Interview: Jean-Pierre Gianotti
What measures can be taken to increase the population’s access to banking services?
JEAN-PIERRE GIANOTTI: The percentage of Djiboutians currently making use of banking services stands at around 20%, compared to 15% three years ago. Although this number is low, mainly due to the persistence of a cash culture, efforts have been undertaken to allow people easier access to banking services. For example, digitalisation has presented new tools, such as mobile banking, that can foster people’s access to services. Current initiatives to stimulate the use of banking services include a new payment plan that obliges all government employees to receive their salary through bank accounts, and of the availability of payment terminals and ATMs across the country. The government also has an important role and has launched initiatives to improve the availability of guarantees, which will result in greater access to microfinance for individuals and small and medium-sized enterprises (SMEs). The overall goal is to have Djiboutians learn to use banking services differently, and see them as an important addition to their daily lives and consumer needs.
Which challenges must SMEs overcome when applying for access to credit?
GIANOTTI: One of the main issues is the formalisation of SMEs. Many of these companies are not accustomed to professional and validated procedures and have difficulties in receiving funding. Although banks do not have any refinancing problems, due to the liquidity of the sector, more ground work has to be done to strengthen judicial guarantees and reduce the risk of non-performing loans (NPLs). Expanding the number of banking agencies in different areas of the city, in order to enhance personal service and assistance with the set-up of business plans and loan applications, will result in better access to financing. Also, the establishment of the Bank Guarantee Fund, which will oversee the operation of deposits in order to increase confidence in the banking system and reduce risk levels for credit provision, will lead to an environment where more financing will become available for Djibouti’s private sector. The introduction of leasing mechanisms will also cater to the demand for credit and further expand the purchasing power of Djibouti’s population.
How can Djibouti decrease the amount of NPLs?
GIANOTTI: In order to tackle the risk of NPLs it is important to professionalise the banking sector. This means putting in place a system that allows for the exchange of information between banks in a digitised format. The number of NPLs can only be decreased by reinforcing cooperation. An important step will be the Unified Credit System, launched by the central bank in cooperation with the World Bank, which will see the development of a secure connection between all of the banks in the country, obliging them to notify the sector in case of fraudulent transactions and non-payment of loans. There needs to be more know-how and expertise developed in order for the banking sector to be more responsive to possible non-payment. This can be achieved by putting more emphasis on training and knowledge sharing.
What can be done to increase local banks’ participation in large-scale public projects?
GIANOTTI: Banks in Djibouti have historically played an important role in the realisation of projects of national importance. For example, the Red Sea Trade & Industry Bank provided financing for the historic Djibouti-Ethiopia railway, and more recently for other major projects such as the submarine telecoms cable and the country’s first container port at Doraleh. The ability to finance such projects is directly related to the liquidity of the financial market. Djibouti has this liquidity and, as such, is developing very quickly.
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