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DRC: high interest rate, a 95% fixation due to exogenous factors of banks

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The determination of the interest rate deemed “high” is dictated at 95% by exogenous factors of Congolese banks, lenders of private sector companies in the DRC. This is reflected in the exchanges of the “Breakfast Connexion” special panel dedicated to the course of the Congolese investor organized on Saturday, July 13, 2019, by Top Congo FM, a radio broadcasting from Kinshasa, on the occasion of its 16 years of ‘existence.

The banker Hugues Bonshe proceeded by a clear schematization to explain this situation which starts from the report according to which the Congolese economy is dollarized at 90%. If the DRC dollar is imported with exorbitant import costs, the financing of medium and long-term projects requires refinancing by banks whose cost is determined by several factors abroad (high country risk is billed consequently increasing the nominal rate).

In addition, he argues, the interest on which the tax authorities levies a 20% property tax to incorporate. There is also the inflation for which the banks have to protect themselves, even though it has stabilized for a year.

Moreover, the regulation of the Central Bank of Congo (BCC) requires that for any credit granted, commercial banks must set aside a provision to cover the risk of default. However, the tax authorities charge back to charge 30% of this provision. Finally, all the operating expenses to be covered by the bank are also to be included in the determination of the interest rate practiced in the DRC at around 16%.

“When you take these different elements, you will understand that 95% of elements are imposed by factors that do not depend on banks today. The administration is largely responsible for this situation. If we manage to facilitate these different points, it will be possible for banks to finance at a low rate”, said Hugues Bonshe.

If the key rate of the Central Bank of Congo (BCC) is set at 9.0%, financial intermediaries who are banks are also required to integrate their profit margin.

According to this panellist, the Congolese banking sector therefore has a sufficient credit portfolio to support small and medium-sized enterprises (SMEs) in the DRC. Hence, the need for economic operators and entrepreneurs to improve the accounting management of their entities and set up bankable projects to take advantage of them.

“Faced with SMEs looking for funding but do not meet these requirements, many Congolese banks are reluctant to take the risk of granting credit”, said Hugues Bonshe answering a question asked him.

Taking the example of the bank where he is deputy general manager, this banker pleaded for support to inform the economic operator on the financing possibilities that exist, to form and formalize its activities. Equity Bank Congo, he revealed, is willing to finance an economic operator up to 200 million US dollars.

Olivier Kamo

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Congo: UBA DRC represented by its general manager at the 5th Forum Investing in Africa

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Congo: UBA DRC represented by its general manager at the 5th Forum Investing in Africa

United Bank for Africa (UBA) DRC was represented at the fifth Forum Investing in Africa (FIA5) held from 10-12 September 2019 in Brazzaville, Republic of Congo. Its CEO, Patrick Kabisi, was the only panelist selected in the Congolese banking sector.

He intervened in the session on Human Capital Development as an analyst of the changing demographic and social environment.

Patrick Kabisi focused on areas where investment is needed, not only to close the gap in basic services, but also to help people become innovators, entrepreneurs, leaders and autonomous citizens, regardless of their income level.

These reflections also focused on opportunities for knowledge exchange and collaboration between African countries, China and the rest of the world on key institutional, regulatory and technological reforms.

Sub-Saharan Africa lags behind in most human capital indicators, and estimates show that the continent is only operating at 40% of its potential despite recent progress in health and education indicators.

At the same time, a skills gap hinders countries’ competitiveness in the global economy.

The objectives of the AIF5 were to examine how best to support economic diversification and job creation in African countries; to take stock of progress made and should chart the way forward.

Emilie MBOYO

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DRC: Moody’s reiterates its positive assessment of the BCDC

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DRC: Moody's reiterates its positive assessment of the BCDC

Despite the high country risk of DR Congo, Moody’s rating agency has just reiterated its positive assessment of the Banque commerciale du Congo (BCDC). In a publication relating to its “credit opinion” of 6 September 2019, it included in a more detailed manner the elements justifying Caa2’s ratings on long-term deposits with a stable horizon and Caa1 on long-term counterparty risk assigned to this Congolese bank.

Banque commerciale du Congo enjoys a predominant position in the large corporate sector, a large stable deposit base and excellent liquidity, but operates in the difficult environment of the Democratic Republic of Congo,” said Yves Cuypers, BCDC’s Executive Director in a statement to Zoom Eco.

Indeed, it is not possible for a banking institution, in the international rating system, to exceed the rating assigned to the country in which it has its residence and main activity. Congo DR has recently seen its sovereign rating downgraded from B3 negative to Caa1 stable.

Logically, it follows that no Congolese bank can be assigned a higher rating than that assigned to DR Congo. What is more normal than BCDC’s Caa1 rating means that the bonds are speculative and subject to high credit risk.

However, BCDC’s efforts are acknowledged by Moody’s, which welcomes the announced acquisition of a majority stake in BCDC by the Equity Group.

Moody’s has published an (issuer comment) considering that this potential acquisition would be mutually beneficial for both the Banque commerciale du Congo and Equity Group Holding,” insisted Yves Cuypers.

Eric TSHIKUMA

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DRC: Moody’s gives BCDC a “Caa2” rating on long-term deposits

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DRC: Moody's gives BCDC a "Caa2" rating on long-term deposits

Moody’s, one of the world’s leading rating agencies, has assigned two ratings to the Banque commerciale du Congo (BCDC). These are Caa2 on long-term deposits with a stable horizon and Caa1 on long-term counterparty risk. According to an official statement from the bank, these two ratings correspond to a speculative environment. Below, the details:

DRC: Moody's gives BCDC a "Caa2" rating on long-term deposits

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