Angola: Financial Sector Profile

Sharp increases in oil production and prices have helped support strong economic growth over the past decade, with real GDP growing by an average of 15.4 percent a year between 2003 and 2008. Significant falls in world prices and demand for oil and diamonds following the onset of the global economic and financial crisis in late 2008 have had a significant negative impact on Angola's economy, causing real GDP growth to decrease from 13.8 percent in 2008 to 2.4 percent in 2009. GDP growth slightly increased to 3.4 and 3.9 percent in 2010 and 2011 respectively, but the economy is however expected to experience a strong recovery with real GDP projected to grow by 6.8 percent in 2012, supported by rising oil production and prices.

The economic crisis has led to an increasing dollarization of the economy as foreign currency deposits have risen to reach over four times the amount of local currency deposits in 2009. Difficulties maintaining the local currency also led to a rapid depletion of foreign currency reserves throughout the first half of 2009, which eventually forced the Central Bank to suspend foreign exchange auctions, impose limits on its foreign exchange sales, and seek liquidity injection from the IMF. This injection of liquidity, coupled with rising oil revenues, helped ease liquidity shortages and allowed the Central Bank to resume foreign exchange auctions by the end of the year. In further macroeconomic stabilization efforts, the Central Bank also moved to limit credit concession, raise reserve requirements for bank deposits to 30 percent, and increase domestic bond issuance in order to sterilize excess liquidity of the Kwanza (local currency).

Despite the vulnerabilities faced by the Angolan financial system, particularly due to risky domestic environment with capacity constrains in banking supervision, high dollarization and inadequate bank corporate governance, the financial sector has broadly continued to expand. While the growth rate of credit to the economy did slow down in 2009, after reaching 137 percent in 2008, the ratio of financial system deposits to GDP has continued to increase, rising from 17.8 percent in 2008 to 22.4 percent in 2009.

The banking sector largely dominates the Angolan financial system. 9 of the 22 commercial banks are foreign owned, and account for about 40% of the assets, loans, deposits, and capital of the system. The sector, as a whole, has continued to experience significant growth in recent years with banking coverage reaching 51 percent of Angola. However. 20 percent of the banks own 80 percent of the financial assets, while only 11 percent of the population has a bank account.

Access to financial services remains limited; the government has however initiated reforms in 2011 to improve access to credit. Subsidized interest rates and state credit guarantees (up to 80%) are planned for implementation. Micro credit is also increasingly being offered by commercial banks.

Capital markets are in their nascent stages of development. The opening of the Angola Stock Exchange, which had been scheduled to open in the course of 2010 with 10 companies listed, has been indefinitely postponed.

Angola's fixed income market remains small. The government continues to be the only active issuer and offers bill and bonds of varying tenures and maturities in both Kwanzas (local currency) and US dollars. As of March 2013 Angola received long-term foreign currency ratings of B+ by Fitch and Standard and Poor's, and B1 by Moody's.

There are no intermediaries active in the market, and government securities are issued directly by the central bank to commercial banks, which are the only active investors on the debt market. Activity on the secondary market is very limited and most investors adopt a buy-and-hold strategy. There is no active derivatives market present in the country.

The insurance sector was liberalized in 1999, and seven companies are currently operating in the country. Their revenues derive mainly from the oil and gas sector. The pension market is also relatively undeveloped reprensenting only 0.52 percent of GDP in 2009 (latest figure available).

Financial Sector Development Indicators
  2007 2008 2009 Average Africa 2009
Liquid Liabilities /GDP 0,164 0,196 0,235 0,412
Deposit Money Bank Assets / GDP 0,114 0,166 0,244 0,32
Other Financial Institutions Assets / GDP n.a. n.a. n.a. 0,288
Private Credit By Deposit Money Banks and Other Financial Institutions / GDP 0,083 0,125 0,19 0,272
Bank Credit / Bank Deposits 0,625 0,791 1,007 0,728
Net Interest Margin 0,055 0,059 0,065 0,069
Bank Concentration 0,703 0,674 0,646 0,841
Stock Market Capitalization / GDP n.a. n.a. n.a. 0,947
Remittance Inflows / GDP n.a. n.a. n.a. 0,237
Mobile Cellular Subscriptions (Per 100 People) 28,263 37,587 - 40,33
Private Credit Bureau Coverage (% Of Adults) 0 0 0 4,539
Public Credit Registry Coverge (% Of Adults) 2,3 2,7 2,5 2,575
Number of commercial bank branches per 100,000 adults 1,372 1,095 0,598 6
Depositors with commercial banks per 1000 adults 102,076 118,135 132,302 311
Borrowers from commercial banks per 1000 adults 15,407 19,979 22,168 87