Country Financial Sector Profilesback

Financial Sector Overview

Guinea, officially the Republic of Guinea, is among Africa's least developed countries, with an estimated GDP per capita of USD 885.4 and a population of 12.4 million as of 2018. The Ebola epidemic[1] severely constrained GDP growth which remained almost stagnant from 2013 to 2015. The pace of economic development has accelerated since 2016, with average annual GDP growth of 10.9% between 2016 and 2018, which is well above the sub-Saharan African average of 2%. However, the Guinean economy remains heavily dependent on a not very inclusive mining sector that is essentially dependent on economic partnerships with multinational firms. Bauxite, gold and diamond mining accounts for about 85% of exports. The country has a rich mineral potential, including more than a third of the world's bauxite reserves, large quantities of high-grade iron ore and other mineral resources such as gold, diamond, uranium and manganese that are still largely untapped. The arable land potential is estimated at 6.2 million hectares, of which 75% is dormant and 64,000 ha irrigable land. Less than 10% of the irrigable land is developed. Guinea also has immense water resources. The hydropower potential is estimated at 6,000 MW, for guaranteed energy of 19,300 GWh per year. Despite this enormous potential, Guinea's human development remains low, with the country ranked 174th in 2019 (out of 189 countries) according to the Human Development Index (HDI), and the poverty rate is still high (61.9% of the population in 2016 according to UNDP data). The business environment is not very attractive despite recorded improvements in recent years. The World Bank's Doing Business 2020 report ranks the country 156th (out of 190 states), up 22 places from 2012. Guinea has also adopted a development strategy known as the "Vision for Emergence by 2040". A National Economic and Social Development Plan (PNDES 2016-2020) has been designed based on this as an instrument for the five-year implementation of that vision and is aligned with the sustainable development goals.

Overview of the Financial Sector

As of 31 December 2018, the Guinean financial sector comprised 17 commercial banks, including 16 banks in operation, 26 microfinance institutions (MFIs), 12 insurance companies, 1 leasing company and 3 licensed e-money providers. The domestic financial sector is dominated by banks, which hold 94.6% of total sector assets, while the share of non-bank deposit-taking institutions and insurance companies stands at 2.5% and 2.8%, respectively. There was no stock exchange in Guinea as of 31 December 2019, and the financial sector was largely shallow, with cumulative assets representing only 22% of GDP in the same year. The Central Bank is the supervisory and regulatory authority for all financial institutions (banks, non-bank deposit-taking institutions, MFIs, mobile money operators, and insurers). Moreover, the country has a National Financial Information Processing Unit (CENTIF), which is an administrative unit under the Ministry of Economy and Finance.

The Banking Sector

Banking Market Structure – As of 2018, 16 banks operating in Guinea had a network of 178 branches and 174 ATMs, serving more than 615,179 customers. Total assets of the banking sector stood at GNF 22,894 billion or USD 2.4 billion, up 16% from 2017. The domestic banking sector is dominated by subsidiaries of foreign banking groups and tends to remain relatively consolidated. The top three banks account for about 57.4% of the sector's total assets. The Islamic Bank of Guinea (Banque Islamique de Guinée), a member of the Tamweel Africa Group Holding, provides banking services in conformity with the principles of Islamic law, while two commercial banks also offer Islamic banking service outlets.

Banking Sector Credit and Deposit Structure – Bank credit to the economy stood at GNF 8,578 billion (USD 901.6 million) in 2018, representing 9.2% of GDP and an increase of 17.5% over 2017. This increase is mainly due to the growth of short-term and - to a lesser extent - medium-term loans (29.8% and 5.2%, respectively). The increase in short-term credit is attributable to the rise in import and inventory financing credit, while the increase in medium-term credit is due to the rise in investment credit. In contrast, long-term credit fell by 9.5%. Short-term credit is mainly granted to private sector companies, accounting for 81.4%, while medium-term credit is mostly extended to private companies (58.4%), individuals (39.4%) and individual entrepreneurs (2.2%). Short-term credit represents more than half (57.8%) of total credits, compared to 39.6% and 2.6% for medium and long-term credit, respectively. Domestic credit provided to the private sector by banks remains low although it has recently increased from 7.9% of GDP in 2017 to 8.9% of GDP in 2018. This level is lower than for 2015 (10.8% of GDP).

Customer deposits increased by 13% over 2017 to GNF 17 429 billion (USD 1.8 billion). These are mainly made up of private customer deposits, which account for 99% of total deposits. Demand deposits represented about 88% of total deposits in 2018. The low level of long-term resources available to banks partly explains the difficulties they face in financing investments.

Interest Income and Expense Rates – The Central Bank pursues a prudent monetary policy to ensure a moderate inflation rate (single-digit inflation rate). The initiatives implemented to achieve this objective included maintaining the key interest rate at 12.5% in 2018 and reducing the reserve requirement ratio from 18% to 16% since March 2017. However, the inflation rate increased slightly from 8.9% in 2017 to 9.8% in 2018 according to the World Bank (WDI, 2020).

Financial Strength of the Banking Sector – Law No. L/2005/010/AN of 5 July 2005 sets the rules for conducting and overseeing the business of credit institutions in Guinea. It establishes a simple legislative framework that complies with international financial and banking standards as recommended by the Basel Committee. The regulatory standard for the minimum share capital of banks is fixed at GNF 100 billion (USD 10 million) (Decision No. D/2013/050/CAM of 19 March 2013). All banks comply with this standard and the banking sector overall is still well capitalized and profitable, notwithstanding the need to improve the quality of sector assets and the liquidity level. The solvency ratio of Guinean banks has declined over the last three years, from 17.8% in 2016 to 14.4% in 2019, but still above the minimum standard of 10%. The decline is the result of both loan portfolio growth and increasing non-performing loans. Asset quality has indeed deteriorated sharply. Non-performing loans have steadily increased over the last five years, from 6.1% in 2014 to 10.4% in 2019. The deterioration in the economic environment following the Ebola crisis, poor credit management by banks, government budget constraints and job losses, particularly in the mining sector, partly account for this decline. Since 2017, non-performing loans have persistently remained above the maximum tolerable limit of 10% under the financial stability indicators of the Economic Community of West African States (AMAO, 2017). The liquidity situation of banks has not improved, despite the reduction in reserve requirements in 2018 and sustained growth in deposits. Ten banks do not meet the minimum liquidity standard of 100%. The liquidity ratio dropped continuously between 2016 and 2019, from 28.9% to 23.2%. However, return on assets (ROA) and equity (ROE) increased from 2% and 19.3% respectively in 2018 to 2.3% and 26.8% in 2019. Intermediation levels are still low, given the rate of transformation of deposits into credit, which attained 49.7% in 2018, compared to the 82% prevailing on average in WAEMU.

Financial Inclusion

Financial inclusion has improved in Guinea, according to the World Bank's Global Findex data. The proportion of adult account holders more than tripled between 2014 and 2017, from 7% to 23.5%, even though the level is well below the sub-Saharan African average of 42.6%. The progress in financial inclusion is partly due to the rapid adoption of digital financial services, including mobile money. The proportion of adults with mobile money accounts increased almost tenfold, from 1.5% in 2014 to 13.8% in 2017, compared to the sub-Saharan African average of 20.9%. Although the country does not yet have a national financial inclusion strategy, the government is making efforts to extend financial services to all segments of the population. These include the adoption of Law No. L/2017/031/AN of 4 July 2017 on inclusive financial institutions (IFIs[2]), which strengthens the regulation of microfinance and provides electronic money institutions with a stronger legal framework. This law reinforces the regulatory framework on IFIs and provides for the establishment of a Deposit Guarantee and Resolution Fund (FGDR), in line with Central Bank Instruction No. I/DGSIF/DSIMF/013/2018. Established in the form of an economic interest grouping, the fund is intended to reimburse all or part of customer deposits, the amount of the guarantee being set at GNF 5 million (USD 525.8) per customer and per IFI, all accounts combined. Another central bank instruction (No. I/DGSIF/DSIMF/006/2018) relates to IFI financial services consumer protection standards.

However, these efforts are insufficient, given the persistently low level of financial inclusion compared to the sub-Saharan average. The banking sector still lacks consumer protection regulations, such as those governing the IFIs. Following the collapse of Banque Africaine de Développement Agricole et Minier (BADAM) in 2011, the compensation of depositors (estimated at GNF 36 billion) (USD 3.6 million), which would have effectively started in 2017, has not yet been completed. Moreover, the lack of a biometric identification system for the design of secure ID cards impedes the implementation of Know Your Customer (KYC) regulatory requirements. Lastly, the conditions for opening an account in a financial institution (minimum deposit amount, submission of financial statements and salary slips, etc.) and account maintenance fees continue to hinder access to banking services for informal businesses and people on low-income.

The Microfinance Sector

In 2018, the microfinance sector comprised 26 institutions and 376 branches or service points, compared to 306 in 2014, for all categories[3] of MFIs combined. Clients increased steadily between 2014 and 2018, from 423,327 to 695,714. MFIs primarily finance short-term commercial activities, agricultural operations, private individuals, private sector employees and businesses in urban areas. Other MFIs offer mobile financial services and other products such as money transfers, marketing of insurance services and bank card sales. The main MFIs have little recourse to bank refinancing, due to what they perceive as high costs. The resources granted by Category 1 and 2 MFIs are mostly of short duration and are financed by clients' demand deposits and bank loans, mainly in the form of overdraft facilities. The resources of Category 3 MFIs come from credit lines granted by donors under development aid programmes, or from loans at subsidized rates. The volume of loans granted by MFIs grew from GNF 396.4 billion (USD 41.8 million) in 2017 to GNF 620.3 billion (USD 65.3 million) in 2018, an increase of 56.5%. The sector is essentially dominated by five institutions[4] holding 99.6% of deposits and 99.2% of the loan portfolio. 

Despite the large number of MFIs registered with the authorities, their outreach remains limited. Most of them are located in the country's capital and main cities, with small MFIs being left to the rural areas, which continue to suffer from the limited number of points of service. This limits access to microfinance services for the country's rural communities. The activities of savings and credit cooperatives are weak and stagnant, and they continue to face problems of governance and recurrent lack of financial resources. The weak financial situation of several MFIs, including the largest ones, has had a negative impact on the sector, which posted a net loss in 2017 and 2018. The deterioration was induced by the poor performance of second-tier MFIs. The outstanding loan portfolio (at 30 days) deteriorated by 371.4% between 2017 and 2018. Moreover, the application of certain texts (central bank instructions and internal rules) is not respected and the reliability of information systems is limited. Lastly, the resources of some MFIs that depend essentially on public lines of credit continue to be largely influenced by the governance of the structures in charge.

Established by decree on 19 April 2011 and placed under the responsibility of the Office of the President of the Republic, the National Microfinance Agency (ANAMIF) has the mandate to develop and implement government’s microfinance policy, with the main objective of improving access to financing, particularly for women and youths. A GNF 130 billion (USD 13 million) fund has been placed under the responsibility of ANAMIF with 80% of the resources dedicated to microcredit and 20% to the financing of support activities. However, governance challenges led to an interruption of ANAMIF's activities in 2016, leaving an outstanding credit estimated at GNF 47.3 billion (USD 4.7 million).   

Digital Finance

The central bank has a wide range of modern, digital market infrastructure, including a real-time bulk settlement system (RTGS) set up in March 2016 and an automated clearing house (ACH) operational since March 2014. In 2018, the country had three electronic money establishments (EMEs), including two mobile money providers (Orange Finances Mobile and MTN Mobile Money approved in March and November 2016, respectively) and one financial service provider through prepaid cards (Paycard licensed in September 2016). The e-money market is still dominated by a single operator (Orange Finances Mobile), which has a 79% market share. The minimum share capital for EMEs is set at GNF 2 billion (USD 209,826) (Decision No. D/2015/008/CAM of 3 June 2015). There has been a steady growth in their activities in terms of distribution networks, the number of transactions carried out and the number of customers. The number of EME transaction points rose from 20,000 in 2017 to 23,809 in 2018 (an increase of 19.1%), while the number of customers grew to 3,262,594 in 2018 (an increase of 63.2% compared to 2017). E-money transactions increased by 50.6% in value to stand at GNF 451.9 billion (USD 47.5 million) in 2018. The mobile money segment has expanded remarkably. The number of active accounts rose from 500,000 in 2016 to 1,545,000 in 2018, then to 1,850,000 at the end of May 2019 (IMF, 2020), while the value of transactions has been steadily increasing from 0.17% of GDP in 2014 to 33.35% of GDP in 2018 (IMF Financial Access Survey, 2019).     

Mobile telephone networks have enabled a significant proportion of the population to access modern payment methods at lower costs than traditional payment channels. However, more than 90% of transactions involve cash deposits and withdrawals. Payment transactions (bill and merchant payments, P2P, G2P and others) are still marginal although beneficial[5] to the economy. Moreover, the sector is not yet equipped with a "switch" system enabling the interoperability of payment instruments. Despite the constantly growing use of digital payments, cash transactions continue to dominate the economy and reflect the high level of informality of economic activities especially affecting the operations of drinking water and electricity distribution companies, which continue to receive cash payments from individuals. Lastly, the persistence of scams involving the use of digital channels argues for the need to strengthen consumer protection.

Financing of SMEs

The multiple reforms initiated by the authorities resulted in the creation of over 38,000 businesses and 114,000 direct or indirect employment opportunities between 2014 and 2019. Poor access to funding is one of the major obstacles to the development of SMEs. Only 3.9% of businesses benefit from bank loans or lines of credit (2.5% more specifically for small businesses and 8% for medium-sized enterprises), compared to 20.2% in sub-Saharan Africa. Outstanding bank loans to SMEs amounted to 2.73% of GDP in 2018 (compared to 5.47% for Namibia). Furthermore, the rejected loan application ratio of 14.8% is slightly higher than that of sub-Saharan Africa (14.2%). Therefore, the proportion of investments financed internally by companies is still higher than in sub-Saharan Africa (92% in Guinea compared to 74% in sub-Saharan Africa).   

The low access of SMEs to bank financing is because they are mostly in the informal sector. A government survey conducted in 2016 revealed that 92% of Guinean businesses are either semi-formal or informal. Other businesses, although formally registered, operate without formal financial management and accounting structures, which makes banks extremely prudent regarding their capacity to repay. This situation is compounded by the weak operational efficiency and economic viability of SMEs.

The Insurance Sector

As of 31 December 2018, the insurance sector comprised of 12 insurance companies, including 8 non-life insurance, 3 endowment insurance (life and non-life) and one company specializing exclusively in life insurance. At the time, the sector had 136 intermediaries, including 46 brokers and 90 general agents. The ECOWAS Brown Card National Bureau is another major player in the sector, which manages cross-border claims within the sub-region. The insurance market in Guinea is dominated by four companies which account for more than 70% of total net premiums. The sector's overall turnover in 2018 amounted to GNF 411.5 billion (USD 43.3 million), i.e. an increase of 15.5% compared to 2017. Life insurance accounted for 54.3% of written premiums in 2017, against 45.7% for non-life insurance. The sector's financial investments increased by about 49% to attain GNF 22.6 billion (USD 2.4 million) in 2018. They mainly consisted of government securities, transferable and real estate securities, and bank deposits. The new Insurance Code, which requires the separation of life and non-life insurance activities, encourages insurance companies to set up subsidiaries specialized in life insurance and allows them to mobilize more long-term resources that are indispensable for financing the economy. This Code also reinforces market security in conformity with international standards.

However, the insurance penetration rate is still low: 0.44% in 2018. Although automobile insurance is mandatory, most drivers do not have insurance, partly due to insufficient income. According to the Association of Professional Insurers (APAG), 7 out of 10 Guineans drive vehicles without insurance. The Motor Vehicle Guarantee Fund[6] set up to provide compensation to victims of traffic accidents whose perpetrators are unknown or known but insolvent, is not widely known to accident victims. Moreover, brokerage firms and insurance agencies are highly clustered in the capital and a few major cities, thus adversely affecting the rural population who know little about the various insurance products available to them. Agricultural insurance, which is suitable for farmers because of extreme weather conditions, is not yet effective, although it is one of the Central Bank's priorities. Lastly, insurance is still not firmly rooted in people's habits, due to cultural and sociological factors. According to the World Bank (2018), more than three-quarters of households rely on relatives in the event of death and almost half in case of illness.

The Capital Market

With no stock exchange, the capital market in Guinea essentially comprises emerging primary and secondary markets for government securities. They are an essential and complementary component providing the banking system with a liquidity guarantee framework. However, the interbank liquidity market is still tight given the lack of active liquidity management by the Central Bank. Moreover, marketable government debt (Treasury bills and bonds) represents only a tiny fraction of the total government debt. The secondary market remains illiquid. The total outstanding amount of Treasury bills, estimated at GNF 4,272 billion (about USD 449 million) in 2018, is dominated by issues with 364-day maturities, followed by those of 182 days. Guinea ranked 43rd in 2017 (50th in 2016) out of 54 economies in the annual African Bond Market Development Index published by the African Financial Markets Initiative (AFMI).   

The Social Security System

Guinea has two statutory social security schemes. The first is the civil service pension scheme, financed from State resources and covers civil servants, government employees and military personnel. It offers several benefits including retirement and invalidity pensions, reversionary pension and temporary orphan's pension, among others. The second is a general social protection scheme administered by the National Social Security Fund (CNSS) under the Ministry of Social Affairs, Women and Children's Promotion. CNSS resources consist mainly of contributions paid by employers and workers to finance the various social security schemes as well as income from capital investments by the Fund and possibly State budget allocations. The contribution rate[7] is 23%, of which 18% is paid by employers and 5% by workers. In September 2016, the government adopted a national social protection policy to serve as an institutional basis for addressing social shocks and improving the living conditions of the people. Another initiative was the creation of a Social Development and Solidarity Fund within the Ministry of Social Affairs, Women's Promotion and Children's Affairs for women, youths, elderly and disabled persons.

However, only a relatively small segment of the population benefits from Guinea's social protection system. The CNSS's general social protection scheme covers only workers in the formal sector, i.e. barely 3% of the population, leaving most workers (from rural areas and the informal sector) virtually outside the scope of social protection. Moreover, the level of pension benefits is extremely low, prompting civil servants to set up mutual insurance companies for each professional category or to turn to private insurance. Lastly, the existing system continues to face enormous internal management challenges. This is particularly the case of the CNSS administration of the general pension scheme, which is experiencing governance and cash-flow difficulties.

[1]       2,544 deaths out of 3,813 cases recorded between 2014 and 2016, i.e. a death rate of 66.7%.

[2]       Inclusive Financial Institutions (IFIs) consist of microfinance institutions (MFIs), electronic money institutions (EMEs) and postal financial services (PFS).

[3]       Category 1: Mutual or cooperative structures (ten), Category 2: Public limited companies (ten), Category 3: Associations and NGOs (five).

[4]       Crédit Rural de Guinée (CRG SA) is the market leader with approximately 31.5% of the sector's outstanding loans and 31.2% of outstanding deposits.

[5]       Recent electronic payments for vehicle licenses (“vignettes”) likely tripled government revenue under this item.

[6]       This Fund is financed by insurance companies through tax levied on contracts.

[7]       The employer pays the contributions to the CNSS and the employee cannot object.










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At a Glance

At a Glance Source
Population in thousands (2019): 12,771.24
GDP per capita (current US$) 2019 - World Average 10,721.61: 1064.13
Account (%) age 15+) - (2014 vs 2017): 7% | 23%
Agriculture Orientation Index - Credit ( Agriculture, Forestry and Fisheries share of GDP) (2015 vs 2016): n/a
Financial Inclusion Strategies: n/a
Domestic credit provided by financial sector (% of GDP) 2017: n/a
Made or received digital payments in the past year (% age 15+) (2014 vs 2017): 6% | 20%
Remittances % of GDP for 2017: 0.002
Mortgage Interest Rate / Mortgage Term (years): 33% | 12

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