Comoros: Financial Sector Profile
A small archipelago state, the Union of the Comoros is emerging from a long period of political instability. Controversial elections in 2007 led to military intervention by the African Union in March 2008. Political stability has since improved following a referendum on constitutional amendments in May 2009 and the formation of a consensus national unity cabinet in May 2010.
Agricultural production and services dominate the economy, accounting for 49.3 percent and 41.6 percent of GDP respectively. Comoros’ domestic market remains small with weak institutional capacities and a relatively narrow export base, with three cash crops, namely vanilla, cloves, and ylang-ylang, representing about 95 percent of export earnings.
After expanding by 4.2 percent in 2005, economic growth has been low, averaging 0.9 percent a year between 2006 and 2008. GDP growth increased to 1.8 percent in 2009, up from 1 percent in 2008, despite delays in foreign direct investments, and declines in official aid and remittance inflows stemming from the global economic and financial crisis. A more stable political environment, combined with growth in tourism, fishing, agriculture and construction is expected to boost economic performance in the near future, with GDP growth registered at 2.1 percent in 2010 and projected at 2.4 percent in 2011 and 3.5 percent in 2012.
Comoros has a relatively small and underdeveloped financial sector. Financial intermediation and credit to the private sector, while still low, have been expanding in recent years following the entry of two foreign commercial banks. However, the further development of credit markets remains constrained by poorly defined land ownership rights and weak enforcement of collateral guarantees. At present, the country’s financial system comprises three commercial banks, a development bank which also engages in commercial banking activities, a National Savings Fund, a postal savings bank, and two networks of microfinance institutions (MFIs). Under current regulatory frameworks, financial institutions can independently set their own credit and lending policies, though commercial bank interest rates and loans to consumers and businesses are partly regulated, with upper and lower bounds set at 14 percent and 7 percent respectively.
Banking system soundness appears to be improving. Profitability and quality of risk have increased in 2010, while the ratio of non-performing loans to total outstanding loans decreased. However the Comoros Development Bank and the postal bank, the later of which accounts for about 15 percent of all deposits and loans, still face significant difficulties complying with prudential regulations and form a potential source of systemic vulnerability. Bank lending activities tend to be concentrated in short-term loans, mostly directed towards financing trade activities. Interest rates on deposits average around 2.5 percent which, given inflation rates of 4.8 percent in 2008 and 2009 and projected rates of 2.6 percent and 2.9 percent in 2010 and 2011, translate to negative real interest rates.
In recent years authorities have undertaken several measures to enhance financial intermediation and strengthen the country’s banking and financial sectors. Such efforts include the facilitation of entry for foreign banks, reforms to the investment code in 2007 and the establishment of a National Agency for Investment Promotion. The country’s authorities have recently concluded agreements with the Central Bank of Tanzania, the Central African Banking Commission (COBAC) and the French Prudential supervisory authority to strengthen regulatory and supervisory frameworks, expand the scope of prudential regulations, and increase the effectiveness of control procedures. The Central Bank is also looking to implement a computerized reporting system for commercial banks and microfinance institutions, and a credit bureau is expected to be established by 2012.
There is currently no stock market present in the country, nor are there primary or secondary fixed income markets for government or commercial debt. Government financing is mostly undertaken in the form of direct credit from domestic commercial banks, and liquidity levels are controlled through the modification of reserve requirements only. As of April 2011, Comoros received no sovereign rating from any of the three major credit rating agencies.
Remittances, which represented an estimated equivalent of 20.7 percent of GDP in 2009, constitute an important source of inflows for the Comorian economy.
Financial Sector Links
|2007||2008||2009||Average Africa 2009|
|Liquid Liabilities /GDP||n.a.||n.a.||n.a.||0,412|
|Deposit Money Bank Assets / GDP||n.a.||n.a.||n.a.||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||n.a.||n.a.||n.a.||0,272|
|Bank Credit / Bank Deposits||0,574||0,649||0,731||0,728|
|Net Interest Margin||n.a.||n.a.||n.a.||0,069|
|Stock Market Capitalization / GDP||n.a.||n.a.||n.a.||0,947|
|Remittance Inflows / GDP||0,027||0,024||0,021||0,237|
|Mobile Cellular Subscriptions (Per 100 People)||10,503||15,294||-||40,33|
|Private Credit Bureau Coverage (% Of Adults)||0||0||0||4,539|
|Public Credit Registry Coverge (% Of Adults)||0||0||0||2,575|
|Number of commercial bank branches per 100,000 adults||0,773||0,754||1,76||6|
|Depositors with commercial banks per 1000 adults||44,294||47,665||62,586||311|
|Borrowers from commercial banks per 1000 adults||5,469||5,42||6,274||87|
For statistical coherence and comparability purposes, the FSDIs are extrapolated from a limited number of sources (AfDB, IMF, OECD, WB), where a common data collection methodology was applied to all countries surveyed. For additional data from other sources, please refer to the Documents section.