Tunisia: New report calls for reforms to improve access to credit

Mar 19, 2015

In order to reduce banks' costs, the report calls for the creation of a new form of hybrid securities.

Despite ongoing reforms, the Tunisian banking sector suffers from deficiencies in the quality of credit, risk monitoring and governance, according to a study led by the Arab Institute for entrepreneurs.

The study - seen by the newspaper La Presse - said that Tunisian banks are experiencing
a
liquidity deficit, with a small banking sector whose assets are estimated at 115 per cent of GDP. "The bond market remains underdeveloped, with a very limited role in financing the economy," the report adds.

According to the Institute, ending the banks' liquidity deficit will depend on several structural factors: foreign reserve level, public confidence in the banking system, economic growth and the development of means of payment.

These factors
should be inserted in long-term policies
as soon as possible,
according to the report. It
calls for
the creation of a security device and progressive taxation of corporate income.

And to ease banks' costs, the report also calls for the creation of a new form of hybrid securities, "halfway between stocks and bonds, called contingent convertible bonds, to raise funds."

In addition, issues of legal and institutional nature impede the financing of small and medium-sized enterprises, the study notes. These include the current law on collective procedures, the absence of binding regulations on banking "risk management" and the lack of an effective system for sharing information on the risk of credit.ADNFCR-2976-ID-801780324-ADNFCR