Financial Crime World

Non-Performing Loans Plague DRC Banks; Foreign Exchange Market Remains Dollarized

Banking System Struggles with Non-Performing Loans

The Democratic Republic of Congo’s (DRC) banking system is facing significant challenges, with non-performing loans (NPLs) plaguing banks. Correspondent accounts, which account for over 30% of bank assets and more than 95% of interbank market activity, are a major source of concern.

Deposit Statistics

The DRC has approximately $3.6 billion in deposits in the banking system, with an estimated $10 billion in savings held outside of banks. Despite a slight increase in bank penetration after 2011, the country remains one of the most under-banked nations in the world, with only 6% of the population holding accounts.

Savings and Credit

Banks are offering savings accounts that pay around 3% interest, but few Congolese individuals hold savings in banks. According to the Banking Association of Congo (ACB), only 4.7% of the estimated 65% of the population that saves do so through a bank. The overall balance sheet of DRC banks amounts to approximately $5 billion, with credit volume estimated at over $2.2 billion.

Credit and GDP

Credit volume has risen rapidly, but remains scarce, short-term, and highly concentrated. From 2012 to 2016, credit reached only 13% of GDP.

Foreign Exchange Market

Foreign exchange transactions play a significant role in the DRC’s economy. The country adopted a free-floating exchange rate policy in 2001 and lifted various restrictions on business transactions, including in the mining sector. Foreign exchange reserves have decreased significantly, with March 2017 reserves standing at $730 million, or 3.3 weeks of import cover.

Currency Depreciation and Inflation

The Congolese franc (CDF) has depreciated by nearly 40% against the U.S. dollar in 2016 and annualized inflation rate increased rapidly to 11%. The economic forecast calls for continuing inflation and currency depreciation.

Remittance Policies

Remittance policies have also been tightened, with new regulations increasing the time for in-country foreigners to repatriate export and re-export income from 30 to 60 days. Foreign investors may remit through parallel markets when legally established and recognized by the Bank of Central African States (BCC).

Sovereign Wealth Funds

The DRC has no reported Sovereign Wealth Funds.

Sources

  • International Monetary Fund
  • World Bank
  • Democratic Republic of Congo Banking Association (ACB)
  • Bank of Central African States (BCC)

Disclaimer

Prepared by our U.S. Embassies abroad, this article is intended to provide general information and should not be considered as professional advice or a substitute for consultation with a qualified expert.