DRC Banking System Faces Major Challenges

KINSHASA, DEMOCRATIC REPUBLIC OF CONGO - The Democratic Republic of Congo’s (DRC) banking system is grappling with significant challenges, according to a recent report by the World Bank and the Banque Centrale du Congo (BCC).

High Degree of Dollarization

The report highlights that most customers prefer to save in foreign currencies, which has led to an extremely high degree of dollarization of the banking system. In September 2021, foreign currency deposits accounted for about 85% of total deposits.

Composition of Aggregate Liabilities

The “Other” sector, which includes medium and long-term loans, other permanent funding, and equity, accounts for a significant share of aggregate liabilities, standing at around 60%.

Capital Levels and Solvency Requirements

• The banking system’s capital levels are too low and have not grown in line with activity over the past decade.
• The aggregate capital adequacy ratio was only 14% in 2020, well below the African average.
• Three banks are currently undercapitalized, with respect to a basic solvency requirement of 10%.
• Four more banks are undercapitalized with a total solvency requirement of 12.5%.

Non-Performing Loans (NPLs)

• The loan portfolio also shows a high level of non-performing loans (NPLs) at 8.5% of total loans.
• System provisioning is moderate at 69.2% of NPLs.

Recommendations for Improvement

To address these issues, the report recommends:

• Strengthening regulatory oversight
• Improving risk management practices
• Enhancing access to finance for small and medium-sized enterprises
• Improved data quality and governance within the banking sector

In conclusion, the DRC banking system faces major challenges that must be addressed to ensure stability and growth in the country’s financial sector.