These funds support housing financing, but the criteria favours large projects, excluding a lot of viable smaller projects,” Souleymane Dogoni, the director-general of BHCI, told OBG.

Reforms are also expected to entail other measures to reduce interest rates and boost home-ownership. Concrete developments were not expected before the government makes clear its plans for restructuring the banking sector in late 2013. Given strong demographics and the continuing need to rebuild after the 2010-11 crisis, there is great latent demand for new housing and an apparent political will to alleviate the short supply. Concrete developments are therefore expected in 2014.

OUTLOOK: Resolution of the 2010-11 electoral crisis and guidance from the country’s leadership are helping steer Côte d’Ivoire’s banking sector back into the clear. Across the country, bank branches are once again up and running, and new entrants are helping to diversify the sector even beyond its pre-crisis reach, particularly through addressing underlying issues, including low banking penetration rates.