Financial Sector Overview
The Republic of Congo (Congo) is largely covered by tropical forests, and has abundant unused arable land equivalent to about one third of its total area. Most importantly, it is endowed with significant hydrocarbon reserves with an estimated proven 1.6 billion barrels of oil reserves and 90 billion cubic meters of natural gas. In addition, the country benefits from significant mining resources. Overall, the heavy reliance on hydrocarbon resources has crowded out development of sectors such agriculture and forestry. Crude petroleum accounts for 61% of the country’s exports and 60%of its GDP, with timber being its second largest export product. Like other CEMAC countries, Congo faces important challenges. With the oil sector playing such a prominent role in the economy, it has not coped well with the fall in oil prices. The informal sector is very large. Three out of five workers (63%) are self-employed, running a business with no employees, or being involved in subsistence agriculture. The Congo presents a remarkable statistic in terms of urbanization with more than 60% of its population living in the main cities of Brazzaville and Pointe-Noire. Congo is ranked 184 among 190 economies in the ease of doing business, according to the 2018 World Bank ratings. The country also ranked 13th in Africa and 137th in the 2018 global ranking according to the Human Development Index (HDI). During recent years, reforms have been introduced to make doing business easier by reducing the corporate income tax; reducing the minimum capital requirement; make enforcing contracts easier by adopting a law that regulates all aspects of mediation as an alternative dispute resolution mechanism.
Overview of the Financial Sector
The Congo is part of the Central African Economic and Monetary Community (CEMAC) and has its banking system regulated by the Bank of the Central African States (BEAC). The Congolese banking sector is supervised by the Banking Commission of Central Africa (COBAC), the regulatory body of BEAC. These countries share a single currency and a unified financial and banking legislation. Congo’s formal financial system is not well-developed. In 2017, there were 36 commercial bank branches per 10,000 adults and 75 ATMs per 100 000 adults. Congo scores low in terms of ease of getting credit, ranking in 133th place out of 189 countries (Doing Business, 2018). The financial sector is largely dominated by commercial banks, which are, mostly, privately owned subsidiaries of foreign institutions.
The Republic of Congo does not have a stock exchange. Congo-based companies may be listed on the Douala Stock Exchange (DAC) or the CEMAC Zone Stock Exchange (BVMAC). Monetary and credit policies are determined by the regional central bank, BEAC, within the CEMAC framework. The main objective is to ensure the stability of the common regional currency. There is currently no Sovereign Wealth Fund (SWF) in the Congo, although there is talk of setting one up in the near to mid-term. A law enabling the creation of such a SWF has been adopted by the Parliament. As of October 2018, Standard & Poor's credit rating for Congo stands at B- with stable outlook, whereas Moody's credit rating for Congo was set at Caa2 with stable outlook.
The bank penetration rate was 26.1% in 2017 (up from 10% in 2011 and 17.1% in 2014) which is half the rate for the whole of Sub Saharan Africa. As of 31 December 2017, the country’s banking system had 11 commercial banks which provide corporate banking services either locally or from overseas. Credit offered to the private sector is primarily available to large clients involved in the sectors of oil, forestry, telecommunications, import-export, and services. Bank lending to the economy has evolved from CFA francs 997.88 billion (1.83 USD billion) in 2015 to CFA francs 1805.7 billion (3.31 USD billion) in 2017: an 81% increase showing a revival of bank financing after the drastic drop in oil prices in 2014. Congo is CEMAC's second largest domestic credit market in 2017, with a credit volume representing 17.1% of the regional total. Cameroon is the first market with 30.2% of the CEMAC credit volumes. However, Congo has the highest credit-to-GDP ratio (38.8%) in the region during the same year. Bank financing to the Congolese government is the largest in the CEMAC in 2017 in nominal terms, and represents 33% of total financing to the economy. Between 2015 and 2017, Congo is also the only country in the CEMAC region where medium-term credits are higher than those in the short and long term.
The informal economy is predominantly cash-based, and commercial banks serve only a small segment of the market with just 5.5%of the adult population having a savings account. One reason lies in the existence of cumbersome requirements for opening new bank accounts, resulting in the growth of informal savings. The Congolese also tend to use bank accounts for business purposes more than the regional average, but at a global scale, access to finance in Congo is low across all demographic groups. Other uses of bank accounts include receiving government payments and wages, as well as for sending or receiving remittances. This is shown by the comparatively widespread use of bank tellers for deposits in Congo, as well as the limited use of advanced payment services such as ATM machines.
Non-performing loans to total gross loans of Congo increased from 1.1 % in 2011 to 13.3 % in 2017 growing at an average annual rate of 55.8 %. Congo suffers from banks high overhead costs, which are comparatively speaking, among the highest in the world. This is a result of the poor business environment and the lack of adequate public credit registries in Congo. The credit registry coverage was 11.9 % in 2017. High collateral requirements also limit the pool of bank customers. Growth and innovation within the sector appear most salient in microfinance and electronic banking.
Financial inclusion in Congo remains limited. According to the 2017 Global Findex, 26.1 % of adults reported to have an account in Congo in 2017 and 23.3 % 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. Women have less access to basic financial services. Only 21 % of adult women have an account. The SSA average is 36.9 %.
Microfinance emerged in Congo in 1981 with preparations for creating a Savings and Credit Union (COOPEC). The Ministry of Rural Development was working in partnership with the Centre International du Credit Mutuel (CICM) to put in place agricultural co-operatives (COOPEC). This COOPEC network became MUCODEC in 1989 (the Congolese Savings and Loans Mutual, Mutuelle Congolaise d'Epargne et de Crédit), which in effect pioneered microfinance in Congo. MFIs play an important role for poor and rural households.
As of 30 June 2017, there were 68 licensed microfinance institutions (MFIs) in Congo. The country is the second largest market of microfinance in the CEMAC zone with total assets of 333 CFA francs billion (568 USD million): 39 % of regional total assets after Cameroon (53 %). At the same period, the MFIs deposits in Congo amounted to 262.1 CFA francs billion (447 USD million) – 39 % of the regional volume – and outstanding credits accounted for 22% of the regional total: 87.9 CFA francs billion (150 USD million). The country also enjoys the best credit coverage (302 %) of MFIs by deposits in 2017, followed by Chad (177 %). The number of MFI clients also increased by 11% between 2016 and 2017, from 305,061 to 338,536; while the number of MFI agencies significantly declined from 167 to 111. With respect to the financing costs in the Congolese microfinance sector, deposit and lending interest rates were respectively on average at 0.1% and 14.1% in 2017, while the regional average deposit and lending rates stood respectively at 1.9% and 10.7% (COBAC, 2017).
The microfinance sector in Congo is dominated by the network of credit unions and remains relatively concentrated in Brazzaville and Pointe-Noire. MUCODEC institutions represent more than half of all microfinance institutions. This major economic player in the Congo showed the path of innovation with the development of electronic banking in 2013, issuing cards enabling customers more services including a higher payment and withdrawal capacity and therefore purchasing power to small businesses..
Led by rapid mobile phone penetration, mobile banking is emerging as an innovative financial product in the Congo. According to World Bank figures, there were 96 mobile subscribers per 100 people in 2017. In 2005, there were only 15 mobile subscribers per 100 people. But the mobile banking market has been slow to develop. Only 17.8% of the population aged 15 years and over had a mobile account in 2017 (significantly up from 9.2 % in 2014). This ratio remains lower than the 29.2 % and 34.4 %, respectively observed on average in Low-Income Countries (LICs) and SSA countries, despite competitive fees, compared to those of traditional banks. Transactions from a bank account to a mobile bank account are free of charge. The other way around, transaction fees vary depending on the amount transferred and can be as low as 0.2%. The costliest operation is cash withdrawal, which can carry a fee as high as 4%. Risks related to mobile banking are mainly operational. The telecom operator must collateralize the entire monetary base in an escrow account at the partner bank.
Only 4% of the adult population used a debit or credit card to make a purchase while there were only 7.5 Automatic Teller Machines (ATMs) per 100,000 adults in 2015.
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 Congo. Congo’s insurance market has developed significantly in recent years supported by vigorous economic activity in the country. Three main factors account for this expansion: the opening of the market to competition, structural development (improving the penetration rate, which was barely 0.6% in 2012), and the expansion of the scope of insurance requirements in 2013. In addition to automobile liability and construction risk policies, coverage requirements were imposed for imported merchandise, creating the conditions for the development of transportation insurance. Six companies now operate in the market as a result, including the state-owned insurer. Insurance turnover in Congo increased between 2014 and 2016, from 71 billion CFA francs (121.3 USD million) to 94 billion CFA francs (160.6 USD million). However, poor economic climate caused by the 2014 drop in oil prices negatively impacted the dynamism of the sector in 2017 and 2018. According to CIMA estimates, the turnover fell in 2018to 53.9 billion CFA francs (92.1 USD million). Congo is the third insurance market in CEMAC with 15.4 % of market share in 2018, behind Cameroon (54.1%) and Gabon (23.2%).
According to the Centre for Affordable Housing Finance in Africa (CAHF), the mortgage finance market is still in its infancy but has a huge potential for growth. Very few banks provide medium-term and long-term credit. Nearly 70% of loans in Congo, including mortgage finnacing, require collateral which sometimes exceeds the value of the loan.
Social Security System
Congo has a National Social Security Fund – Caisse Nationale de Sécurité Sociale (CNSS) – supervised by the Ministry of Labour and Social Security. It is governed by the Social Security Act of 2011 and the Pensions and Occupational Risks Act of 2012. Coverage is for public-sector, semi-public-sector, and private-sector employees, including apprentices, members of co-operatives, and temporary employees. Self-employed persons can volunteer to be covered. Employees contribute 4% of earnings and employers 8%. There is also a second pension fund, the Caisse de Retraite des Fonctionnaires (CRF). They are both in a fragile financial situation. The weaknesses and malfunctioning of these funds have been highlighted through recent audits funded by the Government. All contributions can no longer cover benefits which are financed in part by Government subsidies. To improve coverage, the Government has undertaken a vast number of reforms of the two pension funds in order to adapt the regulatory framework, better organize the audit of State arrears vis-à-vis these two funds and strengthen control mechanisms. The Government intends to finalize this reform over the next few years.
Contact details Informaiton of Banks operating in the Republic of Congo