Country Financial Sector Profilesback

Financial Sector Overview

Guinea-Bissau has experienced a series of political upheavals in the last 40 years, including a civil war, 17 attempted coups, and four successful coups since independence in 1974. Consequently, it is one of the most fragile countries on the continent, with an economy that is highly dependent on cashew nuts, which provided an average of 94 per cent of exports over the last five years. The last coup, in 2012, came as cashew nut prices fell, leading to severe economic disruptions and causing Guinea Bissau's GDP growth to drop sharply from 9.4 per cent in 2011 to -1.9 per cent in 2012. While the economy recovered in the recent years, with GDP growth rate of 2.5 per cent in 2014 and 4.5 per cent in 2015, the fundamentals that underpin economic development, such as the financial sector, remain fragile.

Financial institutions

Guinea-Bissau joined the West African Economic and Monetary Union (WAEMU) in 1997 and shares a common Central Bank, the Central Bank of West African States (BCEAO), and a common bank regulatory and supervisory authority, the West Africa Monetary Union (WAMU) Banking Commission, with the other seven WAEMU countries (Benin, Burkina-Fa-so, Cote d’Ivoire, Mali, Niger, Senegal, and Togo).

The financial system in Guinea-Bissau is mostly limited to the banking system. By 2015, the banking sector comprised five commercial banks with 22 branches, which held 94 per cent of the country's financial system’s assets, although this represented less than 1 per cent of total assets in WAEMU's total banking sector.

There is a small microfinance sector with 18 licensed institutions. However, only five are operational, and they provide limited financial services, with most of the activity concentrated in Bissau, the capital.

Private insurance companies and a semiautonomous public pension fund, the National Institute of Social Security, account for most of the rest of the formal financial system.Informal financial structures exist, and cater poorer sectors, especially people in rural areas and some small entrepreneurs. Data regarding their activities is however not available.

Table 1 : Main Financial Institutions in Guinea-Bissau, 2012-2016

Main Financial Institutions in Guinea-Bissau, 2012-2016

Source: BCEAO.

Guinea-Bissau has access to the regional securities exchange, the ‘‘Bourse Régionale des Valeurs Mobilières’(BVRM),established in 1998 and based in Abidjan. However, none of its 39 listed companies listed in 2015 are from Guinea-Bissau.

Financial depth

Guinea-Bissau's financial depth , as measured by ratios of private sector credit and deposit money banks’ assets to GDP, is the lowest in the WAEMU region, and among the lowest in Africa (see Chart 1). In 2014, the ratio of private  sector credit to GDP for GNB was 6 percentage points below the median sub-Saharan Africa, at 10.6 per cent compared to 16.6 per cent. The ratio of deposit money banks’ assets to GDP was even lower, at 12.8 per cent against the sub-continental average of 23.8 per cent.

Chart 1:

Financial depth in WAEMU

Source: Global Financial Development Database (GFDD, June 2016)

Deposit money banks dominate Guinea-Bissau's financial system and are the sole providers of private sector credit. Their size relative to the economy is not only small, but it is also stagnating. Generally, most financial depth indicators
have remained stagnant since 2013 (see Table 2).

Table 2 : Depth of Financial Institutions and Markets in Guinea Bissau, 2010 to 2014

Depth of Financial Institutions and Markets in Guinea Bissau, 2010 to 2014

Source: Global Financial Development Database, June 2016.

Bank credit

Total bank credit increased fourfold in the six years from 2009 to 2015, rising to 113 653.9 million CFA francs (US $188 million) in 2015. The sharpest increases were in 2014 and 2015, driven almost exclusively by credits to the central government (see Chart 2). The share of total bank credit to the government more than doubled, from 20 per cent in 2014 to 45 per cent in 2015.

Chart 2: Total bank credit

Total bank credit

Source: MFW4A. Data from BCEAO.

Private sector credit totalled 62.6 billion CFA francs (US $104.7 million) in 2015, 2.5 per cent lower than in 2012. Indeed, while private sector credit was growing between 2009 and 2012, it dropped in 2012 after the military coup and the sharp decline in cashew prices. The annual growth rate was 48.5 per cent in 2011, but only 3.6 per cent in 2013. After shrinking by 8.2 per cent in 2014, growth returned by 2015, but at the modest rate of 2.4 per cent.

The sharp decline in private credit between 2012 and 2014 hit short-term loans hardest, reducing their value 35 per cent. Medium and long-term credits increased 27.6 per cent and 209.5 per cent respectively.

The recovery of private credit in 2015 was primarily in medium term lending, which increased 58.8 per cent over its 2014 level. Short-term credits grew only 10.3 per cent, while long-term credits fell 44.6 per cent between 2014 and 2015.

Medium-term credit dominated in 2015 (see Chart 3), accounting for 51.6 per cent of total private credit, compared to short-term loans that fell from 71.3 per cent of private sector credit in 2012 to 47.2 per cent in 2015. Long-term credits fluctuated around 3 per cent of the total.

Chart 3 : Credit to the private sector by maturity

Credit to the private sector by maturity

Source: MMFW4A. Data from BCEAO.

Agriculture and fishing were the sectors of Guinea Bissau's economy that took out the lowest share of loans: 2.6 per cent of the total in 2014, compared to manufacturing (14.7 per cent) and commerce (44 per cent).

Bank interest rates

Matching the general regional trend, bank interest rates in Guinea-Bissau improved in the five years to 2015. Lending rates fell from 10.7 per cent to 9.2 per cent. Deposit rates increased from 3.7 per cent to 4.3 per cent. Lending-deposit spread dropped from 7 per cent to 4.7 per cent.

Nonetheless, Guinea-Bissau has had the highest lending rates and the lowest deposit rates among WAEMU members since 2013, and therefore its interest rate spread remained above the regional bloc's average (see Chart 4).

Chart 4:Averages lending and deposit rates

Averages lending and deposit rates

Source: MFW4A. Data from BCEAO.

Financial access and usage

According to the limited data available, access to financial services in GNB is low compared to its regional neighbours. On average, only 89.46 of every 1,000 Bissau Guineans held deposit accounts in commercial banks, the second lowest among WAEMU members after Niger (48.87), IMF Financial Access Survey data showed in 2015. Togo and Cote d’Ivoire topped the Union's tables with 253.52 and 199.75 accounts per 1,000 of their respective citizens.

Mobile money remains marginal in the country. There were only 236 active mobile money accounts in the country in 2014, which equated to 0.22 accounts per 1,000 adults. In Benin, the WAEMU member with the second-lowest mobile money penetration, there were 22.1 active accounts per 1,000 adults. In Cote d’Ivoire, at the top of the table, there were 613.4 active accounts for every 1,000 adult Ivoirians.

Nonetheless, 36 per cent Bissau Guineans have access to a mobile connection, via two national providers, and although that is roughly half the sub-Saharan average, it still presents significant room to expand the country's mobile money services. Developing mobile financial services could help widen financial inclusiveness for the unbanked population in the country, especially in rural areas.

Banking Sector

Guinea-Bissau's banking sector comprises five commercial banks: Banco Da África Ocidental (BAO); Banco Da União (BDU); Ecobank-Guinea Bissau (Ecobank); Orabank Cote D’Ivoire; and Banque Atlantique Cote D'Ivoire. The  first three banks are subsidiaries and the last two are branches.

Foreign investors, mostly from WAEMU countries, hold 94 per cent of shares in the GNB’s banking system, with the local private sector owning the remaining 6 per cent. The country's government holds no bank shares.

Assets and liabilities

Guinea Bissau's banks' balances sheets totalled 197.6 billion CFA francs (US $330 million) in 2015, up 30 per cent from 2014, and 92 per cent from 2010.

Private sector loans accounted for the largest share of assets at over 55 per cent each year since 2010. Liquid reserves were the lowest share of assets: 10 per cent since 2013. Foreign assets accounted for 21 per cent of the total in 2015 – down from 40 per cent in 2010 – while loans to Guinea Bissau's government leapt from 0.38 per cent of assets in 2010 to 10 per cent by 2014 and 26 per cent a year later.

Private deposits accounted for most liabilities, varying between 58 and 60 per cent of the total since 2010. Government deposits accounted for the lowest share, falling from 7 per cent in 2010 to less than 3 per cent in the years from 2011  to 2015.

The ratio of private sector credit to private deposits has dropped since 2012 (see Chart 5), probably because of political uncertainty fuelled by the 2012 military coup: from a pre-coup peak of 81 per cent, the ratio stood at 54 per cent by the end of 2015.

Chart 5: Banks' total assets, loans and deposits

Banks' total assets, loans and deposits

Source: MFW4A. Data from BCEAO.

Financial soundness

The banking system is well capitalised, with solvency ratios above regional averages. 4 In particular, the capital adequacy ratio – capital to risk-weighted assets – was 21.4 per cent in 2014, down from 23.1 per cent 12 months earlier, but still above the regulatory minimum of 8 per cent, and above WAEMU's 2014 average of 9.6 per cent.

Other financial soundness indicators, however, are weaker than regional averages. 4 Return on assets and return on equity, for example, both show banks are commonly less profitable in Guinea-Bissau than in other WAEMU countries (see Chart 5). In the past years, both indicators moved erratically in Guinea-Bissau, perhaps because of the country’s political and economic environment.

Chart 6 : Profitability of banks in Guinea-Bissau (GNB), 2010-2013

Profitability of banks in Guinea-Bissau (GNB), 2010-2013

Source: MFW4A. Data from GFDD 2016. Regional averages are unweighted.

The ratio of non-performing loans to all loans in Guinea-Bissau increased sharply after the 2012 to 2013 drop in international cashew prices, and the 2012 military coup (see Chart 6). 5 Non-performing loans were 29.2 per cent of gross loans in 2014, close to double the 15.8 per cent WAEMU average.

Chart 7 :Non-performing loans to total loans (%) in Guinea-Bissau (GNB), 2010-2014.

Non-performing loans to total loans (%) in Guinea-Bissau (GNB), 2010-2014.

Source: MFW4A. Data from the IMF.

There are risks from the banking sector's over-concentration of lending to the sector ‘retail and wholesale trade, restaurants and hotels, and other services’, which accounted for 75 per cent of total credit portfolios.

Table of selected financial access indicators in Guinea-Bissau, 2010-2014


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At a Glance

At a Glance Source
Population in thousands (2017): 1,861.28
GDP per capita (current US$) 2017 - World Average 10,721.61: 723.61
Account (%) age 15+) - (2014 vs 2017): n/a
Agriculture Orientation Index - Credit ( Agriculture, Forestry and Fisheries share of GDP) (2015 vs 2016): 0.00 (2015)
Financial Inclusion Strategies: La Stratégie régionale d’inclusion financière dans l’UEMOA (published 2016) FR
Domestic credit provided by financial sector (% of GDP) 2017: 20.92
Made or received digital payments in the past year (% age 15+) (2014 vs 2017): n/a
Remittances % of GDP for 2017: 0.076
Mortgage Interest Rate / Mortgage Term (years): 11.0% | 15

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