Tunisia: World Bank Urges Reform of Public Banks
The World Bank has called for a comprehensive reform of public banks in Tunisia as part of a broader banking sector overhaul. In an interview with La Presse, Marie Francoise Marie-Nelly, the World Bank’s Country Director for the Maghreb, emphasized that the restructuring of public banks is crucial to modernize and make the financial sector more competitive.
The Importance of Public Banks
Public banks in Tunisia account for one-third of the market and have a significant influence on the banking sector. However, Marie-Nelly noted that there has been a “race to the bottom” within the sector, where poorly performing banks are allowed to continue operating without facing consequences due to lax regulations.
World Bank’s Recommendations
The World Bank is urging the Tunisian government to introduce more stringent banking regulations to raise professionalism and competitive pressure among banks. Specifically, they recommend:
- Introducing stricter capital requirements
- Improving management, governance, and operations of public banks
- Bringing in a strategic partner with expertise in banking sector restructuring
Progress on Restructuring Plans
The restructuring plans for public banks are now underway, with new boards of directors and directors general appointed. Competent and dynamic top managers are expected to be formed soon. The Ministry must strengthen its monitoring unit to ensure the plans are implemented effectively and completed on time.
Clarifying Recapitalization
Marie-Nelly clarified that the recapitalization of public banks does not mean wiping out debts of unscrupulous businessmen but rather addressing past mismanagement by the public banks themselves. Cases of abuse by well-connected clients are being settled in courts, and all unpaid loans will be repaid.
Expected Outcomes
The World Bank believes that restructuring public banks is a crucial step towards increasing competitive pressure among them, making loans more accessible to small and medium-sized enterprises through reforms such as:
- The system for managing businesses in difficulties
- Establishment of credit bureau
- Easing rules for calculating maximum interest rates
If implemented fully, these reforms are expected to drive Tunisia’s economy engine generating over 38,000 new jobs each year.