Country Financial Sector Profilesback

Financial Sector Overview

Since the end of its conflict in 2002, Sierra Leone has made significant progress towards transforming into a resilient and stable country, which aspires to become a middle-income economy by 2035. The Government has highlighted the importance of the financial sector to realise that long-term goal, and has created a Financial Sector Development Plan as a framework for creating a sound and well-functioning financial system to support the Government's overall growth objectives and poverty reduction strategies.

Financial institutions

At end-January 2014, the Sierra Leone’s financial system comprised the Central Bank and 13 commercial private banks, alongside other financial institutions including 8 insurance companies, 3 housing finance firms, 17 community banks, and 11 licensed microfinance institutions.

The Sierra Leone Capital Market, launched in 2009, helps new enterprises to get off the ground by providing a venue for long-term and risk capital, and a market place for trading equities, commodities, bonds, forex, and derivatives

An informal financial sector exists, which caters for the financial needs especially of poor households, rural populations, and small entrepreneurs. A lack of data means it is hard to analyse their activities.

Table 1 : Number of Main Financial Institutions in Sierra Leone 2010-2014

Number of Main Financial Institutions in Sierra Leone 2010-2014

Source: Central Bank of Sierra Leone

Financial depth

Sierra Leone's financial depth' – approximated by ratios of GDP to  financial system deposits and private credit – is among the lowest in Africa, according to World Bank’s Global Financial Development Data (GFDD 2016). In 2014, the ratio of total financial system deposits (demand, time and saving deposits in deposit money banks and other financial institutions) to GDP was 13.7 per cent, compared to a median of 23.5 per cent for sub-Saharan Africa (developing countries only). Private sector credit -by banks and other financial institutions- as a percentage of GDP was 4.4 per cent, compared with a sub-continental median of 16.6 per cent.

Commercial banks dominate the financial system and are the sole providers of private sector credit. However, their size relative to the economy is small, with total assets representing 11.3 per cent of GDP, compared to 23.1 per cent for the median of developing countries in sub-Saharan Africa. Data are not available on the relative size of stock markets or non-bank financial institutions.

Table 2 : Depth of Financial Institutions & Markets in Sierra Leone 2010-2014

Depth of Financial Institutions & Markets in Sierra Leone 2010-2014

Source: Global Financial Development Database, 2015.

Bank credit

Two key features emerged from the evolution and allocation of bank credit over the past few years. First, Government borrowing is increasing and this is crowding out private lending. Credit to the Government as a share of total bank assets increased from 13 per cent in 2009 to 27 per cent in 2013. Over the same period, the share of private sector credit among total assets decreased from 29.3 per cent to 21.9 per cent.

Second, the share of total bank lending to agriculture, forestry, and fishing is relatively small, whereas these sectors accounted for nearly half of the growth of Sierra Leone's economy. Manufacturing also made up a relatively small share of total bank lending. From 2006 to 2013, these sectors together received less than 15 per cent of total bank lending.

By contrast, the sector “Commerce and Finance", which includes international and domestic trade, tourism, and financial services, received the largest share of total bank lending between 2006 and 2013, amounting to 33.2 per cent of the market by the end of 2013. "Other services” and construction were second and third on the table of bank lending,
reaching 30 per cent and 18.7 per cent respectively by 2013.

Chart 1: Bank loans and overdraft

Bank loans and overdraft

Source: MFW4A. Data from Bank of Sierra Leone

Bank interest rates

Average interest rates on both lending and deposits have remained broadly unchanged over the past decade. Loan and overdraft rates were between 24.2 and 25.5 per cent from 2009 to the end of 2013, and rates for savings and 12-month time deposits hovered between 5.8 and 6.4 per cent and 10.4 and 11.1 per cent respectively.

Interest rate spreads – the difference between lending and deposits rates – have consequently remained stable, indicating a lack of, or limited improvement in banking sector development in the country. Data from the GFDD (2016) show that Sierra Leone's bank lending-deposit spreads are among the highest in sub-Saharan Africa, ranging two to four percentage points higher than the median spreads for the region Africa between 2009 and 2013.

Chart 2 : Bank interest rates

Bank interest rates

Source: MFW4A. Data from Bank of Sierra Leone

Financial access

Financial access in Sierra Leone is among the lowest in Africa, according to Global Findex Data (2015). On average, only 14.1 per cent of Sierra Leoneans aged 15 and above held an account at a formal financial institution in 2014, compared to 28.9 on average in sub-Saharan Africa (developing countries only). Even fewer had mobile money accounts: 4.5 per cent compared to the sub-continental average of 11.5 per cent. Data are not available on other key aspects of access to finance, and usage of financial services in Sierra Leone, such as the capital values of average loans and average deposits at financial institutions.

Table 3 : Financial access in Sierra Leone (SL), 2014

Financial access in Sierra Leone (SL), 2014

Source: Global Findex Database (2015) *Developing countries only.

Recent developments

The economy of Sierra Leone was recently badly affected by two severe shocks: the Ebola outbreak in 2014 and the collapse of iron ore prices, which drove the two leading iron ore mining companies in the country out of business. Together, these events prompted a substantial decline in economic growth, from 20.9 per cent at the end of 2013 to 4.6 per cent a year later.

The negative consequences on the financial sector were substantial. In particular, banking sector vulnerabilities increased. By the end of 2014, two banks were unable to comply with minimum liquidity ratios, and five could not meet minimum capital adequacy stipulations. A year earlier, all banks in the country had been compliant with both measures. Ratios of non-performing loans (NPL) have also grown significantly, reaching nearly 40 per cent of all loans by June 2015, almost double the 2013 rate of 22.2 per cent.

Sierra Leone's two largest banks are under administration and have received capital injections since December 2014 as part of the Government’s efforts to mitigate the problems caused by non-performing loans.

In addition, the Bank of Sierra Leone has taken the following actions.

  • Introduced a cap on lending, or a temporary moratorium on lending, for some banks;
  • Created the Loan Write-Off Policy Directive to help banks clean their balance sheets and repackage toxic assets for eventual sale;
  • Adopted the Lenders and Borrowers Act 2014, to improve access to credit by widening the scope of collaterals borrowers can use and setting up a Collateral Registry.


Banking Sector

By the end of 2015, Sierra Leone's banking sector comprised 13 commercial banks, of which three were local (one owned by the local private sector and two state-owned). 3 No new commercial banks have been licensed since 2010,  but existing banks have expanded their network, increasing the number of commercial bank branches from 80 in 2010 to 97 in 2014.

Assets and liabilities

The banks' asset base increased more than fivefold between 2006 and 2013, although year on year growth rates are slowing, from 29.4 per cent in 2009 to 25.1 per cent in 2010, 22.9 per cent in 2011, and 20.6 per cent in 2013. The  increase of both deposits, and ‘loans and advances’, has also been striking: both have almost doubled between 2009 and 2013.

Chart 3: Deposit money banks’ assets, loans and deposits

Deposit money banks’ assets, loans and deposits

Source: MFW4A. Data from Bank of Sierra Leone

Deposits account for the largest share of total liabilities at 75.5 per cent. Government deposits were 14.8 per cent of  the total, while time and savings deposits accounted for 31.7 per cent and demand deposits for 21.7 per cent.

Deposits in foreign currency are relatively important, making up 31.8 per cent of the total, with savings and time and demand deposits in local currency accounting for 53.6 per cent. The share of savings, and ‘time and demand deposits’  in local currency declined by about 10 percentage points between 2006 and 2013, but that was offset by an increase of about 10 percentage points in government deposits over the same period. The share of foreign currency deposits varied between 29 and 37 per cent.

Chart 4: Structure of total deposits (% of total)

Structure of total deposits (% of total)

Source: MFW4A. Data from Bank of Sierra Leone

Financial soundness

The banking system as a whole is well capitalised, with a capital adequacy ratio consistently well above the 15 per  cent regulatory minimum. The ratio was 28 per cent in 2012, 30.1 per cent in 2013, 30.2 per cent in 2014, and 33.6 per cent by June 2015. However, the two largest banks continue to have challenges to meet the regulatory required minimum capital adequacy ratio of 15 percent.

The banking system is also liquid. The overall liquidity ratio was 40.7 per cent in 2012, 72.5 per cent in 2013, 78.8 per cent in 2014, and 83.6 per cent by June 2015. 3 These figures reflect substantial excess liquidity over regulatory minimums of 30 per cent.

The non-performing loans (NPL) ratio however remained high and has increased substantially recently, from 14.8 per cent in 2012 to 39.6 per cent by June 2015, in part because of the effects of the Ebola outbreak.

Profitability of banks, as measured by return on assets (ROA) or return on equity (ROE) shows a decreasing trend since 2010, despite increasing between 2013 and 2014. ROA decreased from 3.4 in 2010 to 1.8 per cent in June 2015. ROE fell from 12.1 percent to 9.4 per cent in the same period. Banks' profitability however remained positive, largely due to other operating income primarily from foreign exchange transactions.

Chart 5: Financial soundness

Financial soundness

Source: MFW4A. Data from Bank of Sierra Leone. 2015 data are as of end-June.

Non-bank financial institutions

Alongside banks, Sierra Leone’s financial system comprises a variety of other financial institutions. These include:

  • Community Banks and Financial Service Associations (FSAs), which provide basic credit and deposit  services in rural areas. By end 2014, there were 17 community banks and 51 FSAs. The Bank of Sierra  Leone is licensed to carry out first level supervision of these institutions.
  • Discount houses, which accept deposits from the public, deal in government securities, and function as security dealers who assist in trading over-the-counter shares. The traditional market for their services is declining, and their assets and business are decreasing 1 , leaving two discount houses in Sierra Leone by  the end of 2014.
  • Microfinance institutions (MFIs), which are of two types: those that take deposits and those that only offer credit. There were two deposit-taking MFIs at the start of 2015: Ecobank Microfinance (SL) Ltd, and Bank for Innovation and Partnership (BIP), and nine credit-only institutions. The Bank of Sierra Leone  overseas all of these MFIs.
  • Credit Reference Bureau (CRB) : This provides credit reference reports to commercial banks about their individual and business clients. It had issued 11,891 such reports by the start of 2014.

In addition, there was one licensed leasing company, one housing finance company, and eight insurance companies by the end of 2014. The state-owned development bank was recently closed and its assets liquidated. The Sierra Leone Post Office had a banking arm whose operations were suspended in 2007.

Table of selected financial access indicators, Sierra Leone, 2010- 2014

Table of selected financial access indicators, Sierra Leone, 2010- 2014

Source: IMF Financial Access Survey, 2015.

Read More

At a Glance

At a Glance Source
Population in thousands (2017): 7,557.21
GDP per capita (current US$) 2017 - World Average 10,721.61: 499.53
Account (%) age 15+) - (2014 vs 2017): 16% | 20%
Agriculture Orientation Index - Credit ( Agriculture, Forestry and Fisheries share of GDP) (2015 vs 2016): n/a
Financial Inclusion Strategies: National Strategy for Financial Inclusion 2017 – 2020
Domestic credit provided by financial sector (% of GDP) 2017: 21.94
Made or received digital payments in the past year (% age 15+) (2014 vs 2017): 13% | 16%
Remittances % of GDP for 2017: 0.012
Mortgage Interest Rate / Mortgage Term (years): 22% | 15

Donor Projects Database


Latest News & Events

May 31, 2019 | Ecofin Agency
The ECOWAS Bank for Investment and Development (EBID) has just launched a bond issuance operation.
Oct 27, 2019
Abidjan, Côte d'Ivoire
"Positioning West Africa Capital Markets to Achieve Sustainable and Real Economic Growth Through Integration and Sound Regulation" Organized by the…

Latest Publications

Feb 28, 2019 | UNSGSA Fintech Group, CCAF | UNSGSA
Dec 31, 2016 | Bank of Sierra Leone | Bank of Sierra Leone
Sep 20, 2016 | MFW4A | MFW4A