Democratic Republic of Congo: Banking on the little guy
With most banks focused on dealing with the government and a few select corporates, some are rethinking their strategies and tentatively offering new products aimed at ordinary people and small and medium-sized enterprises (SMEs).
Rawbank, the country’s largest bank by assets, is providing loans to civil servants and has developed the DRC’s first mortgage product.
Similar products are on their way from the other big hitters, including the Banque Commerciale du Congo, Banque Internationale pour l’Afrique au Congo and Trust Merchant Bank.
The financial sector has come a long way in the DRC during President Joseph Kabila’s 14-year reign, but with more than 95% of the population still without bank accounts, compared to a continental average of 76%, the country remains one of the least banked in Africa.
One reform boosting financial intermediation is bancarisation, a policy introduced by prime minister Augustin Matata Ponyo in 2011.
Under bancarisation, all security forces’ and civil servants’ salaries are paid into bank accounts and not in cash.
The change has made embezzlement of salaries by greedy senior managers and commanding officers much harder and has led to a tripling in the number of bank accounts to 1.8m, even though the majority of people apparently withdraw most or all their salaries in cash from their accounts soon after pay day.
All these new bank accounts have encouraged the country’s more innovative banks to consider how to give the people who hold them access to credit.
Mustafa Rawji is a senior corporate officer at Rawbank, which has an 18% share of the market. He points to the extra 200,000 bank accounts opened since the bancarisation programme began, with new branches, cash machines and bank cards delivered.
Now, he says, there are 1.5 million people who want access to credit: “But this is a challenge for the banks. Most of our deposits are short term and can disappear in an instant. It is risky funding long-term loans with deposits like that. We still lack a savings culture.”
Still, Rawbank, which received a stable rating from ratings agency Moody’s last year, now offers salaried state employees a credit package branded the ‘Léopard’, entitling them to borrow up to four times their monthly salary, repayable over 15 months.
And in March 2015, Shelter Afrique, a pan-African finance institution focused on supporting affordable housing, extended an eight-year, $10.6m line of credit to Rawbank, enabling the bank to launch the country’s first mortgage product.
As in most of the continent, there are a large number of small businesses in DRC, the vast majority of which operate in the informal economy.
Most of the SMEs engage in trade, a small number offer other services and a tiny minority are in manufacturing. Such SMEs typically lack accounts and ledgers, and a major challenge for banks looking to lend to them is working out the size of their assets in order to assess risk.
Working with the Frankfurt School of Finance and Management, specially trained Rawbank staff are using an innovative microfinancing model to work out the wealth of potential clients.
Rawji explains how the bank has allocated $1.5m to a pilot project. This is not much compared to Rawbank’s $1bn total balance sheet, but it is a start, he says: “Our staff have learned to value all the assets of our clients so we can assess their total real wealth and create their financial statements, usually for the first time. We are giving out loans averaging $30,000 to 50 businesses a month.”
Rawbank’s total SME portfolio is worth $30m, all backed, says the bank, by tangible guarantees. The sum is a significant increase on the $2-3m Rawbank had allocated to SMEs just five years ago and is a sign of things to come from the Congolese banking sector.