Financial Sector Overview
In March 2012, Mali experienced the most serious crisis in its history with a coup d'état and the occupation of the North by rebel and jihadist groups. The situation stabilised after January 2013 thanks the efforts of the international community. The situation however remains fragile: armed groups have sporadically attacked UN forces, the Malian army in the north, and civilians in Bamako, the capital. The most recent attack targeted the Nord-Sud Azalai Hotel in March 2016. The crisis caused annual GDP growth to fall from 3.2 per cent in 2011 to minus 0.8 per cent in 2012. The recovery was quick, driven mainly by strong performance in the agricultural sector, and growth returned to positive levels in 2013, when it passed 2.3 per cent and consolidated at 7 per cent in 2014 and 6 per cent in 2015, exceeding its pre-crisis levels. However, the fragile security situation, vulnerability of agricultural production to weather.
As a member of the West African Economic and Monetary Union (WAEMU) Mali shares a common currency, central bank (the Central Bank of West Africa, or BCEAO), and joint monetary policy with other member states. As such, commercial banks, financial institutions, and microfinance organisations are subject to the WAEMU regional banking regulations and supervised by the WAEMU Banking Commission.
The key institutional players in the Malian financial sector are commercial and non-bank financial institutions. By 2015, there were 17 credit institutions in Mali including 14 commercial banks, holding 97 per cent of financial sector assets; one leasing company; and two guarantee funds, one for mortgages and the other for small and medium sized enterprises (SMEs). The country has access to the regional securities exchange, the BRVM (Bourse Régionale des Valeurs Mobilières), based in Abidjan. By mid-2016, only one of its 40 listed companies was from Mali: Bank of Africa– Mali.
Table1: Main financial institutions in Mali, 2010-2015
Source: IMF Financial Access Survey, 2016.
Mali's financial depth indicators are generally above sub-Saharan African averages, according to the most recent data
available from the World Bank Global Financial Development Database (see Table 2). The ratio of private credit by banks to GDP was 22.7 per cent in 2014, compared with a median of 15.7 per cent for sub-Saharan Africa. The ratio of deposit money banks’ assets to GDP was also higher than the regional median, at 26.9 per cent vs 23.8 per cent, in 2014.
Table 2: Depth of Financial Institutions and Markets in Mali, 2010-2013
Source: World Bank Global Financial Development Database, 2016.
The expansion of bank credit slowed from rates as high as 24 per cent in 2011 to as low as 4 per cent after the crisis at the end of 2012. By 2013, it had recovered to relatively high rates between 15 per cent and 27 per cent, boosted by loans to the Government.
Source : MFW4A. Data from BCEAO.
By 2015, the total volume of bank credit stood at CFA F 2,180 billion (USD $3.6 billion), of which CFA F 1,747 billion (USD 2.9 billion) was loans to the private sector (80.1 per cent of the total).
The economic sectors that received the largest shares of private credit in 2015 were Trade, Hotels, and Restaurants (43.5 per cent) and Manufacturing (12.5 per cent). Despite contributing 40 per cent of GDP and employing roughly 65 per cent of workers, the agricultural sector only received 3.1 per cent of overall private sector credit, and that was highly concentrated to the cotton sector. Mining, mostly of gold, accounted for 3.8 per cent of loans in 2015 and represented about 60 per cent of exports. Its funding comes mostly from outside Mali.
Which industries receive how much credit in Mali has not changed significantly over the past decade (see Chart 2): Agriculture and Manufacturing are consistently loaned less than 15 per cent of the total, while Trade, Hotels, and Restaurants receive roughly 40 per cent.
Short term loans commonly account for around 60 per cent of total loans (see Chart 3), the largest proportion. Medium-term credit increased slightly from 29 per cent in 2010 to 32 per cent in 2015, while the share of long-term credit decreased by 2 percentage points, from 5 per cent in 2010 to 3 per cent in 2015.
Bank interest rates
Mali's average loan interest rate declined modestly but consistently from 9.4 per cent in 2010 to 8.6 per cent in 2015. By contrast, the average deposit rate remained stable at around 4.8 per cent over the same period. As a result, the interest rate spread declined slightly, from 4.5 per cent in 2010 to 3.9 per cent in 2015. This is consistently higher than the WAEMU’s averages (see Chart 4), where the spread for the bloc as a whole fell from 3.2 per cent in 2010 to 1.8 per cent in 2015. The minimum interest rate spread recorded in Mali over the same period was 3.8 per cent.
Source: MFW4A. Data from BCEAO.
Most of Mali's financial access indicators are low compared to the rest of sub-Saharan Africa, according to the latest Global Findex Data. In 2014, the proportion of Mali’s adult population with an account at a formal financial institution was 13.3 percent, less than half of the sub-continental median of 28.9 per cent. Similarly, the proportion of adults saving and borrowing at financial institutions were below the average. Access to mobile money services, however, was in line with the average (see Table 3).
Unlike traditional financial services, the use of mobile money services is growing rapidly. Between 2013 and 2014, the number of active mobile money accounts in Mali increased by 157.5 per cent, from 452,007 to 1,163,997, according to the IMF Financial Access Survey (2016). Mobile money transactions' value as a percentage of GDP also increased more than threefold, from 3 per cent to 11 per cent. This raises hopes of increasing access to financial services for people in Mali who are currently under-served by traditional branch banking.
Recent policies and reforms
New regulations in 2014 required banks to offer 19 different services free of charge, a move that will make financial products more affordable to more people. The list, negotiated with the Bankers' Association, includes services that are free in most of the rest of the world, such as depositing and withdrawing cash, intra-bank transfers, receiving monthly account statements, and using ATMs.
In the microfinance sector, Mali's Council of Ministers adopted the Emergency Plan for the Microfinance Sector in 2015.wo of its six key measures are to restructure the sector, including closing nonviable MFIs with a depositors’ compensation mechanism, and to reform the national supervisory body to give it more independence and capacity. The Emergency Plan matches regional efforts to restructure and strengthen the microfinance sector in the WAEMU.
Implementing the Emergency Plan remains challenging amid fiscal tightening and the donors' reluctance to intervene following blows to the reputation of Mali's microfinance sector, and some MFIs' poor governance records. The Plan requires a budget of CFA F 5.8 billion, of which CFA F 3.3 billion would be spent on microfinance sector restructuring and reform of the MFIs Control and Supervisory Unit (CCS-SFD) at Ministry of Finance. AFD, the French development agency, plans to give CCS-SFD about CFA F 1 billion for technical assistance.
There are 14 commercial banks in Mali 5 , a number unchanged since 2013. Commercial bank branches and ATMs, however, both increased between 2013 and 2015, respectively from 419 to 516, and from 343 to 405.
Seven of the 14 banks are classified as “large banks”, with total assets less than CFA F 200 billion or USD $332 million, and seven are “small banks”, with total assets less than CFA F 100 billion or USD $165.5 million, according to the WAEMU Banking Commission.
One of the banks specialises on financing agriculture, another focuses on housing, and another is for microfinance.
Mali’s banking sector is dominated by foreign shareholders: they held 56.2 per cent of total bank capital by 2014, while the Malian Government held 22 per cent, and private Malians 21.8 per cent. The foreign shareholders are primarily from Africa, especially from Morocco, and from other WAEMU countries. The recent emergence of WAEMU banking groups was spurred in part by the approval of a single banking license for the sub-region. French banking groups, which have a major presence in many WAEMU countries, own only one relatively small bank in Mali, BICIM, which has a market share of only 4 per cent.
The top three banks controlled 48 percent of deposits and 40 percent of loans in 2014, indicating a moderated level of concentration.
Assets and Liabilities
Despite the 2012 crisis, the banking industry recorded a solid growth in its balance sheet, which more than doubled in volume between 2010 and 2015 (see Chart 4). Total assets stood at CFA F 3,850 billion (USD $6.4 billion) in 2015, up from CFA F 1,870 billion (USD $3.1 billion) in 2010.
Chart 5 : Total banks’ assets, loans and deposits.
Source: MFW4A. Data from BCEAO.
Banks' assets were mostly private sector credit, totalling 45.4 per cent of total assets in 2015, followed by gross foreign assets, at 20.5 per cent. The same year, government credit accounted for 11.2 per cent of total banks’ assets, up from 5 per cent in 2010, while reserves accounted for 8.2 per cent, down from 11.8 per cent in 2010.
On the liabilities side, private deposits remained the largest component, although their share fell from 58.4 per cent in 2011 to below 50 per cent by 2014, probably due to the consequences of the 2012 crisis. In 2015, total private deposits accounted for 47.5 per cent of total bank liabilities, foreign liabilities for 12.2 per cent, and government deposits for 11.2 per cent.
The most notable recent change in banks’ funding structure comes from central bank credits, which became the second-largest source of bank funding in 2015. Their share of total liabilities rose sharply from 2 per cent in 2010/11 to 9.5 per cent in 2013, and 14.7 per cent in 2015.
As for the transformation of banks’ resources into credits, the ratio of private credits to private deposits stood at 95.5 per cent in 2015, up from 86 per cent in 2010. However, it remains below the peak of 97.5 per cent reached in 2011, just before the crisis (see Chart 5).
Most financial soundness indicators for Mali's banking sector have improved since 2013 (see Chart 6). The ratio of Tier 1 capital to risk-weighted assets – the 'solvability ratio' – was 13.4 per cent in 2015, up from 10 per cent in 2012 and well above the regional required minimum of 8 per cent. In terms of profitability, Returns on Assets (ROA) rose from 1.3 in 2012 to 1.6 in 2015, and Returns on Equity (ROE) almost doubled from 12.5 to 21.5 over the same period. The non-performing loans (NPLs) ratio also improved, from 18 per cent in 2012 to 14.5 per cent in 2015.
Chart 6: Financial soundness indicators, Mali 2011-2015
Source: MFW4A. Data from the IMF report no 16/149.
Nonetheless, the banking system continues to face risks. IMF stress tests conducted during a regional consultation with the BCEAO and the Banking Commission in 2015 indicated that the concentration of credit on a few large borrowers is a main concern for banking sector stability. This concern remains largely unaddressed today.
In addition, while NPLs have declined, a large share of those that remain date back more than a decade, and are concen-trated in three banks, including the state-owned Housing Bank of Mali (BHM) that recently merged with another bank to reduce financial sector risks.
Non-Bank Credit Institutions
In addition to Mali's 14 banks, there are three small non-bank credit institutions: one leasing company and two guarantee funds, one for mortgages and the other for SMEs. The SME Guarantee Fund only started operations in late 2014. These 17 financial institutions are together subject to the WAEMU regional banking regulations and supervised by the WAEMU Banking Commission.
Regulation of insurance companies in Mali is conducted through the ‘Conference Interafricaine des Marchés d'Assurances’ (CIMA). All the 14 member countries of CIMA have shared the same insurance legislation and supervision since 1992
Until its privatisation in 1998, Mali's insurance sector was dominated by the National Insurance and Reinsurance Fund.
Today there are 11 insurance firms: 3 for life insurance and eight non-life insurance companies. Four of the 11 belong to international insurance groups. All 11 combined account for less than 3 per cent of the total financial sector’s assets.
The insurance market is smaller than the size of its economy and population would suggest: insurance penetration (premium to GDP) and insurance density (premium per person) are low in comparison to most other markets in the CIMA region.
The relatively small size of the Mali’s insurance market reflects the fact that a number of institutions outside the insurance industry provide a notable tranche of insurance-like services. For example, banks and microfinance institutions often charge their borrowers a fee (frequently 1 per cent of the loan amount) to establish an internal “solidarity fund”, or similar, which pays outstanding balances if the borrower dies. Sometimes other events are included, most often disabilities but occasionally also property damage. Also, around 50,000 Malians have joined “mutuals” that provide most of their members some form of health care financing that equates to health insurance. The market would grow noticeably if all these informal products were transferred to formal insurance companies.
The housing finance market in Mali remains small and underdeveloped, with just 2 per cent of the population having a loan to buy, construct, or renovate a dwelling. In 2013, only 452 mortgages were issued, 3 per cent of all mortgage lending across the WAEMU. In terms of loan maturity, interest rates, and volume of loans, Mali lags behind all of its WAEMU peers except Guinea Bissau. Mali needs 82,500 new housing units to be added each year, a target not yet being met. That requirement will accelerate as the population grows and urbanisation passes 50 per cent by 2030.
WAEMU's digital financial services development started in 2009 in Senegal and Cote d’Ivoire and then spread to other member countries.
The e-money regulatory framework, adopted by the Central Bank in 2006 and updated in 2015, authorises two types of models for electronic money: the banking model and the non-bank model. In the former, electronic money is the responsibility of a credit institution or a microfinance institution, sometimes working with a technical operator. The non-bank model involves Electronic Money Institutions (EME), which manage their own electronic money.
By 2015, they were 33 electronic mobile money issuers in WAEMU: 29 stemmed from partnerships between banks and telecommunications companies; two are EMEs and two are microfinance institutions.
Mali's two mobile network operators, Malitel and Orange-Mali, offer mobile money services to customers, called Orange Money and MobiCash respectively. Their services include domestic transfers, and bill and merchant payments. Orange Money offers international remittance services in partnership with the Banque Internationale pour le Commerce et l’Industrie du Mali (BICIM).
Active mobile money accounts more than doubled in the year from 2013 to 2014, and transactions increased by 306.6 per cent over the same period, reaching 50,612,514 by the end of 2014. Transaction value jumped from the equivalent of 3 per cent of GDP in 2013 to 11 per cent in 2014, or CFA F 811 billion (USD $1.3 billion) from CFA F 199 billion (USD $0.3 billion).
Mali had a lower number of active mobile money accounts per 1,000 adults (129.9) than Cote d’Ivoire (613.4) and Senegal (131.9), but had the second-highest value of mobile money transactions as a percentage of GDP in WAEMU in2014 (see Chart 7).
Chart 7: Penetration of mobile money in the WAEMU
Source: IMF Financial Access Survey (2016).
Microfinance institutions (MFIs) in Mali provide both savings and credit services, and are licensed to collect deposits from their members. By 2015, there were 126 deposit-taking MFIs, making Mali second only to Senegal in WAEMU for this measure.
Deposit-taking MFIs had 883 branches in Mali by 2015, serving 257,309 borrowers and 645,334 depositors, according to the IMF Financial Access Survey (2016). In comparison, commercial banks had 516 branches and served 1,310,529 depositors.
Besides serving fewer clients, microfinance firms provide far fewer loans and hold far fewer deposits than commercial banks (see Table 4). In 2015, commercial banks had 26 times more outstanding loans and 41 times more outstanding deposits than deposit-taking MFIs.
Table 4: Outreach: deposit-taking microfinance institutions vs. commercial banks in Mali.
While the 2012 turmoil significantly affected deposit-taking MFIs 12 , they have been able to expand their activity since (see Table 4). Between 2013 and 2015, the number of branches more than doubled, the number of borrowers increased by 40 per cent, and the number of depositors rose by 9.7 per cent. The volume outstanding loans with deposit-taking MFIs also increased by 35 per cent, and the volume of outstanding deposits by 19.5 per cent, over the same period. On regulation, all MFIs in Mali are licensed under BCEAO, as part of the WAEMU-wide microfinance law adopted in 2010.
The law also stipulates, in Article 44, that any MFI with deposits or assets over CFA F 2 billion (USD $3.3 million) in consecutive years must be supervised by the BCEAO. National finance ministries oversee those that do not reach this threshold.
Tables of financial sector development indicators
Source: IMF Financial Access Survey (2015).