Author: Imran Patel


Date: 9 May 2018

The Democratic Republic of Congo, Africa’s hidden gem


The Democratic Republic of Congo (“DRC”) is a country with significant resources and the country has the true potential to be one of the richest countries on the African continent and a significant driver of Africa’s growth. Despite its vast expanse, the country remains virtually unconnected due to the lack of basic infrastructure, agricultural production and notable industrial base.
The lack of depth in the domestic financial sector is perhaps the most important headwind to sustainable growth. The DRC is one of the larger economies in Africa that lacks a domestic stock exchange. More strikingly, aggregate domestic bank assets [of the DR Congo] are only USD 5 billion, only fractionally higher than those of the Vatican Bank, which currently stand at USD 4 billion!. The five largest banks hold approximately 60 per cent of all these assets. Bank assets to GDP is only seven per cent, which is perhaps the lowest of any country in the World. Furthermore, banking penetration ranks at the bottom of regional peers, with only seven per cent of the population holding a bank account. With the exception of BIAC and FiBank, the sector has recovered from the downturn (BIAC was placed under administration in 2016 and FiBank was dissolved in 2017).
In the medium and long term, the banking sector in the DRC will have to play a critical role in enabling the economic growth and development required to propel the country to the top tier of economic performers on the continent. Currently, only a couple of investment funds, backed by DFIs, are extending credit to small corporates and large SMEs in the DRC, filling in for the near-absence of bank credit. Furthermore, many multinational microfinance banks have established significant activities in the country: Microcred acquired Oxus DRC and FINCA acquired iFinance in 2017. Such institutions have supported the economy with credit at the bottom of the pyramid.
The Central Bank of Congo (BCC) has directed that all banks must raise their minimum capital to USD 50 million by the end of 2020. Banks have the option to sell and exit, to merge, to raise capital or to step down to be a non-bank lender or microfinance institution. Bank Byblos so far is the only bank to begin exiting the market via a sale of its portfolio. Given the low banking penetration rate, poor recent economic performance, and optimism over future economic growth driven by a new mining boom, we foresee a significant consolidation amongst the two-thirds of the banks in the country holding the remaining 40 per cent of assets.
With a fair wind from politics and commodity prices, these catalysts – consolidation, capitalisation and adoption of mobile technology – will allow banking penetration to increase in the hands of much more stable and profitable banks.
This article is a synopsis of the article originally published in Banker Africa, written by Imran Patel, Vice President at Verdant Capital. The full article will be available shortly on our website.

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