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 Bank ....................... 39 Annex 2: List of currency exchange offices licensed by the Central Bank ........................ 40 1 | P a g e 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 Trust Merchant Bank UNCDF United Nations Capital Development Fund UNDP United Nations Development Program VSLA Village Savings and Loans Activities WB World Bank 3 | P a g e Introduction The financial sector in DRC, as of 2012, counted 20 commercial banks, 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 Kinshasa 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 loan 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 4 | P a g e 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