Banking Sector

Sudan’s banking system is Shariah-based, with a Higher Shariah Supervisory Board in place which delivers fatwas on banking products and transactions. Conventional banking was allowed in the country’s south in 2005 following a peace pact. The secession of South Sudan in 2011 meant that conventional banking ceased to exist in Sudan. In 2021, however, the Central Bank of Sudan announced a return to a dual banking system which would allow conventional banking business in the country’s banking sub-sector. As of 2020, there were 38 banks in Sudan. Out of the 38 banks, 33 are commercial banks and 5 are specialized banks. Of the 33 commercial banks, 9 are foreign-owned, 1 is owned by the government and 23 are owned jointly by several investors. Out of the 5 specialized banks, 3 are government-owned and 2 are jointly owned by several investors.

Even though banking sector assets seem to have risen in local currency, due to high inflation, this seems to be more of a decline. Banking sector assets since 2017 have ranged from SDG 211.25 billion (USD 35.51 billion) in 2017 to SDG 5,334.60 billion (USD 10.84 billion) in 2022.  This decline is due in part to a reduction in private sector lending as a result of political instability. 

Credit to the private sector have varied considerably over the years. It increased from just SDG 72.74 billion (USD 10.96 billion) in 2017 to reach SDG 304.84 billion (USD 5.65 billion) by 2020, representing an increase of 319.1% over the period. As a percentage of GDP, lending to the private sector, provided exclusively by banks, has seen a steady increase since 2015, having dropped for 2 consecutive years in 2013 and 2014. From 12.12% in 2012, banking sector lending to the private sector as a percentage of GDP dropped for 2 consecutive years to reach 8.02% in 2014. In 2015, however, it rebounded to 8.23% and maintained an upward trajectory to reach 9.34% in 2018. It dropped marginally to 9.2% in 2019 and further down to 7.89% in 2020 when the effect of the COVID-19 pandemic became more severe. It also dropped in 2021 and 2022 due to the Russia-Ukraine war and the political tensions in Sudan.

Banking sector soundness

The profitability of the Sudanese banking sector has seen marked variability since 2017. The sector’s pre-tax return on assets (ROA) rose to 4.7% in 2018, up from 3.8% in 2017. In 2019, however, it dropped to 3.4% and further down to 3.1% in 2020. Similarly, the pre-tax return on equity (ROE) almost doubled in 2018 to reach 94.7% from 48% in 2017. In 2019, it fell sharply to 42.9% in 2019 but rebounded to 60.7% in 2020. On liquidity, the ratio of liquid assets to total assets was 52% in 2018 compared to 37.3% in 2017. It dropped to 49.5% in 2019 but bounced back to 53.7% in 2020. In terms of capital adequacy, the capital adequacy ratio (CAR) was 9.9% in 2018, down from 16.2% in 2017. The deterioration in 2018, occasioned by the depreciation of the country’s currency against major foreign currencies, took the CAR below the 12% minimum requirement. The CAR increased to 15.4% in 2019 but fell again to 11.5% in 2020, 50 basis points below the minimum 12% requirement. This resulted from the rate of increase in risk assets (65.2%) outpacing the rate of increase in supervisory capital (23.4%). The banking sector capital and reserves as a percentage of total liabilities dropped to 6.9% in 2018 compared to 10.8% in 2017. In 2019, it increased to 10.6% but dropped again to 7.7% in 2020. In the area of asset quality, the banking sector's non-performing loans (NPL) were 3.2% in 2018, down from 3.3% in the previous year. It increased to 3.5% in 2019 but fell slightly to 3.4% in 2020. The ratio of finance provisions to NPL was 72% in 2018 compared to 81.3% in 2017. In 2019, the provisions stood at 74% but fell sharply to 55.5% in 2020. Sudan's banking system is still undercapitalized, lacks contemporary technology, and lacks skilled and experienced people resources[1].

Assets and liability structure of the banking system

The banking sector assets in Sudan comprise local currency (cash), balances with the central bank, balances with other banks, foreign assets, advances (loans), and other accounts. The two major components of the banking sector assets are advances (loans) and balances with the Central bank. In 2022, for instance, banking sector loans constituted 34.49% of the banking sector assets, up from 30.10% in 2021, respectively. Balances of banks with the central bank, on the other hand, constituted 33.8% of the total banking sector assets in 2022, down from 39.2% in 2021. The two components combined (advances and balances with the central bank) constituted 68.29% of total banking sector assets in 2022, and 69.3% in 2021. On the liabilities side, the components include customer deposits, capital accounts, due to banks, and other accounts. Of these components, customer deposit is the largest, accounting for 59.27% and 60.52% of total banking sector liabilities in 2021 and 2022, respectively.

Capital Market

The Khartoum Stock Exchange (KSE) is the main stock market in Sudan. The KSE index reached 18,254.5 in 2020, up from 15,964.1 in 2019. The number of shares traded in 2020 was 1,449 million worth SDG 1,848.9 million (USD 34.29 million) compared to 465.1 million shares traded in 2019 worth SDG 1,291.3 million (USD 26.92 million). Of the total number of shares traded in 2020, the banking and investment sector shares were the most traded shares, controlling as much as 99.3% of total number of shares traded. In terms of the value of shares traded, the banking and investment sector shares controlled 96.2% of the total value traded in 2020. Market capitalization varied from SDG 19.84 billion (USD 2.99 billion) in 2017 to SDG 75.96 billion (USD 1.40 billion) in 2020 to 2241.86 billion in 2022 (USD 4.55 billion). The substantial leap in the market capitalization in 2018 and thereafter is attributable to the revaluation of the assets of the Sudanese Free Zones and other companies. There were 67 companies listed on the KSE in 2022.  

Fixed Income Securities Market

Sukuk (bonds) are traded in Sudan on the KSE. The number of traded sukuk was 20,179,000 worth SDG 8,320.1 million (USD 457.85 million) in 2018, compared to 21,087,000 traded in 2017 worth SDG 10,396.4 million (USD 1563.7 million). In 2019, the number of sukuk traded rose to 30,785,000 worth SDG 13,425.8 million (USD 279.92 million). By 2020, the number of sukuk traded had reached 36,203,000 worth SDG 15,299 million (USD 283.79 million). In 2020, 2021, and 2022, there were 1,317,059, 3,495,793, and 437,497, number of sukuk in circulation, respectively, where most of the sukuk bonds were sold in 2022.

Contractual savings institutions and institutional investors

Insurance sub-sector

The insurance sector in Sudan has grown in size (assets) over the years. The sector’s assets grew by 46.6% and 73.7% in 2017 and 2018 respectively, driven largely by outstanding premiums, fixed assets, cash and investments. There are currently 14 insurance companies (same since 2017) and 1 reinsurance company in Sudan. The number of insurance agents increased to 288 in 2018 from 269 in 2017. There were also 1,163 insurance providers in 2018, up from 1,029 in 2017. As of 2018, there were 101 inspection and settlement experts in the sector, down from 105 in 2017. There were also 10 insurance brokers in 2018 which was the same in 2017. The sector also had 5 medical insurance claim managers as of 2018, up from 3 in 2017 including an office of a regional reinsurance company for the Common Market for Eastern and Southern Africa (COMESA). In 2018, insurance sector gross premium rose by 61.2% compared to 2017. Net premium also rose by 52.2% over the same period. A greater proportion of total premiums in insurance sector in Sudan comes from the motor insurance policy. In terms of type of insurance, the gross premium is dominated by general insurance which contributed 97.89% to the insurance sector gross premium in 2018. Gross claims paid was increased by 54.99% in 2018 compared to 2017, with 56.2% of the total in in 2018 going to motor insurance policy holders. Moreover, the general insurance sub-sector expectedly dominates the claims paid by the sector, receiving 99.1% of claims paid in 2018.

Pensions Industry

Sudan’s pension industry, until the enactment of the Pension Law of 2016, had two distinct pension funds for private, public and government sector workers. The two distinct funds were Social Insurance Fund (which offered pension services and coverage for public and private sector workers) and the National Pension Fund (which offered pension services and coverage to government workers). Following the passage of the Pension Law of 2016, these two funds were amalgamated into one fund called the National Pension and Social Insurance Fund (NPSIF), which has been mandated to offer pension services and coverage to workers in the private, public and government sectors. In addition to pension benefits and insurance coverage, the NPSIF also provides lending services (loans and microfinance) to reduce poverty amongst retirees and their relatives. In spite of the legal consolidation of the two funds, they are still operationally and administratively separated (IPC-IG, 2020). As of 2018, there were 688,050 employees from the government sector who were covered under the NPFIF, up from 634,142 in 2017. There were also some 191,000 government sector retired workers accessing benefits from the NPSIF. For the private and public sectors, there were 427,000 employees covered under NPSIF in 2019, with some 142,000 retired workers accessing benefits from the NPSIF.

Challenges, opportunities and recommendations for the financial sector

The low levels of development of Sudan’s financial system, present a major challenge for the Sudanese economy. As the country’s economy continues to reel from the devastating economic knock occasioned by the secession of South Sudan and the current conflict, a strong and well-developed financial system is crucial to provide the impetus for recovery and sustained growth. The increasing balances of the commercial banks with the central bank are worrying. These balances should find their way to the private sector to boost investments and productive activities.

The deterioration in banking sector capital adequacy below the 12% minimum requirement is problematic. The central bank of Sudan should seek to stem this tide by ensuring that banks do not derail their capital levels below regulatory requirements. Adequate sanctions must be instituted against defaulting banks to send strong signals to potential culprits. Moreover, the Sudanese banking sector suffers marked variability in asset quality (NPL) and profitability indicators such as ROA and ROE. Such variability, along with the deterioration in capital adequacy ratios, presents serious soundness concerns for several stakeholders. Allowing such concerns to fester endangers public confidence in the banking sector.

The low financial inclusion levels in Sudan are worrying. However, the rising trend in mobile banking uptake is encouraging and presents an opportunity not only for reducing the staggering exclusivity levels but also an avenue to mobilize financial resources for the needed economic recovery. Indeed, the burgeoning mobile banking demand presents an opportunity for the banking sector to develop robust mobile and other electronic payment platforms, especially in the wake of the new normal presented by the COVID-19 pandemic.

The NBFI sector in Sudan is relatively small, particularly the MFIs sub-sector. This is particularly problematic for the SME sector which faces a rising financing gap in the country. The move by the central bank to ensure that a certain proportion of the banking sector credit goes to microfinance activities is noble and must be deepened. The insurance sub-sector is also relatively small which may not be supportive of risk underwriting for large financial and other transactions for a fledgling financial sector. The delisting of Sudan from the Financial Action Task Force’s (FATF) blacklist and the United States blacklist of countries sponsoring terrorism presents Sudan’s financial sector the opportunities to integrate with the international financial markets and attract foreign investments.

Once the Framework Agreement is signed between the military and civilians and the political tensions are reduced, Sudan must engage in open, democratic, and innovative economic reconstruction to regain the trust of the Sudanese people and the world community and to attract foreign investment. It must prioritize banking reform, particularly improved banking supervision and the implementation of more robust, real-world anti-money laundering and anti-corruption measures.

Contact Details Information of Banks operating in Sudan