Abidjan: Microfinance lenders gaining ground in Côte d’Ivoire

A rise in microfinance lending in Côte d’Ivoire has been accompanied by a steady process of consolidation – driven in part by government clean-up efforts.

Shift in microfinance landscape

As the client base of the country’s microfinance institutions (MFIs) additional than doubled to 1.17m between the end of 2013 and December last year, so did the segment’s loan portfolio, rising from CFA79.2bn (€120.7m) to CFA189.9bn (€289.5m).

Over the same period, deposits grew by 66.5% to CFA210bn (€320.1m), while loan disbursements increased by 176% to CFA77.8bn (€118.6), according to data compiled by the Professional Association of Decentralised Financial Systems of Côte d’Ivoire.

Conversely, the number of accredited microfinance institutions has been steadily decreasing since 2010, in part the result of a push by the government to improve the sector’s stability by cracking down on risky lenders and poor performers. The final quarter of 2016 alone saw five licences withdrawn by the Ministry of Finance due to bankruptcy, with 52 MFIs officially registered as of March – down from 73 at the end of 2013.

The improved health and performance of the country’s microfinance lenders has had knock-on benefits for the people’s ability to access formal financial services.

Additional than 20% of Côte d’Ivoire’s people held a bank account in 2014, according to the majority recent figures from the Central Bank of West African States (Banque Centrale des Etats de l'Afrique de l'Ouest, BCEAO), though penetration levels reached 34% once services provided by MFIs and other non-traditional lenders, such as mobile money operators, were included.

While last year’s data for the segment marks a clear and rapid development, Côte d’Ivoire still lags behind other markets elsewhere on the continent, such as Kenya, where financial inclusion is closer to 75%, or neighbouring Ghana, where it stands at 40%, suggesting further room for increase.

Major player looks to restructure

The in general performance of the microfinance segment hinges on that of its major player, the National Union of Savings and Credit Cooperatives (Union Nationale des Coopératives d'Epargne et de Crédit, UNACOOPEC), which serves around 63% of the country’s microfinance users.

However, following an audit by the central bank in 2012, which revealed the organisation had accrued CFA11bn (€16.8m) in losses and a negative equity of CFA20bn (€30m) over an 11-year period, UNACOOPEC was placed under provisional government in 2013.

As a result, the government has proposed a restructuring programme for the institution, which, according to Issiaka Savané, general manager of UNACOOPEC, will be buoyed by an injection of public funds.

“We intend to streamline our network, reducing the number of cooperatives from 123 to 24, and to become a limited company,” he told us. “The government recently approved our recapitalisation plan for around CFA40bn (€61m).”

New players enter the market

In spite of the hurdles the country’s existing operators face, high macroeconomic increase and relative stability attracted several new players in the previous two quarters.

The majority recent of these was CEFIS, whose licence was approved in March, while Yveo-Finances, IGITRUST-CI, CREP ECO de Meagui and CREP Microcredit d’Abengourou joined the country’s portfolio of registered MFIs in the final quarter of last year.

Obstacle to growth

That is not to say the sector faces a worry-free outlook, however. While the microfinance industry is benefitting from rising deposits and a drop in the number of risk-prone lenders, a three-%-point decrease in the interest rate cap on microfinance products, implemented in 2014 to reduce borrowing costs, is pushing firms to compete for the same customer base, according to Grégoire Danel-Fédou, operations director of Luxemborg-based Advans Group.

“Someday, this could increase the risk of over-indebted borrowers of a certain category,” he told us.

To reduce the risk of nonaccrual loans and improve transparency across the board, a new credit bureau, the Bureaux d'Data sur le Crédit (BIC), was set up in February 2016 by the BCEAO. However, the tool remains at a nascent stage, and tangible benefits for the microfinance segment in Côte d’Ivoire will likely take time to be realised.

Yves Komaclo, deputy regional manager at Oiko Côte d’Ivoire, described the launch of the BIC as “a step forward for disciplining borrowers”, but added that additional data was needed. “As additional institutions adhere to it and additional data on borrowers is provided, we should start seeing additional benefits,” he told us.

A strong regulatory body would be welcomed by stakeholders, with François Barnabé, CEO of MicroCred, highlighting the difficulty MFIs face at the same time as debtors fail to meet their loan obligations. “The legal system is not developed, so chasing people that default remains difficult,” he told us.