Financial Crime World

Djibouti’s Banking Sector Sees Significant Growth

Djibouti’s banking sector has experienced remarkable growth, with credit allocation to the economy increasing by 54.2% to reach DJF230.3 billion ($1.3 billion) by the end of 2021, according to statistics from the Bank of Djibouti and Commerce (BCD).

Expansion and Resilience

The country’s banking sector has expanded significantly since the early 2000s, with the number of banking institutions increasing and the sector’s offer and reach expanding. Despite challenges posed by the COVID-19 pandemic, regional conflicts, and global macroeconomic instability, the sector has maintained a solid financial position in recent years.

Islamic Finance Gains Popularity

  • The segment of Islamic finance has seen significant growth in Djibouti, with three out of 13 institutions operating as Islamic banks.
  • The number of Islamic bank accounts rose from approximately 34,500 in 2013 to over 56,000 in 2021, while total assets grew from DJF45.2 billion ($254.7 million) in 2013 to DJF136.5 billion ($769 million) in 2021.

Mobile Banking and Digital Payments

  • The country’s banking sector is also embracing digital banking offers as a way to increase sector penetration.
  • The digital payment environment has improved, with several banks investing in digital platforms and offerings.
  • In addition, government-owed telecommunications provider Djibouti Telecom launched a digital mobile money service, D-Money, in 2020.

However, the growth of online banking is hindered by high prices for telecommunications services, which remain a major obstacle to expansion. Approximately one-fourth of Djiboutians had access to mobile internet services in 2021, and fixed-internet subscriptions are also costly.

Outlook

  • The banking sector in Djibouti is expected to continue growing, with the government launching initiatives to increase access to financial services.
  • The affordable housing project launched in early 2023 aims to improve access to long-term financing solutions for underserved populations and increase private sector contributions to the housing construction value chain.

While Islamic finance has played a significant role in increasing banking penetration, mobile banking services are expected to play a crucial role in expediting access to financial services. However, consumer-led growth in this area will depend on lowering telecommunications prices, which remain high and hinder expansion.

  • The banking sector is likely to undergo some consolidation moving forward, with new competitors expected to enter the market in 2023.
  • Overall, Djibouti’s banking sector has made significant progress in recent years, and its continued growth is expected to have a positive impact on the country’s economy.