Financial Sector Overview
Chad—a landlocked country in Central Africa—has been plagued by domestic instability, conflicts in neighboring countries, and the impact of climate change through desertification and the drying up of Lake Chad. The country has been heavily dependent on oil and is a member of a monetary union, the Central African Economic and Monetary Community (CEMAC), which is consisted of 5 other countries including Cameroon, Central African Republic, Congo, Equatorial Guinea and Gabon. The economy, previously agrarian, saw per capita GDP grow from about USD 497 in 2001/02 (which was less than half of the average in Sub-Saharan Africa) to about USD 967 in 2014. However, the combined effect of the 2014 drop in oil price and the weak security environment left the country in deep recession, with poverty expected to rise to 39.8% by 2019. This is reflected in cuts in public expenditure, low foreign direct investment (FDI), and a loss of income caused by the disruption of cross-border trade with Nigeria in livestock. Nonetheless, there were modest increases in agriculture, which constitutes the primary sector of employment for nearly 75 % of Chad’s working age population. According to the UNDP Human Development Index, Chad is one of the three least developed countries in the world, listed186 out of 188 () countries. 46.7% of the population live below the national poverty line and 38.4 % below the international poverty line of less than USD 2 a day. Chad is also ranked 181 out of 190 countries on the World Bank’s Doing Business Index for three consecutive years (2016, 2017, 2018).
Financial Sector Overview
Chad’s financial system is among the least developed in the CEMAC region and is characterized by limited debt and low monetization. Access to financial services remains a major issue for the vast majority of Chadians, with banking services almost non-existent outside of urban areas. With less than one branch per 1 000 km, the country has the least dense banking network in the region with only 70 banking branches. Only 8.8 % of the population have formal bank accounts (a quarter of that of Sub-Saharan Africa), and only 3.9 % of the adults population have access to credit. Including the newly established Banque de l’Habitat du Tchad (BHT), Chad's financial system comprises 9 commercial banks, 2 insurance companies, 2 pensions funds, and 197 licensed microfinance institutions (MFIs) as of 31 December 2017. The activities of pension funds and insurance companies are extremely limited. There is no established secondary market for government debt; and no stock exchange, but the country has access to the regional stock exchange for Central African states (BVMAC).
As of 31 December 2017, the Chadian banking sector numbered 9 commercial banks whose outstanding loans to the private and public sectors amounted to more than 1138.9 billion F CFA (USD 2.08 billion), or 21.1% of GDP. Banking credit to the private sector accounted for 54.4% of total credit to the economy, the remaining 45% financing government needs. The agricultural sector which contributes to 25% of GDP, receives a mere 2 % of total credit provided by commercial banks. The deteriorating economy caused by the 2014 oil prices drop has severely impacted the banking sector. Banks’ links to the government are significant because of their exposure to government debt, and the private sector’s dependence on government procurement. At end-December 2017, non-performing loans accounted for 28% of gross loans. This, together with the fact that some banks (which increased significantly their exposure to public securities in the last two years) have reached the refinancing limit at the BEAC, has increased liquidity pressures. Deposits and credit to the private sector declined by 9 percent and one percent respectively in 2017 and the deposit-to-loan ratio fell to 94 percent from over 100 percent at end-2016. An interim emergency liquidity facility introduced by the BEAC has helped prevent further liquidity position deterioration for banks that rolled over domestic securities. BEAC refinancing now accounts for about 17 percent of bank liquidity on average, and is much larger for some banks.
The banking sector is concentrated, with nearly two-thirds of total assets held by 3 banks. The two largest banks are subsidiaries of foreign banks, and the government is a shareholder in 4 other banks with between 20 % and 62 % of their total capital.
In its commitments to the International Monetary Fund (IMF), the government will consider its role in public banks and ways to improve their position, including a review of their financial situation and strategy and the adoption of a reorganization plan. The review of public banks strategy and the reorganization plan report is intended to be delivered by end-January 2019 to the IMF staff and the regional banking commission (COBAC). These reforms will aim to ensure that the banking system plays its proper financial intermediation role.
While the use of financial services by Chadian households has expanded somewhat over the years along with the expansion of commercial banks’ physical presence, it is still very limited. The 2018 Financial Access Survey by the IMF shows that the use of financial services by households in Chad has not increased much since 2014. For example, the share of bank branches per adults remained the same from 2014 to 2017, i.e.10 per 10,000 adults.
and the country is also lagging behind its peers in terms of financial inclusion. According to the 2017 Global Findex, only 21.8 % of adults reported to have an account and only 8.8 % to have an account with a financial institution. In comparison, almost 42.6 % of the adult population in Sub-Saharan Africa (SSA) reported having an account in 2017, with 32.8 % having an account with a financial institution. Gender inequality in access to financial services in Chad is also severe and worse than in most of its peers. Women in Chad have considerably less access to basic financial services. Only 14 % of adult women have an account. The SSA average is 36.9 %.
As of 30 June 2017, there were 197 licensed microfinance institutions (MFIs) in Chad. This is the second market in the CEMAC zone in terms of number of institutions after Cameroon (531 MFIs). However, the country represents only 1% (15.6 million USD) of the total balance sheet of MFIs in the CEMAC region.. Chad also enjoys the second-best credit coverage (177%) of MFIs by their deposits in 2017, after Congo (302%). Between 2016 and 2017, the number of MFI clients fell by 17%, from 66,921 to 55,759; MFI agencies also declined from 77 to 68. Interest rates stood respectively on average at 2% for loans and 8% for borrowings in 2017(1.9% and 10.7% for regional averages).)
Despite the efforts of international development partners, the microfinance sector expansion has been unevenly distributed throughout the country, with the majority of the MFIs remaining located in the central and southern regions, where the banks’ presence is the heaviest. Poor performance of MFIs also limits their ability to expand their services and coverage in Chad. Most MFIs have poor management procedures, high administrative costs, and poor internal controls mechanisms. The existence of some MFIs relies on subsidies from foreign partners, and they often have a weak business model to sustain their operations. The lack of risk management procedures can also send some MFIs into distress.
Due to the higher coverage of mobile phone services in the population, mobile banking is now considered as a way to improve financial inclusion. In 2014, the subscription rate to mobile phone in Chad was 39.8%. 15.2% of the population aged 15 years and older had a mobile account in 2017 (significantly up from 5.7 % in 2014). Nevertheless, this ratio remains lower than the 17.6 % and 20.95 %, respectively observed on average in Low-Income Countries (LICs) and SSA countries. Chad is also among the 10 economies worldwide where more adults have a mobile money account than have a financial institution account, including Burkina Faso, Côte d’Ivoire, Gabon, Kenya, Mali, Senegal, Tanzania, Uganda and Zimbabwe.
Acting at a supra-national scale and covering all the countries of the Franc Zone, the CIMA – Conférence Interafricaine des Marchés d’Assurance (Inter-African Conference of Insurance Markets) – monitors insurance companies’ operations in Chad. The insurance industry in Chad is concentrated and underdeveloped, with the presence of three domestic insurers: Star Vie SA (life), Star Nationale SA (non-life) and Société Africaine d’Assurance et de Reassurance (non-life). In 2017, insurance company assets to GDP represented only 0.22 %. The turnover of the Chadian insurance sector decreased from 2014 to 2016, from 13.6 billion CFA francs (23.3 USD million) to 12.4 billion CFA francs (21.2 USD million). The CIMA forecast also indicates that the sector activities are in a downward trend since 2016.
The housing finance niche is almost solely dominated by commercial banks in Chad. According to the Global Findex 2017, 3.2 % of adults have an outstanding mortgage. Some banks provide mortgages and rates are set at between 7-17 % (2018). Orabank offers a mortgage for a loan repayment term between five and 10 years, at an average rate of 9%not to exceed CFA 30 million (USD 53 436.59) to those who are formally employed, private companies and multinationals. The Sahel-Sahara Bank for Investment and Commerce also offers property loans. The newly created housing bank - Banque de l’habitat du Tchad (BHT) - established in August 2017 is expected to provide loans at rates between 7-8% for a 15-year term.
Social Security System
The two pension funds in Chad have large claims on the government relative to their asset base. The Caisse Nationale de Prévoyance Sociale (CNPS) is the pension system for private sector employees and government employees not covered under the civil service system. The instantaneous replacement rate - the ratio between the retirement indemnity and the last salary in activity - of CNPS is around 45%, while the cumulative contribution rate (for employees and employers) is 8.5% for members of CNPS pension plan. The second pension fund, the Caisse Nationale de Retraite du Tchad (CNRT), is the pension fund for civil servants and the military.
In recent years, Government debt to domestic pension funds arose mostly from the treasury’s failure to pay in the funds due by the government and its employees. The national Treasury has long been debtor vis-à-vis the CNPS and the CNRT and had accumulated a large amount of arrears. For instance, the government has accumulated 23 billion CFA francs (59.7 USD million) of arrears vis-à-vis the CNRT, of which 17 billion CFA francs (29.04 USD million) were paid back in 2013. 6 billion remained to be paid by October 2018.
Contact Details Information of Banks operating in Chad