MAPPING THE FINANCIAL SECTOR IN DRC AND IDENTIFYING OPPORTUNITIES FOR THE ACCESS TO FINANCE SUB COMPONENT

ADAM SMITH INTERNATIONAL

Xavier Desmoulin

February 2014 Contents Acronyms ...... 2 Introduction ...... 4 Methodology ...... 5 General Approach ...... 5 Definitions ...... 6 MPMEs definition ...... 6 Lending products maturities ...... 6 Barriers to increased lending to MSMEs and Agribusinesses ...... 7 Mapping of the financial sector in DRC ...... 14 Financial services providers ...... 14 Financial services Associations ...... 16 Development Financial Institutions ...... 17 Non-Governmental organizations ...... 25 Other organizations ...... 25 Gap assessment and Identification of opportunities ...... 26 Recommendations ...... 35 Diagnostic ...... 35 Positioning ...... 35 Target markets ...... 36 Partners ...... 36 Limits of the proposed recommendations ...... 37 Bibliography ...... 38 Annex 1: List of financial messaging offices licensed by the Central ...... 39 Annex 2: List of currency exchange offices licensed by the Central Bank ...... 40

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Acronyms

ACTED Agency for Technical Cooperation and Development AFD French Agency for Development ANIMF Association Nationale des Institutions de Microfinance APROCEC Association Professionnelle des COOPEC BAD Banque Africaine de Developpement BCC Banque Centrale du Congo BIAC Banque Internationale pour l’Afrique au Congo BIC Banque Internationale de Credit BIO Belgian Investment Company for Developing Country BOA Bank Of Africa CEFORMAD Centre de Formation des Gestionnaires d’Entreprise CDF Congolese Franc CGAP Consultative Group to Assist the Poor COOPEC Cooperatives d'Epargne et de Credit DRC Democratic Republic of Congo DIAL Developpement Institutions et Analyse de Long Terme DFIs Development Financial Institutions FEC Federation des Entreprises du Congo FINCA Foundation for International Community Assistance FPM Fond de Promotion de la Microfinance FISEA Investment and Support Fund for Businesses in Africa FPI Fond pour la Promotion de l’Industrie GIZ Gesellschaft fur Internationale Zusammenarbeit GPTF Groupe des Partenaires Techniques et Financiers IECD Institut Europeen et de Cooperation IFAD International Fund for Agricultural Development IFC International Finance Corporation IMF International Monetary Fund KFW Kreditanstalt für Wiederaufbau MAP Make Access to finance Possible MDC Market Development Component MFI Microfinance Institution MIS Management Information System NGO Non-Governmental Organization OCDE Organisation pour la Cooperation et le Developpement OeEB Oesterreichische Entwicklungsbank OHADA Organisation pour l'Harmonisation et le Droit des Affaires OPEC Office de Promotion des Petites et Moyennes Entreprises du Congo PASMIF Programme d'Appui au Secteur de la Microfinance PROPARCO Investment and Promotion Company for Cooperations RCCM Registre du Commerce et du Credit Mobilier RCF Risk Capital Fund RSE Responsabilite Sociale et Environnementale SIDA Swedish International Development Cooperation Agency SME Small and Medium Enterprises SOFIDE Societe Financiere de Developpement SONAS Societe National d’Assurance SSA Sub Saharan Africa TMB UNCDF United Nations Capital Development Fund UNDP United Nations Development Program VSLA Village Savings and Activities WB World Bank

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Introduction

The financial sector in DRC, as of 2012, counted 20 commercial , 157 COOPEC and MFIs, 59 financial messaging bureaus, 16 currency exchange offices, 3 e-wallet companies, 2 specialized financial institutions (FPI and SOFIDE), one insurance company and one savings and pension fund. The sector remains mainly dominated and drawn up by banks.

Deposits and credits from the banking sector respectively increased by 33% and 35% in 2012 compared to 2011. Banks total volume of assets grew by 30% and stated at USD 3.6 billion. Most of credits are attributed over short term periods and were oriented towards consumption (22%), wholesalers and retailers (21%), transports (21%), construction and public services (6%), industry (6%), information and communication (5%), mines (5%) and agriculture (4%)1.

On the demand side, no recent survey or census counted the number of MPME and international enterprises. A survey 1-2-3 conducted in in 2004 and 2005 and in the main urban centers on employment, informal sector and consumption counted 2.9 millions of informal production units2. The formal private sector is small. The FEC estimated that only 110 entities are large enterprises and realized between 8 and 10% of country GDP in 20103. Besides, 1700 small and medium enterprises are members of the FEC. This last figure seems to be underestimated. Advans and Procredit, which provide financial services to small and medium enterprises counted respectively 4925 and 5597 active borrowers as of June 2013 and December 20124.

The Enterprise survey conducted in 2010 by the International Finance Corporation and the World Bank revealed that 54% of businesses consider the access to finance as the main obstacle for the development of their activity compared to less than 20% in Sub Saharan Africa.

In addition, only 1.7% of businesses benefit of banking loans for investment against 10.4% in Sub-Saharan Africa. Only 9.2% of the respondents received loans for working capital against 26% in SSA. The value of collateral in percentage of the amount is 261% in DRC against 149.8 in SSA5.

The analysis of the context reveals a mismatch between the demand and the supply of financial services. In this frame, how could the MDC intervene, without duplicating existing activities and projects, to support the access to finance sector and help lessen this gap?

1 FPM (2013), Veille sectorielle, 4eme trimestre 2012. 2 Makabu, Mba, Merceron, Torelli (2007), Le secteur informel en milieu urbain en Republique Democratique du Congo: Performances, insertions, perspectives. Principaux resultats de l'enquete 1-2-3 2004-2005, DIAL (Developpement, Institutions et Analyses de Long terme), DIAL (Institut de Recherche et de Developpement), AFFD (Agence Francaise de Developpement). 3 BAD (2010), Environnement de l'Investissement Prive en Republique Democratique du Congo, Departement Regional de l’Afrique Centrale. 4 http://mixmarket.org/mfi/country/Congo%2C%20Democratic%20Republic%20of%20the 5 IFC, WB (2010), Enterprises Survey, Congo, Dem. Rep., Country Profile 2010

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Methodology General Approach Activities are being conducted in two phases: Phase 1: mapping of the sector, identification of opportunities to develop additional activities, and identification of partners’ organizations. Activities conducted during this period, from February 3rd to 17th, are described below.

Phase 2: Identification of coordination mechanism, work plan for the implementation of an integrated approach to Access to Finance and scope of deliverables under these new activities and project plans / activities / data / studies in the area of access. Activities for this second phase will be decided as soon as conclusions of the survey and recommendations will be identified.

It should be noted that the identification of coordination mechanisms, presented here in the phase 2, was initially included in the phase 1, as introduced to the management in the Access to finance sector analysis methodology. Additional information are needed to determine appropriate mechanisms.

The phase 1 is conducted in six steps: 1. Documentation review (see bibliography in annex) 2. Identification of barriers explaining the mismatch between the supply and demand for financial services. 3. Analysis of the main donors involved in the access to finance sector: representatives of AFD, WB, IFC, GIZ, KFW, USAID, FIDA, DFID and UNCDF have been met or are being met. 4. Analysis of the suppliers of financial services: several banks have been selected according to the following criteria: a. Strategic vision not to target corporate clients and individuals only b. Credit methodologies adapted to both MSMEs (cash flow based methodology) and large / corporate companies (asset based methodology) c. Network of branches in the MDC’s targeted areas d. Solid financial statements 5. Gap analysis and identification of opportunities 6. Report preparation and recommendations.

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Definitions MPMEs definition The definition of MSMEs vary by country. The World Bank has established its own definition based on its international experience6:

World Bank - Definition of MSMEs Firm size Employees Assets (USD) Annual sales (USD) Micro < 10 < 100 000 < 100 000 Small < 50 < 3M < 3M Medium < 300 < 15M < 15M

The Congolese Ministry of SMEs has defined MSMEs as follow7:

Congolese Ministry of SMEs - Definition of MSMEs Firm Employee Annual Sales Value of investments size s (USD) (USD) Management type Micro 1 to 5 1 to 10 000 < 10 000 Centralized Small 6 to 50 10 001 to 50 000 10 001 to 50 000 Centralized Open to Medium 51 to 200 50 001 to 400 000 150 001 to 350 000 decentralization

None of the definition is well adapted to the Congolese context. We consider the World Bank definition over estimates MSMEs’ characteristics while the Ministry of SMEs under estimates it. Like Schwarz8, we assume the Ministry developed this definition based on the declarations done by MSMEs to the Ministry. These declarations do not reflect the reality as entrepreneurs usually declare less than what they earn to keep taxes low. In addition, we considers that an appropriate classification of MSMEs as per sector and industry is still to be defined, ideally by concrete practices and experiences of the FIs and the MSMEs.

Lending products maturities • Short-term credit, defined as credit extended for 12 months or less. • Medium-term credit, defined as credit extended for 13 months through 60 months. • Long-term credit, defined as credit extended for more than 60 months.

6 IFC, OeEB (2012) Customer Management in SME Banking, A Best-in-Class Guide, IFC Advisory Services, Access to Finance, p.15. 7 Ministere des PME (2009), Charte des petites, moyennes entreprises et de l'artisanat en Republique democratique du Congo p.5-6. 8 Schwarz (2011), Financial Institutions' Challenges to provide credit in the Democratic Republic of Congo, KFW.

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Barriers to increased lending to MSMEs and Agribusinesses

Based on the experience, the first review of Schwarz’ reports9 and a survey recently conducted by the Central Bank10, the following assumptions have been listed.

ASSUMPTIONS DESCRIPTIONS NATIONAL AUTHORITIES

The Central Bank regulates the financial sector under the supervision of the Ministry of Regulatory bodies are not in finance. We do not intend to analyze the Central Bank's potential limitations here but we will place identify donors supporting regulatory bodies.

A solid regulation enabling the financial sector development but also preventing the risk is a prerequisite to the good working of the sector. The banking law was updated in 2002 and is being revised. The microfinance law has been updated and approved in 2013. The existing banking and microfinance regulations The survey will verify if existing laws prevent financial institutions from developing their prevent the development of the activities. We do not aim to analyze existing laws. Discussions only will be held with actors access to finance in DRC. met in the course of the survey. The program intending to develop new financial products, we will verify if existing laws (targeted at financial institutions and other required fields) are in place once innovative financial products will be identified. Based on financial actors' responses, we will identify mechanisms and activities implemented to overcome these limits.

9 Schwarz (2011-a), Entrepreneurs' Challenges to access credit in the Democratic Republic of Congo, Experiences from financial cooperation, KFW. Schwarz (2011-b), Financial Institutions' Challenges to provide credit in the Democratic Republic of Congo, Experiences from financial cooperation, KFW. 10 BCC, Resultats enquetes banques et autres institutions financieres, 2013

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IFC developed a program in 2001 to foster the development of credit bureau in emerging markets11. The credit bureau is a crucial tool to identify enterprises and individuals' credit history. It enables financial institutions to distinguish good clients from bad ones. Until recently, DRC's credit bureau was not run with a solid information system and not accessible to all financial institutions.

In order to comply with OHADA's requirements, each Commercial Court and Regional Court must hold a RCCM. The RCCM enables the collection of information about enterprises from The state of financial the first date of matriculation to its possible radiation. This register should be updated each infrastructures does not permit time an enterprise's statutes is modified. Such tool is crucial for enterprises and banks to to control clients' identity and identify the characteristics of the partners they intend to collaborate with. history and mitigate credit risks. Ensuring formal property rights is fundamental. Effective administration of land is part of that. If formal property transfer is too costly or complicated, formal titles might go informal again. And where property is informal or poorly administered, it has little chance of being accepted as collateral for loans—limiting access to finance. Regarding property rights, DRC is situated at the rank 133 in the Doing Business report for 2014, behind the Sub Saharan African average (121). In addition, there is no collateral registry in operation, unified geographically and by asset type, with an electronic database indexed by debtor's name12.

The survey will identify actions that have been put in place to strengthen these mechanisms.

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SUPPLY SIDE GOVERNANCE AND STRATEGY

Most of commercial banks target corporate clients (including government institutions, donors and NGOs) and individual clients (including employees, civil servants and wealthy individuals). Some banks have the strategic willingness to serve SMEs. However, the degree of motivation varies from an institution to another. Schwarz13 distinguished three categories of banks depending on their strategic orientation to serve SMEs. The 1st one gathers institutions having solid financial resources and international experience in 10 to 20 countries. Their mentality is mainly corporate and oriented to larger medium size companies. The 2nd category targets MSMEs in addition to corporate and individual clients. It cooperates with DFIs (line of credits targeted at MSMEs, some technical assistance) but does not have the Strategic orientation to serve organizational structure or has a limited structure in place to deal with MSMEs. The 3rd MSMEs: Financial institutions do category has international and local experience with MSME lending methodology and the not have any strategic interest organization (including the MIS) in place is adapted to the methodology. The survey will in lending to micro, small and classify banks in the above mentioned categories. medium enterprises and agribusinesses. No financial institution is specialized in the provision of financial services to the agro sector. Procredit is the only bank which intended to provide services to this market. According to the CEO, it was a complete failure and the branch was closed.

Banks which would like to develop an adapted MSME and agribusiness approach could request the support of DFIs for technical assistance. This type of technical assistance will support the bank to put in place adapted organization, methodology, product and services, training system and management information system. The survey will verify which banks have such orientation and which DFIs provide technical support to move into this direction.

11 IFC (2001) Credit Reporting Knowledge Guide, IFC Advisory Services, Access to Finance 12 IFC, WB (2014), Doing Business 2014, Economy profile DR Congo 13 Schwarz (2011-a), Financial Institutions' Challenges to provide credit in the Democratic Republic of Congo, Experiences from financial cooperation, KFW

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OPERATIONS - HUMAN RESOURCES - MANAGEMENT INFORMATION SYSTEMS

Most of financial institutions are located in urban centers, providing financial products Lack of knowledge on MSMEs targeted at urban enterprises or products targeting corporate enterprises. A limited number activities and sectors: the lack of branches is located in rural areas. Banks might need more information and knowledge of knowledge prevents financial about members of the value chains. The MDC program intends to develop financial services institutions to develop adapted targeted at specific sectors, starting with coffee exporters and river transporters. In the products and restrain financial course of this survey, we will verify how well financial institutions know both sectors. In institutions from lending to the addition, we will verify what mechanisms are currently in place to collect information about private sector. specific sectors of activity (marketing information system).

Financial products characteristics are the minimum and maximum amounts, pricing (interest rate, commission fees), maturity, type of requested guarantees, type of repayment (grace period or not, monthly installments, bullet repayment at maturity etc...), and the eligibility criteria. In addition, we should not forget administrative costs which are indirect costs supported by the clients to prepare the loan application (expertise of the mortgage value, possible notarization, life insurance etc...) Products characteristics not answering to businesses’ needs: Most of the Congolese and new international banks use their existing products designed for inadequate products limit corporate clients to serve MSMEs (supply-driven attitude) instead of analyzing target groups' private sector’s interest for needs (demand-driven attitude). Schwarz14 highlights that MSMEs (except for the fast turning financial services and increase import-export business) need medium term loans not only for production and agricultural the risk to lend to MSMEs and projects, but also if they import goods and then add value to the product through production agribusinesses. or services before selling it again.

The survey will draw a general profile of the financial products supplied by financial institutions met but does not intend to conduct a detailed analysis of each product's characteristics. Furthermore, the MDC aims at identifying financial products specific to target groups. Surveys targeted at coffee exporters and river transporters, conducted in parallel to this study, with enable to identify missing products in a demand driven manner.

14 Schwarz (2011-a), Financial Institutions' Challenges to provide credit in the Democratic Republic of Congo, Experiences from financial cooperation, KFW

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Lending Methodologies Business valuation could be conducted via three types of methodology: income - based, asset- based or market based. Within each approach, there are various techniques to value the business.

● Income based approach determines value by calculating the net present value of the benefit stream generated by the business (discounted cash flow). ● Asset based approach determines value by adding the sum of the parts of the business (net asset value). ● Market based approach determines value by comparing the subject company to other companies in the same industry, of the same size, and/or within the same region.

Bank's traditional methodology is the asset based approach. This methodology is practical to analyze large and corporate enterprises which can provide audited financial statements. MSME-banks apply a cash flow-based analysis. They do not seek to rebuild the MSME’s balance sheet nor are they interested in the MSME’s assets for their credit decisions. The objective is Inappropriate organization and to determine a monthly cash flow over 12 months which permits the bank to have a reliable methodologies to partner with average monthly cash flow, but also an available yearly cash flow. MSMEs and agribusinesses The survey aims to identify banks which apply the discounted cash flow approach (or intend to) and eventually are the most likely to conduct solid and successful assessment of businesses targeted by the program.

Organization Most of banks have settled branches in provinces. The strategy for banks is twofold: to serve its international clients located in these areas and collect deposits. Few of them have a demonstrated intention to develop solid lending activities. Eventually, the structure of the branch mostly focuses on deposit activities. The number of credit analysts is limited. In addition, credit decisions are mostly taken at the HQ. Limited powers are attributed to the branch manager. The provision of credit products to MSMEs is de facto limited.

Management Information system MIS used by the banks is usually in line with corporate / large enterprises banking needs but not in line with MSME lending needs. The latter imply needs for reporting and clients monitoring that are not often available in usual banking software.

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Most of financial institutions face difficulties to recruit employees15. In addition, the survey Inadequate technical capacities states that applicants' level of knowledge is usually limited despite the graduation of the and human resources limit relevant level of education. In this frame, financial institutions have to train their employees. efficiency and increase the risk Schwarz revealed that budget for training might be insufficient. We will identify mechanisms to lend. available on the market to overcome this limit. Poor rural infrastructure Lack of paved or well-maintained roads and electricity add to the cost of doing business and hampers the development of the ease of access for agribusinesses and FI personnel. financial services. FINANCE The average loan maturity goes from 1 to 2 years while clients' needs might require longer Potential asset / liability term maturity products. Banks are facing difficulties to collect long term savings to mitigate mismatch liquidity risks of long term loans. RISK MITIGATION TOOLS The first and primary options to limit the risk within the organization are the implementation Absence of external risk of adapted financial infrastructures, adequate lending methodologies and organizations, and mitigation tools for financial solid knowledge of the market. The guarantee fund could be a very last solution to mitigate services providers the risk. We do not consider the guarantee fund as the ultimate tool to strengthen SME lending but as the last option after reinforcing the above mentioned topics. DEMAND SIDE

Managers' business skills vary depending on the size of the business. Needs of a Medium size enterprise differs from micro enterprises'. The level of structuration is different, the capacity to analyze the market and anticipate its evolution differs. On a short term, it might not Business management skills are prevent the business to access finance if the application is made at a specialized financial too limited. institution providing adapted services to low skilled people. On the long term, however, it hampers the development of the business. In addition, the manager might not have the right skills to anticipate the development of the business or basically, might not have the skills to run a growing business, leading to the collapse of the business.

15 Schwarz (2011-a), Financial Institutions' Challenges to provide credit in the Democratic Republic of Congo, Experiences from financial cooperation, KFW

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Managers are not always well aware of their rights or basically, of banks' general conditions. Business managers' limited There might be a need to develop financial literacy skills, on both sides: developing banks' financial literacy skills. capacities to "educate" clients and providing information to SMEs on their rights and on products available on the market.

SMEs' managers do not want to collaborate with banks because they are afraid of losing their business / personal assets. They refuse to collateralize their assets and eventually do not get the money they need from the bank. They get it from alternative ways which can be much SMEs cannot or do not want to more costly on a short term period but do not require any guarantee. In Kinshasa, the provide guarantees requested "banque Lambert" is an alternative tool to get quick working capital at a monthly interest by financial institutions. rate going up to 50%. An adequate approach / methodology and financial education system with clients could get them closer to financial institutions. We will study systems in place to lower this constraint.

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Mapping of the financial sector in DRC

Financial services providers The study aims to identify commercial banks which could collaborate with the MDC program in the near future. Selection criteria have been listed in the methodology section. Based on these criteria, 7 seven banks have been or are being met. Representatives of banks highlighted in blue are yet to be met while those of banks highlighted in red have been met.

Below is the classification of banks according to their type (commercial banks, MFIs, Cooperatives) and target market (corporate, large, medium, small and micro enterprises). As we have not been able to meet with all of them, the classification is based on the literature and our knowledge of the market.

Note: the cooperatives sector is composed of more than 150 independent and small structures. We decided to keep the three biggest ones according to their portfolio size16

Enterprises size Financial Institutions Corporate Large Medium Small Micro COMMERCIAL BANKS Banque Commerciale du Congo (BCDC) x x Banque Internationale pour l'Afrique au Congo (BIAC) x x x Banque Internationale du Credit (BIC) x x x Citigroup x Standard Bank Congo x Rawbank x x x Ecobank x x Trust Merchant Bank (TMB) x x x Procredit x x x Afriland First Bank x x Access Bank x x Byblos Bank x x First International Bank x x Sofibanque x x Advans Banque Congo x x x Bank of Africa (BOA) x x x United Bank of Africa x x BGFi Bank x x Invest Bank Congo x x Crane Bank Congo x x MICROFINANCE INSTITUTIONS

16 http://mixmarket.org/mfi/country/Congo%2C%20Democratic%20Republic%20of%20the

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FINCA x x x Opportunity International x x Hope International x x OXUS x x Life Vest x x PAIDEK x x COOPERATIVES MECRECO x x x COOPEC CAHI x x COOPEC Nyawera x x

Key points: Rawbank 1. Target groups: • Corporate and large enterprises • SMEs: with the support of the FPM, the bank intends to shift towards cash-flow based methodology. The transformation will start in March 2014 and should be achieved within 6-9 months. • Within the SME segment, women are specifically targeted: Lady's first program, business training program for women entrepreneurs, 16 days training. 2. Rawbank has developed an insurance product targeted at individuals travelling outside DRC, in partnership with international insurance companies. 3. Problems encountered by the bank: SME Non Performing Loans (NPL) represent 7% of the SME outstanding loan portfolio (NPL international standards are 2-3% max. For a country with limited structures like DRC, 3% could be the norm). 4. Network of branches: 13 in Kinshasa, 6 in , 1 in , Boma, Moanda, , in , Fungurume, Kakanda, Kasumbalesa, , , , , , , Beni, Watsa, Sakania 5. Solid interest in the program: • Technical assistance needs to manage stock collaterals • Business management support to SMEs

Procredit 1. Satisfaction with international organizations' services: • Technical assistance: collaboration with AFD not fully satisfactory, program not in line with the bank’s requirements. • Guarantee scheme (AFD): two limits: 1. The administrative process is heavy and 2. The scheme only targets production and fixed assets credits, not working capital which represents more than 80% of the outstanding loan portfolio. 2. Problems encountered by the bank: • The absence of a solid and reliable credit bureau does not enable the bank to verify clients' credit history. • Immovable collateral is not located in the bank’s operating area or the client’s need is beyond the collateral value. 3. Network of branches: 7 in Kinshasa, 3 in Bas Congo, 1 in Lubumbashi 4. Interest in: • SME training in collaboration with a bank and linked to bank’s needs.

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• Guarantee scheme focusing on a specific segment (river transporters for instance) and administratively flexible (the procedure to submit the credit file is supple, trust in the bank’s credit methodology).

Advans 1. Satisfaction from collaboration with international organizations: • TA from AFD to train Advans' clients on financial literacy. Training conducted by IECD. Mistrust from the client for a training conducted by a bank. In addition, credit officers were not trained on financial literacy training, implying mismatch between the bank's methodology and clients' updated knowledge. • AFD guarantee fund only targets production and fixed asset credits. 2. Network of branches: 6 in Kinshasa. 3. Interest in the program, especially: • Information / surveys on river transporters / coffee exporters. • Development of Agro products. Methodology should match with Advans'. • Business management support to SMEs. • Guarantee fund. • Interest in river transporters. • Interest in agro sectors when the bank will start operations in the regions.

This section will be developed after meeting with four additional commercial banks: TMB, BIAC, BIC and BOA.

Financial services Associations Financial institutions are embodied in associations specific to each category: 1. The Congolese Banking Association 2. The National Association of microfinance institutions 3. The Association of cooperatives for savings and credit

The last two ones were recently created and eventually have limited power and capacities.

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Development Financial Institutions17

Type of Target Cooperation Institutions Activities Remarks / Additional Notes support Market Grants FPM Financial participation into the FPM Support to the central bank to improve Grants BCC the payment system in DRC Was strongly interested in (architecture, connectivity) DFID's positioning regarding

Support to the implementation of Technical its investment in the FPM.

WB Central Bank' action plan (risk advisory BCC Was awaiting a feedback management, especially banks' risks of from DFID to finalize the services insolvency, data management...) deal into the FPM's capital. Overall Survey on the "Health of the financial Other financial sector in DRC", which should be sector published in a near future. Banks targeted at Equity SMEs Shareholder Interest in contributing to (Procredit, the development of the Advans) credit bureau. No concrete Rawbank Line of Credit targeted at SME lending action for now.

Rawbank, MULTILATERAL COOPERATION MULTILATERAL Line of Credit in the frame of Global Interest in meeting with ASI's

IFC Standard Trade Finance Program Bank representatives in the frame of the launch of Business Debt KingKuba, a Dutch-funded investment / risk capital fund financed by IFC, Edge second phase and IFC Investment FMO and Lundin Foundation and activities. Will contact Fund created by XSML. Private investment partners from March 16th. (KingKuba) fund targeted at SMEs. Investment size ranges from USD 100 000 to 500 000. In

17 GPTF (2013) Cartographie du Groupe des Partenaires Techniques et Financiers and updated with information collected during meeting with donors’ representatives.

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addition, it provides equity and advisory services to the SMEs. SME oriented Technical assistance for SME lending bank methodology in addition to debt (Rawbank) Product development: leasing product is being developed. Steps: a. Creation Financial of the legal frame (ongoing) b. services Capacity building in one bank c. providers Partnering with banks to disseminate the product Program to support SMEs since 2009. Three components: a. Managers capacities building b. SME linkages with financial services providers c. Access to Market Tools: a. Business Edge Africa: Technical business management training advisory conducted by Congolese training services centers. +/- 2500 SMEs have been trained in DRC since 2009. It proposes solutions in Business planning, marketing, accounting and banking. 4 SMEs days per module in average. IFC funds the training of trainers component, business training companies pay a fee to access training materials. In the course of the banking training module, banks are invited to conduct financial education modules and introduce their characteristics / products. Business Edge is entering in a 2nd phase targeted at governance and national standards (environment, terrorism etc...) b. SME Toolkit put in place in

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DRC by a consortium Rawbank - FEC - AFAD (Business training company) Technical advisory PASMIF II Leads the PASMIF II services Strong interest in the Grants PASMIF II Financial contribution to the PASMIF II development of mobile Capacity building and technical banking activities. assistance via the FPM to develop Grants FPM UNDP / UNCDF / UNDP financial services in remote areas and develop innovations Institutions Technical intending to Strong interest in partnering advisory provide agro Practical / advisory support with MDC regarding the services loans in rural collect of smallholders’ agro

IFAD areas products and the Financial contributions to the MAP development of rice, seeds Grants PASMIF II survey to identify the supply and and micro hydro sectors. demand of financial services in DRC. ● Consumer protection (regulation) ● Financial education: definition of a Possible coming strategic common approach axis for GIZ in the future: ● Credit bureau: inclusion of the private sector development,

Technical telecommunication, electricity and vocational training, business advisory BCC GIZ water sectors environment, value chain services ● Risk management: creation of a risk development, rural / management sub-direction and regional development. exchange reserves management Nothing concrete for now, committee SME oriented Three axis of developments: banks Equity Shareholder 1. Energy finance (credit to (Procredit,

BILATERAL COOPERATION BILATERAL equip MSMEs with alternative Advans)

KFW energy systems, solar panel Debt Finca Midterm loans for instance) Grants FPM Financial participation into the FPM 2. Education finance: target

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KFW chairs the Board of Directors market not yet defined. The Frankfurt School provides two Feasibility study on going. FPM technical assistants to manage the 3. Micro insurance fund. Modernization of the credit bureau No solid interest in the BCC Guarantee fund for deposits: program for now. Expect Feasibility study political decisions to be Support to the creation of the taken before moving into the Technical ANIMF association support to the agro sector. advisory Financial services Events: "Journee Epargne", "Access to institutions finance" day (June 2013) and clients Micro and small Radio Business Club entrepreneurs Surveys on the supply and demand of Others: financial services, on over Surveys indebtedness

Grants FPM Financial participation into the FPM.

Na

DFID Technical Business environment improvement assistance Private sector Markets for the Poor grants Agro sector Guarantee Guarantee fund targeted at one bank oriented fund for agro lending banks (BIAC)

Technical SME oriented advisory Support to SMEs in Katanga via TMB bank (TMB) not met yet

services USAID Toolkit for the agro sector / Support Technical Banking to the banking sector and SMEs, in advisory sector / SMEs rural areas and for the access to services financial services.

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"Fonctionnalite du credit agricole en Others Agro sector in RDC", "Strategie de financement des (surveys) DRC chaines de valeur" (manioc, mais et

legumineuses)

Grants PASMIF II Financial contribution to the PASMIF II not met

SIDA

Grants PASMIF II Financial contribution to the PASMIF II not met

CBT

Equity Banks Shareholder of Procredit and BOA not met BIO

SME oriented Technical assistance grants used by No more technical assistance banks Horus and Procredit holding to grants in the future. AFD is (Advans, reinforce commercial and clients changing its strategy for the Procredit) competences. coming three years towards: Technical Grants to open branches in rural areas MFI (FINCA) 1. Water and Sanitation assistance and grow portfolio AFD 2. Education grants 3. Vocational training: Technical assistance grants and loans collaboration with the INPP MFI (OXUS) in CDF for the opening of branches and (National Institute of portfolio growth. Professional Preparation) to

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This fund targets commercial banks: develop vocational trainings 1. Individual guarantee ARIZ covers (business management, individual loans ranging from EUR 300k technical skills) in the agro to 4M. ARIZ covers up to 50% of the transformation sector in outstanding loan amount (+ interests Bukavu, Goma (Catering), over a one year period - realization of and Kisangani securities). ARIZ takes a commission of (wood, river transport). 2% of the outstanding loan amount. 4. Partnership with the IECD 2. The Portfolio guarantee ARIZ covers to conduct the trainings. Banks 50% of the outstanding loan amount of Guarantee (Advans, loans ranging from EUR 10k to 300k (+ fund Rawbank) interests over a year) maturing at 5 years at maximum. The maximum outstanding portfolio is to be defined with the bank. The guarantee takes a yearly commission of 2% of the guaranteed outstanding amount or a yearly rate of the engaged portfolio.

The guarantee fund targets Investment credit only, not working capital.

Banks (Advans, Shareholder Equity Byblos) MFIs (Oxus) Shareholder na SME oriented Midterm / long term loans targeted at Debt bank SME loan portfolio growth (7 years for

PROPARCO FISEA / PROPARCO (Rawbank) RawBank) Support to the BCC's action plan: vulgarization and sensitize to law, Technical

control and regulation; publishing data Solid interest in mobile S advisory BCC of the financial sector; capacity banking (via UNCDF)

services FUNDED FUNDED

PASMIF II PASMIF building of BCC managers on CGAP

PROGRAMS / PROGRAMS LOCAL MULTI MULTI LOCAL

ORGANIZATION modules.

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Support to the APROCEC's action plan creation and implementation: consumer protection, data collection APROCEC to promote financial transparency via the Mix Market Website, capacity building Microfinance "Youthstart" and "Cleanstart" products Institutions development (FINCA, Microlead: savings mobilization Opportunity) Partnership to strengthen RSE in the Private sector private sector Articulation of VSLA with certified VSLA institutions to cover UNDP and UNCDF's targets. COOPEC Diagnostic of MISs used by COOPEC Diagnostic of organizations supporting microfinance: ANIMF and technical Microfinance assistance providers sector Studies / Market survey in , Kasai, Surveys Equateur Diagnostic of access to finance for the Youth youth Ministry of Support to the Access to finance finance / BCC strategy reformulation: MAP survey FPM provides loans ranging from USD MFIs (Life 100k to 3M, maturing from 2 to 5 years Possible strategy for the Vest), with a grace period ranging from 6 coming five years: Cooperatives months to 1 years. Repayment is done developing technical (MEKRE) and every quarter. Mechanism: FPM ASBL assistance and funding for Debt

FPM SME oriented put in place a fixed term deposit with MFIs and commercial banks banks a local bank (BCDC). It guarantees the targeted at agro MSMEs (Advans, money lent by the BCDC to the (depending on decision from BOA, BIC) financial institution partnering with the Board of Directors). the FPM.

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Technical assistance in governance, Technical downscaling, institutional advisory transformation, control and internal services audit, risk management, financial management, MIS.

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Non-Governmental organizations A few NGOs provide business management training to MSMEs, mainly in Kinshasa and Bas Congo regions. UMOJA Developpement Durable, and the CEFORMAD are Congolese NGOs. IECD is a French NGO.

Several NGOs are providing or provided technical assistance to cooperatives and microfinance institutions. TRIAS, a Flemish organization, has been supporting MEC BOSANGANI, MEC IDECE KINSHASA, MEC IDECE NIOKI, COOPEC MAKIN et le COOCEC CEAC in technical assistance, funding and equipment. SOS Faim, a Belgian organization, has been supported the IMF PAIDEK in the Kivus18.

Other organizations

In addition to institutions listed above, 16 currency exchange offices, 3 e-wallet companies, 2 specialized financial institutions (FPI and SOFIDE), 1 insurance company and 1 savings and pension fund are part of the market 19.

It must be noted that the insurance sector has been liberalized in 2013. Before, the SONAS, an own-state institution, was the only organization on the market. SONAS provide multiple insurance products, including insurance targeted at agro products. However, its bad reputation of non-payer hampers possibilities of collaboration.

Non exhaustive lists of Central Bank licensed financial messaging bureau and currency exchange office are available in annexes 1 and 2.

18 https://www.lamicrofinance.org/resource_centers/rdc/profilrdc16 19 FPM (2013), Veille sectorielle, 4eme trimestre 2012.

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Gap assessment and Identification of opportunities

Level of opportunities Assumptions Information from Market Analysis Comments (high, low medium) NATIONAL AUTHORITIES WB, GIZ and PASMIF II provide technical advisory services to the Central Bank to develop and improve: ● Risk management / Creation of a sub division for risk management ● Data management / Publishing data of the Regulatory bodies are already in financial sector Regulatory bodies place and well supported by a group ● Consumer protection (regulation) Low are not in place of donors. We do not identify a ● Financial education: definition of a common window for the MDC. approach ● Credit bureau: inclusion of the telecommunication, electricity and water sectors ● Capacity building of BCC managers on CGAP modules

So far, banks met have not complained about The global regulation is in place but the regulation system. The existing banking law The existing banking there might be a need to identify is anyway being revised. The new law of and microfinance additional regulations that could microfinance has been approved in 2013. regulations prevent reinforce the sector. For instance, Possibly high the development of regulations for leasing, warehouse IFC is collaborating with authorities for the the access to finance receipt products require additional development of a legal frame for the leasing in DRC. developments that are not available product, which could correspond to river on the market for now. transporters' needs.

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KFW has been supporting the development of the credit bureau for the past 3-4 years. A Financial infrastructures are being The state of financial management information system was installed improved by the authorities with the infrastructures does in 2013. IFC, which developed a guideline to support of several donors. However, not permit to control foster the development of credit bureaus in the identification of lands is still an Medium clients' identity and emerging countries, and DFID might want to issue in DRC and is a topic that does history and mitigate look into it as well. not seem to be supported by any credit risks. donor. This last assumption is to be In addition, the WB will be working with the verified. BCC to improve the payment system (architecture, connectivity etc...)

DFID, in the frame of the Business environment component of the PSD, will provide technical support to the improvement of the RCCM, to make it correspond to the OHADA's requirements.

We are not aware of a donor working on the development of collateral registries. According to discussions with bankers, it does not seem to be an issue in Kinshasa where collateral could be easily appraised.

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SUPPLY SIDE GOVERNANCE AND STRATEGY Based on our information, no bank is currently applying a specific agrolending approach. This assumption needs however to be verified as BIAC and TMB might have received support from USAID. The lattter is to be met in the coming days. Strategic orientation There is no sign that financial to serve MSMEs: institutions intend to move into the A few banks have developed or are going to Financial institutions provision of financial services for develop a methodology and organization to do not have any agro activities. There is a possibility target SMEs (BIC, Rawbank). Both banks strategic interest in High to create a demand for such services. received or are going to receive technical lending to micro, Commercial banks could target solid assistance from the FPM and midterm loans small and medium large enterprises with sufficient targeted at SMEs from, respectively, FPM and enterprises and guarantees and SMEs located in peri PROPARCO. Advans (which received support agribusinesses. urban areas. from the FPM) and Procredit are SME oriented banks. BIAC has a SME department. TMB was historically a bank targeted at SMEs. BOA received a loan from the FPM. In addition, Schwarz (2011-a) revealed that more and more bank are looking into SME banking. OPERATIONS - HUMAN RESOURCES - MANAGEMENT INFORMATION SYSTEMS Lack of knowledge Financial institutions are developing a good on MSMEs activities knowledge of certain types of clients or and sectors: the lack segment when they develop a collaboration of knowledge with them. However, it does not seem that Data and studies about the agro prevents financial banks have put in place a market intelligence sector are lacking for the all country, institutions to system (to be confirmed). Banks develop a High not only specific regions. There might develop adapted solid network of SME clients, distributors or be a need to develop value chains products and restrain suppliers of their corporate clients, as the studies. financial institutions latter are a guarantee / security. from lending to the private sector. One bank we met in the course of the survey

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was interested in getting knowledge of specific agro sectors (Advans).

According to information collected so far, no international organization or a limited number (USAID) provides The gap is being filled by: technical support to financial ● USAID which provided several types of institutions for the development of supports to a few banks (BIAC, TMB) and products targeted at micro, small, created a guarantee fund specific to agro medium and large enterprises lending. Unfortunately, we have not met yet involved in the agro business. with USAID's representative. We are planning to meet with BIAC and TMB in the coming days. Remark: the development of agro ● FPM which intends to develop a strategic products targeted at SMEs should go planning targeted at the agro sector. FPM is along with an appropriate about to launch a survey to identify needs in organization specific to SME lending. Products are not DRC and the type of technical assistance to Do we want to move into this adapted to MDC's provide to financial institutions. This could direction, which is already the target markets (for include the development of products specific mission of the FPM? The FPM might High now, river to the agro sector. The survey should be want to develop technical assistance transporters and finalized at the end of 2014. services targeted at SMEs only and coffee exporters) only in a year. BIAC might have created a product targeted at river transporters: short term working capital Agro products targeted at larger loan / line of credit with a grace period for the enterprises might not require strong duration of the trip with bullet repayment at change in the organization but delivery / when the payment is done. It must adapted methodology. be verified if the guarantee remains the contract proving the payment on the clients' Additional products could be created account or if banks require the clients to (insurance for agro activities for provide additional securities. instance). KFW might want to move into this direction but has not taken any decision yet. The insurance market has just been liberalized and might not want to come into the agro

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sector, which is a risky market in DRC.

The FPM provides technical assistance services to financial institutions in governance and strategy, downscaling, institutional transformation, control and internal audit, risk management, financial management and MIS. The FPM targets microfinance institutions, FPM provides technical assistance to COOPEC and commercial banks. The technical commercial banks and MFIs to assistance intends to improve the access to develop organizations adapted to finance for MSMEs. So far, activities did not lending activities targeted at SMEs. Inappropriate focus on a specific sector of activities. PASMIF II targets cooperatives. organization and However, enterprises located in urban areas methodologies to Possibly High mostly benefited from this support. Does the MDC want to compete with target MSMEs and the FPM? If not, the MDC could still agro businesses PASMIF II provides support to microfinance develop agro products targeted at institutions and cooperatives to reinforce SMEs but only partners with financial capacities, organizations and develop specific institutions having an organization products targeted at youth and renewable capable to handle SME lending. energy. The PASMIF II does not focus on agriculture for now.

Both institutions provide training and aim at reinforcing staffs' capacities.

Inadequate technical No international organization provides capacities and technical assistance in agro lending (products human resources and methodology). The FPM intends to include limit efficiency and it in its five years strategic plan but should not increase the risk to start before a year. lend.

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Poor rural infrastructure The World Bank and the European Union are It is not MDC's mandate to work on hampers the implementing programs aiming at reinforcing Low the improvement of infrastructures. development of the state of infrastructures financial services. FINANCE

Three international organizations provide midterm / long term loans to commercial banks. This portfolio is to be used to finance SME loans: It is not MDC's mandate to provide FPM provides Senior loans / Subordinated debt funding to financial institutions but / specific products to finance market niches Potential asset / banks might be interested in getting Low liability mismatch such funding. There is an opportunity PROPARCO provides line of credit targeted at to partner with DFIs providing such SMEs via commercial banks. services (PROPARCO, IFC, FPM).

IFC has put in place a line of credit in the frame of the global trade finance program.

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RISK MITIGATION TOOLS

Two organizations provide guarantee funds in DRC: Segment market targeted by the MDC AFD provides two types of guarantee fund. This are unusual for commercial banks, fund targets commercial banks: used to partner with urban SMEs or 1. Individual guarantee ARIZ covers individual corporate / large enterprises. A bank loans ranging from EUR 300k to 4M. ARIZ covers which would agree to collaborate up to 50% of the outstanding loan amount (+ with the MDC might have to put in interests over a one year period - realization of place adapted lending methodologies securities). ARIZ takes a commission of 2% of and develop its knowledge of the the outstanding loan amount. targeted sector. These are primary Absence of external 2. The Portfolio guarantee ARIZ covers 50% of risk mitigation mechanisms. The risk mitigation tools the outstanding loan amount of loans ranging guarantee fund should be considered Low for financial services from EUR 10k to 300k (+ interests over a year) as the last option to mitigate the providers maturing at 5 years at maximum. The risk. maximum outstanding portfolio is to be defined with the bank. The guarantee takes a yearly Banks could be interested in this commission of 2% of the guaranteed mechanism as a risk mitigation tool in outstanding amount or a yearly rate of the the frame of the development of new engaged portfolio. financial products.

USAID created a guarantee fund targeted at There is an opportunity to partner agro lending activities. We do not know how with DFIs providing such services successful this fund was. As of today, we have (AFD). not met with USAID yet.

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DEMAND SIDE Several programs are in place to reinforce MSMEs managers' skills: NGOs like IECD, UMOJA provide training to micro and small enterprises. IECD is collaborating with Advans to reinforce its clients' capacities. IFC has developed tools (Business Edge, SME Toolkit) to reinforce SME Managers' skills. Training are provided by local training companies paying a license to IFC to be allowed to use the tools. More or less 2500 businesses have been trained with the Business Usual training (classroom) and Edge tool since 2009. advisory services are available on the RawBank has put in place two entities aiming market. Coaching targeted at large at reinforcing SMEs capacities. The program and medium enterprises is not Lady's first targets SME women entrepreneurs available on the market. Business and provide 16 days of training. In addition, a management skills Medium specific entity provides legal and advisory There is an opportunity to develop are too limited. services to SMEs. Rawbank is also leader of the alternative mechanisms of training consortium (including FEC and AFAD) for the (coaching), partnering with training promotion of the SME toolkit in DRC. companies and DFIs providing the tools specific to agro businesses (IFC In terms of business management training, for instance). banks recommended: 1. If the training in conducted in partnership with banks' clients, it must embed the bank's procedures and systems to avoid a mismatch between loan officers' knowledge and clients' updated skills (Procredit, Advans). In addition, Advans' clients were suspicious of a business training conducted for a bank. 2. The risk of default grows with the quick growth of the business. A business training / coaching could be useful for a medium size

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business growing fastly and significantly (Rawbank). GIZ collaborates with the BCC and the MDC could contribute to the association of banks (ANIMF and APROCEC being development of financial literacy just created, their structure is not strong tools adapted to the characteristics enough to provide a solid contribution) to Business managers' the chosen target market (see develop a consumer protection regulation and limited financial Medium recommendations). Meetings with a common approach for financial education. literacy skills. banks branch managers revealed that GIZ is suffering from the absence of structured individuals and entrepreneurs still associations representing MFIs and COOPECs need to be educated in banking while bankers have a limited sensitivity to terminologies. financial education and client protection. The MDC could conduct multiple Efforts need to be conducted on multiple sides: actions to modify security conditions 1. Financial institutions could modify their requested by financial institutions: lending conditions: collateral valuation beyond 1. A strong lending methodology SMEs cannot or do 50% of the collateral value and collateral value coupled with a guarantee fund could not want to provide representing less than 150-200% of the loan help lower these requirements. guarantees value. 2. A collateral registry could help High 2 Developing financial literacy tools requested by estimate the value of a collateral and facilitate explaining the purpose of the financial institutions. the work of the banker to identify whether the guarantee. collateral is already guaranteeing another loan. 3. Supporting the development of a 3. Entrepreneurs do not understand well the collateral registry system with purpose of the collateral. potential other donors.

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Recommendations Diagnostic The Access to finance sector in DR Congo is well provided with multiple Development Financial Institutions at the macro, meso and micro levels: • At the macro level, WB, GIZ, KFW, PASMIF II, and IFC provide technical assistance to the Central Bank for the reinforcement of its capacities and for the development of financial infrastructures (credit bureau, payment system). DFID, as a new comer, intends to improve the business environment by collaborating with national authorities. • At the meso level, two bodies, the FPM and PASMIF II, have been built to support both macro and micro levels. They are funded by several multilateral and bilateral institutions (WB, UNCDF / UNDP, KFW, CBT, and SIDA). • At the micro level, more than 150 financial institutions (commercial banks, MFIs and cooperatives) provide financial services to micro, small, medium, large and corporate enterprises. Some of them receive technical assistance and funding from both institutions listed at the meso level. In addition, they receive equity, technical assistance grants and advisory services from multiple organizations from the bilateral and multilateral cooperation (AFD, PROPARCO /FISEA, KFW, USAID, IFC, PASMIF II and IFAD).

In this frame, how could the Market Development Component, at the meso level, intervene? What mechanisms could the program put in place, without duplicating existing activities and projects, to support the access to finance sector?

In 2012, agriculture was the last funded sector with 4% of the commercial banks’ total outstanding loan balance20. Financial institutions are located in the main urban centers and secondary cities. Commercial banks’ branches aim at providing financial services to their corporate and large clients and collecting deposits. More and more commercial banks tend to provide financial services to small and medium enterprises. However, this observation concerns barely one third of the total number of banks in DRC.

The agro sector appears to be under funded. Multiple barriers have been identified, some of them seem to being overcome by DFIs but others remain: • No sign that financial institutions intend to move into the provision of financial services for agro activities. • Lack of data and studies about the agro sector for the all country, not only specific regions. • A limited number of financial products targeted at micro, small, medium and large enterprises involved in the agribusiness • No international organization or a limited number (USAID) provides technical support to financial services for the development of products targeted at the agro sector.

Positioning Eventually, there is a market for the provision of financial services to businesses involved in the agro sector. In this frame, the MDC could intervene to provide technical assistance to financial institutions for the development of adapted financial services. In other words, we recommend the MDC to:

20 FPM (2013), Veille sectorielle, 4eme trimestre 2012

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• Provide detailed data and studies presenting the main characteristics of the value chain of specific sectors. Quantitative and qualitative data about input suppliers, producers, processors, exporters, wholesalers, national and global retailers could be provided. In addition, it should strengthen the MDC’s activities. This information should focus on provinces currently targeted by the program. • Develop a range of adapted financial products, currently not available on the market, to be put at the disposal of financial institutions. USAID21 developed a list of financial products that could be adapted to the characteristics of the multiple actors of the value chain. o Credit products like Production / Pre-harvest financing, Post-harvest finance and / or working capital financing, warehouse receipts, purchase order finance, real estate mortgage financing, equipment financing, and equipment lease could be developed. o A few trade finance products, like documentary credit or remittance, are already available on the market. Additional ones targeted at exporters and importers could be also developed, depending on the need of market. o In addition, in the frame of the improvement of the population’s financial inclusion, saving products could be developed via the mobile banking component. The development of new products o Insurance services targeted at the agro sector are quasi non-existent. However, the market for insurance services might too young and too risky for such product. • Provide technical assistance to financial institutions desiring to launch them. The development of specific products should go along with the improvement of the overall organization, the training of the staff and the modification in the MIS. Basically, a gap assessment survey of the company should be conducted first to propose adapted recommendations before developing the product.

Target markets • Directly: financial institutions desiring to develop financial services targeted at actors of the agriculture value chains. Depending on the type of beneficiaries, several types of institutions could be targeted: commercial banks, MFIs, cooperatives. However, it must be noted that commercial banks targeted at SMEs should have the adapted organization in place to ensure a successful delivery. As stated above several times, SME lending, for all types of sectors, require a specific approach, different from the methodology usually applied by commercial banks. • Indirectly: micro, small, medium and large enterprises involved in the agriculture value chains. The sectors to be targeted in priority need to be defined first after determining multiple criteria. The high number of beneficiaries should be one of them but it should be balanced by the ease for financial institutions to reach targeted clients (operational constraints like the location of potential clients compared to branches, the state of infrastructure to reach them etc...).

Partners • Certain categories of the target market, especially micro and small farmers, are not easily reachable but are already supported by existing donors. In order to better reach them and not duplicate projects already in place, partnerships with IFAD and UNCDF could be

21 USAID (2012) Lending to the Agriculture Sector - A Toolkit - FS Share - Financial Sector Knowledge Sharing

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developed. In addition, partnering with multiple NGOs or consortium of NGOs (ACTED) working in the targeted areas could be sought. • The development of agro products could require additional mid-term funding to develop a portfolio specific to the target market. PROPARCO, IFC and FPM are the institutions which could provide such service. Coupling technical assistance with funding is a model which already exists in DRC. • As stated several times above, markets knowledge, development of adapted products, methodologies and systems are prerequisite to mitigate risks. An additional risk mitigation tools is the guarantee fund. The AFD provides such system. Unfortunately, it only targets investment credits. Partnering with AFD would imply the development of adapted mechanisms to finance working capital and the agro sector. • Most of met bankers and providers of training (IECD) raised the fact that MSMEs lack of structuration, organization and education. More specifically, one banker (Rawbank) stated there is a need to develop capacities of the upper class of the medium size enterprises category. IFC made toolkits available. They could be adapted to specific segment and disseminated via innovative means (coaching) with the support local consulting companies. • Ultimately, the FPM is the actor providing technical assistance to commercial banks to downscale. Providing the proposed services (development of new products and technical assistance) might put the MDC in competition with the FPM. However, for now, the FPM is not providing it and should not be doing so before a year at least. Synergies instead of competition should be sought. For instance, the MDC could provide its expertise in sector knowledge and products targeted at the value chains of targeted sectors to the FPM.

Limits of the proposed recommendations • One actor (FPM) currently provides similar services to those listed in the recommendations above. If the MDC decides to move into this direction, a close collaboration with the FPM should be sought to avoid competition. • Technical assistance to the financing of the agro sector in DRC is still new and has encoutered some failures in the past (Procredit). The development of such service should be done cautiously and take in consideration unsuccessful experience from the past. • The consultant has not been able to meet with USAID yet. USAID being the only donor which directly supported the financing of agriculture in DRC, its input should help confirm or overturn some of the propositions made in this document.

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BAD (2010), Environnement de l'Investissement Prive en Republique Democratique du Congo, Departement Regional de l’Afrique Centrale.

BAD, OCDE (2008), Perspectives economiques en Afrique, Republique Democratique du Congo

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Annex 1: List of financial messaging offices licensed by the Central Bank

The list introduced below is as of 2010 and is non-exhaustive. We have not been able to collect the full list.

1. Money Trans Rdc 2. African Express Sprl 3. Agence Aiglon Service 4. Amis Fidèles 5. Apocalypse 22 6. Axes Services 7. Berval Express 8. Colikin 9. Colombe Service Sprl 10. Datco 11. Golden Money Trust 12. Groupe Lambert de Paris 13. Justin et Cie Sprl 14. Kin Express Multi Services 15. Kin Personnel Mail (KPM) 16. Maison Lupi 17. Malu Transfert 18. Société Jesus Seul Sprl 19. Soficom Transfert 20. Solidaire Transfert Sprl 21. Winkele Business Agency 22. Zifa Ft 23. Société de Transport Compagnies Sprl 24. Sikar Finances 25. Transcash 26. Express Union 27. Agence Grâce D. World Business Sprl 28. Trans Mbwesa Sprl 29. New Way Fr Agency 30. New Way Fragency 31. Wapicom Transfert 32. Avida Business Link Sprl 33. Agence Baudouin Transfert Sprl 34. Agence Elsa Commercial Sprl 35. Bobo Cash Express 36. Graines des Ass Sprl 37. Armi Global Buisiness

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Annex 2: List of currency exchange offices licensed by the Central Bank

The list introduced below is as of 2010 and is non-exhaustive. We have not been able to collect the full list.

1. Malu Change 2. Solidaire Change 3. Soficom Change 4. Modestie Change 5. Mamie Laure 6. Abs Change 7. Monex Bureau de Change 8. Christel Change 9. La Référence Change 10. Free Business Change 11. Kilefu Sprl 12. Ewedje Exchange Rdc 13. Société de Change (Ludjuma Sprl) 14. Société Mère Double Sprl 15. African Change

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