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Central Africa Republic: Central African Republic: Financial Sector Profile


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Central African Republic: Financial Sector Profile

A decade of political turmoil and armed conflict, compounded by drought and regional tensions, have taken a heavy toll on the Central African Republic (CAR), weakening public institutions, undermining the economic infrastructure and basic social services, and leading to a severe contraction of real GDP. Despite abundant natural mineral resources and favourable farming conditions, since the early 1990s economic activity has been steadily declining and living standards have deteriorated considerably. As a result, it became difficult for the government to mobilize domestic tax resources, which, at about 8.5 % of GDP, are part the lowest for developing nations. This, along with a drying up of foreign aid and loss of public spending control, led to significant accumulation of domestic and external arrears.

This trend, however, was less pronounced during the 2004-07 period, which saw a gradual return to socio-political stability and economic increase. Despite the decline in GDP for 2008, mainly due to the combined effects of the external shocks that occurred during the time(soaring oil prices, food crisis, depreciation of the US dollar against the Euro, to which the CFA franc is pegged, the international financial crisis, and the decline in world request for raw materials and consequent fall in their prices), the outlook for 2009/2010 is relatively positive: GDP increase is estimated at around 3.2 % for 2009 and 5 % for 2010.

The financial sector of the CAR, the smallest in the CEMAC, plays a limited role in supporting economic increase. Suffering from weak market infrastructure and legal and judicial frameworks, the economy remains small, undeveloped, and dominated by commercial banks. In addition to the National Office of the BEAC, the system consists of three commercial banks, two microfinance institutions (MFIs), two post office banks, two insurance companies, and a social security fund. Because of economic and security concerns, financial institutions, and particularly microfinance institutions (MFIs), have consolidated their business in the capital, Bangui, over the completed few years.

With less than 1 % of the total people holding a bank account, access to financial services is extremely limited in the CAR. Microfinance accounts only for 1 % of the total credit facilities, serving 0.5 % of the people. Low levels of mobile penetration – which stand at 30 %, a significantly lower % than in the rest of the continent – dampen the potential expansion of access to financial services through mobile technology.

Bank branches and ATMs are concentrated in three towns, with 71 % of total branches located in Bangui. The post office is in charge of the postal savings bank, primarily serving for fee payments to civil servants, a minimal % of which holds, however, a savings account.

The supervision of commercial banks and micro finance institutions is conducted by the Central African Banking Commission (COBAC), as for all Central African Economic and Monetary Community (CEMAC) member states.

No stock market exists in the CAR, but two parallel independent stock exchanges are under construction in the CEMAC. Beyond that, the country has no money market, no securities market, and no foreign exchange market.

Equity investment financial institutions, leasing, licensed venture capital and/or factoring companies are absent from the country’s economy, their development hampered by the lack of the necessary legal, prudential, and regulatory frameworks.

Two insurance companies operate in the CAR, regulated by the Inter-African Conference on Insurance Markets (CIMA) in Gabon, which conducts the supervision of insurance companies in 16 African nations.

Due to uncertainties in legal enforcement, particularly in the housing finance market, long-term finance arrangements are scarce.

The CAR is member of the CEMAC, a customs and monetary union which as well includes Cameroon, Chad, Congo, Equatorial Guinea, and Gabon. Since the ratification of the CEMAC treaty in 1999, the region has been heading towards fuller economic and monetary integration.