Interview: Patricia Danielle Manon
What can financial institutions do to improve the banking penetration rate, especially in rural areas?
PATRICIA DANIELLE MANON: Establishing a banking agency in Gabon involves high fixed investment costs, and every new branch requires a financial, social and marketing viability study. To increase the banking penetration rate, the sector must think beyond traditional methods. Banks should be able to adapt to their customers and offer modern services, such as mobile banking or any service not needing a physical person behind a window. Given the low penetration rate, there is certainly opportunity for development in mobile banking. Micro-finance entities can also be considered a key alternative to reach those users with more limited resources, offering nearly identical banking services and perfectly adapting their products to their customers’ specific needs without major drawbacks.
How can banks increase their role in financing large-scale and long-term projects?
MANON: One vulnerability of Gabonese banks is weak capitalisation; most of them hold the minimum amount required. Besides meeting regulatory requirements, each financial institution should manage its funds and loans according to its ambitions.
Gabon has recently committed to several structuring projects through its Emerging Gabon strategic plan, as state revenues by themselves seem unable to support such large-scale and long-term projects. Moreover, the use of loans seems necessary to achieve the 2025 goals and position the banking sector at the heart of the economy’s financing. However, these loans may seem a challenge when it comes to the regulatory ratios of the Central African Banking Commission. A valid solution in this regard is to pool efforts through a banking syndicate when looking to finance large projects.
The Gabonese syndicates market, though it has started to awaken in the last five years due to the government’s structuring projects, remains undeveloped. Unlike more advanced countries, the Gabonese and African economies remain largely dependent on government investment, which substantially influences the demand for financing. Syndicated loans, though widely used abroad, remain unknown by local banks because of the external financing that the government generally uses, such as through Development Bank of Central African States, the African Development Bank or the World Bank. Additionally, the fact that the economic tissue is composed mainly of subsidiaries of international groups hasn’t benefitted the development of syndicated credits in the local market. These subsidiaries generally employ their mother companies’ resources to finance their projects.
How competitive is the Gabonese banking sector?
MANON: It is undeniable that, with the arrival of new operators to the Gabonese market in recent years, competition among banking entities has significantly increased. This opening of the market has translated into a reduction of interest rates, which has led to higher penetration. However, such a trend could not stand for long considering the real cost of resources, which is less favourable to a general decrease of interest rates. This situation highlights the character of Gabon’s banking sector and its market, which has a low banking penetration rate, and thus concentrates a large portion of loans into a few economic operators.
What can be done to minimise non-performing loans and encourage better regulation?
MANON: The degree of performance can vary according to the objectives, target or size of each bank. In this regard, the decision-making on minimising the impact of non-performing loans should be done by each financial institution. A common solution would be difficult to find as it would involve several players, each of which has its own perspective on non-performing loans. Instead, a framework exists for consultation among professionals of credit institutions, where approaches such as transparency and regulations are discussed.
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