Room to grow: Nadhir Zouaghi, President, Professional Association of Credit Institutions, on balancing priorities to foster growth

Nadhir Zouaghi, President, Professional Association of Credit Institutions

How can Djibouti’s banking sector further support incoming foreign investment?

ZOUAGHI: In recent years Djibouti’s economy has experienced average annual growth of 7%. This expansion is advantageous for all the players in the Djiboutian economy. Both market dynamism and foreign direct investments have a positive impact on productivity, consumption, purchasing power and financing, in addition to generating multiple financial transfers, account openings and requests for banking service – all of which will continue to grow in the coming years.

That said, investors tend to arrive to Djibouti with external financing plans already in place and foreign banking institutions are coming to Djibouti to support these investments, which in turn increases competition in the local financial market. Competition is fundamental for every market; hence, local operators have to find new ways to attract incoming investors. The virtuous trickle-down effects of these investments for the local economy are undeniable. However, in the near future, it would be ideal if a certain percentage of these investments are made internally, by banks already located in Djibouti.

What needs to be done to increase the country’s banking penetration rate?

ZOUAGHI: The Central Bank of Djibouti (Banque Centrale de Djibouti, BCD) and the lenders are working to formalise the sector. It is important to highlight that Djibouti has seen its banking penetration rate increase from 7% to 25% over the last 10 years.

Further growth may be recorded when employers start transferring wages to bank accounts to replace cash payments. Regulatory entities have much to gain, as this process is fundamental for the financial market to become more efficient. The digitalisation of services can also participate in the formalisation of financial practices, for instance, with the establishment of easy means of payment and electronic money transfers. Therefore, it is important to give access to a bank account to anyone that wishes to open one.

Djibouti’s economic dynamism can also be an asset, helping to increase the banking penetration rate and demand for financial services. This will fluctuate in line with the country’s growth rate and the decline of the unemployment rate. For example, the economic development of cities Tadjourah and Ali Sabieh have shown that ensuring widespread access to bank branches and cash distributors throughout the territory is a priority. As the country is willing to decentralise and diversify its economy, financial institutions must be ready to accompany the economic and social development of new cities and regions within the country. Under these conditions, Djibouti could see its banking penetration rate reach new heights in the short to medium term.

What measures can be taken to enhance the quality of the sector’s human resources?

ZOUAGHI: Businesses depend on the local education system. In recent years, Djibouti has dedicated a significant portion of its public budget to education. The repercussions of these efforts are likely to be noticeable in no less than ten years, if not a generation, but it is laying the grounds for a modern, competent and competitive base of human resources.

However, these moves will not be effective if they are not supported both by companies and financial institutions. This is why the private sector must contribute through different mechanisms, including the provision of continued education to professionals, creating masters degrees tailored to the banking industry in partnership with sector operators, and by continuing to host trainees so that the employees of tomorrow are able to quickly develop the necessary skills. Such initiatives could be highly beneficial to the financial sector. It is also important to have access to foreign assets in order to facilitate knowledge transfer and the competitive development of local human resources.


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The Report: Djibouti 2018

Financial Services chapter from The Report: Djibouti 2018

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