Banking in Ivory Coast
Ivorians depend more on mobile money than on banks as there is little incentive for approaching a bank
West African country Ivory Coast, officially called the Republic of Cote d’Ivoire, has a peculiar problem. Official estimates maintain that only 1 in 8 people who save money chooses a bank or financial institution to do so. This is almost two times lower than those observed in any other African country. Most of the countrymen prefer to keep their money at home or those who are rich and affluent chose to buy real estate assets or send it abroad for safekeeping. This is an unfortunate situation for a country that is trying to find a place among the emerging economies.
LACK OF TRUST
A World Bank Economic Update titled ‘The Race to Emergence: Why Cote d’Ivoire Must Adjust its Financial System’, says: “The reluctance of Ivorians can be explained in part by the political crisis, which weakened the trust between banks and their clients. It can also be attributed to the historic failures of several public banks that are likely to be closed, restructured, or privatized.” There is absolutely no incentive for an Ivorian to open a bank account and keep his hardearned money there. The transport system is abysmal and costly in the country, there is always high bank transaction charges and there is no guarantee that the customer can have access to credit from the bank. The banks find it more expedient to have corporate clients than retail customers. They also prefer to invest in safe government securities, or just create reserves. There are instances where banks ask a customer to invest an equivalent amount in the bank as guarantee for a loan.
Such a situation has its advantages too. The country today has a flourishing mobile money business. There are more mobile money accounts (24.3%) than bank and microfinance accounts combined, and it is becoming very common for Ivoirians to use mobile money to make payments. The country has the 5th highest rate of mobile money accounts in the world behind Kenya (58%), Somalia (37%), Uganda (35%), and Tanzania (32%). These mobile accounts facilitate payments and transfers of funds, but they do not give credits. It is common for Ivorians to pay school fees and utility bills using mobile money.
The World Bank has suggested that Cote d’Ivoire take steps to reverse this trend to strengthen its financial system, especially its banking system. It wants banks and microcredit institutions to develop closer ties with their customers through innovations and partnerships, with the aim of reducing their transaction fees. Likewise, the bank has proposed creation of financial institutions other than commercial banks like mobile phone companies that could grant loans, as they do in Kenya. The World Bank has also suggested that the country should be able to create a financial market regulatory framework that can adapt to future innovations.
Cote d’Ivoire is a member of the Communaute Financiere Africaine (CFA), a financial grouping of francophone African countries, which belongs to the West African Economic and Monetary Union. The country’s central bank is the Banque Centrale des Etats de l’Afrique de l’Ouest, located in Dakar, which is also the central bank for WAEMU members. There are 26 commercial banks, a regional stock exchange and 30 insurance companies operate in the country. Five of the banks are domestic-owned, these accounting for 21% of total assets. The government is heavily involved in the sector, in an effort to prop up these institutions since the beginning of the conflict that rocked the country in 2002.
The banking sector in the country is less sophisticated than those is some of the other African countries or in Europe. There are several financial institutions, including retail and wholesale banks, specialized banks, insurance companies, finance companies, investment advisors, money changers, insurance brokers and securities brokers. The banks have a great potential for growth as the banking services penetration rate is just about 8%. The market is still dominated by cash transactions, but the future trend is leaning towards digitization and electronic mode.
The top banks in the country are Societe Generale de Banques en Coe d’Ivoire, Banque Atlantique Cote d’Ivoire, Ecobank Cote d’Ivoire, Banque Internationale pour l’Afrique Occidentale, Banque Nationale d’Investissement, Societe Ivoirienne de Banque, Bank of Africa, Citibank Côte d’Ivoire, Standard Chartered Bank Cote d’Ivoire, Banque pour le Financement de l’Agriculture and Versus Bank.
Cote d’Ivoire continued to witness a stable economy since 2012 after the country gained some equilibrium after the 2002-03 civil war and the following years of uncertainty. However, setting up of new regional banks, microfinance institutions, and the mobile money spread helped to create a somewhat semblance of banking services. In the recent years, the banking sector has also seen some restructuring. Two of the five domestic banks, which had negative net worth at the end of June 2008, formulated recapitalization plans approved by the Banking Commission.
Ivorian cocoa farmers transact money through mobiles