Madagascar Banking Regulation Updates Boost Financial Sector Transparency

In a bid to enhance customer protection and increase transparency in services offered by financial institutions, Madagascar’s parliament has passed new banking and insurance laws. These revised regulations require banks and other financial entities to secure their IT systems and provide tools to detect money laundering and terrorist financing.

Background: Concentrated Commercial Banking Sector

Madagascar’s commercial banking sector remains highly concentrated, with four main banks holding a staggering 86 percent of loans. Currently, there are eleven commercial banks operating in Madagascar, nine of which are subsidiaries of foreign banks.

Key Statistics: Banking Penetration and Assets

The banking penetration rate is relatively low at around 18 percent among adults.
The assets of all eleven banks have grown significantly, totaling approximately $3.83 billion or 28 percent of GDP as of December 2020.
Private sector loans accounted for a substantial $2.0 billion or 53.1 percent of total assets and 14.9 percent of GDP.

New Regulations: Opportunities for Investment

The new regulations are expected to create opportunities for investment in the financial sector, particularly in sub-sectors such as:

Banking
Financial technology
Insurance services
Investment services
Leasing services
Private equity
And more

A clearer legal framework is also seen as a boost for the development of cash-transfer technologies tailored for Madagascar’s informal sector.

Ministry of Economy and Finance Response

The Ministry of Economy and Finance has welcomed the move, viewing it as an important step towards creating a robust and transparent financial system that supports economic growth and stability in the country.