SENEGAL: FINANCIAL SERVICES FOR USITC STUDY ON

UNCLAS SECTION 01 OF 04 DAKAR 002503 SIPDIS SIPDIS STATE FOR EB/TPP/BTA, AF/EPS AND AF/W STATE PLEASE PASS USTR USDOC PLEASE PASS USITC ATTN: L. SCHLITT E.O. 12958: N/A TAGS: ETRD EFIN EINV SG SUBJECT: SENEGAL: FINANCIAL SERVICES FOR USITC STUDY ON U.S-SUB-SAHARAN AFRICA TRADE AND INVESTMENT REF: STATE 146622 DAKAR 00002503 001.2 OF 004 ¶1. SUMMARY: Senegal's financial sector is anchored by the Central Bank of West African States (BCEAO),based in Dakar. The commercial banking sector is active, and relatively efficient, with a number of international banks using Dakar as their regional headquarters. Senegal has one of Africa's most effective and highly capitalized network of microfinance institutions. These institutions have spawned the creation of profitable local businesses providing financial services, including software systems, which are pursuing markets in other African countries. Senegal also benefits from growth in other service-related sectors, including call centers. END SUMMARY. FINANCIAL SERVICES -------------- ¶2. While the banking sector is over-liquid and stable, it is conservative in issuing medium and long term loans. Mortgage markets are underdeveloped and expensive, generally offering only short-term funds. Most banks active in real estate lending express the need for additional tools to refinance mortgage loans. Senegal's commercial banks have a mixed record on offering affordable credit to small and medium-sized enterprises (SMEs) and business start-ups. Many commercial banks maintain their regional headquarters in Dakar. The largest commercial banks, including "Societe Generale de Banques au Senegal" (SGBS) and "Banque Internationale pour le Commerce et l'Industrie du Senegal" (BICIS) are predominantly French. Citibank, the only U.S. bank present in Senegal, is active but only provides corporate and investment banking services. ¶3. There are 800 microfinance institutions (MFIs) in Senegal with a total deposit of CFA 60 billion (USD 117.6 million). Senegal's microfinance sector, one of the most dynamic in the West African Economic and Monetary Union (WAEMU) is made up of a solid core of profitable instittions that compete with banks to finance SMEs. (OTE: WAEMU members countries -- Benin, Burkina Fao, Cote d'Ivoire, Guinea-Bissau, Mali, Niger, Too and Senegal -- share a common currency, the "Comunaute Financiere d'Afrique Franc" (CFAF). ENDNOTE.) While the microfinance sector represents oly a small part of the system, it has contribute to about one third of the increase in the ratioof total assets to GDP. The dynamism of microfinance is also reflected in an expansion of outstanding credit by MFIs at a rate of 3.3 percent. The penetration rate of the MFIs rose from 25 percent of all households in 2003 to 41 percent in 2005, and outstanding credit expanded four times faster than commercial bank credit during the same period. ¶4. The larger Senegalese MFIs, including "Credit Mutuel du Senegal" (CMS) and "Agence de Credit pour l'Epargne et la Production" (ACEP), are now well positioned to compete with commercial banks to provide financing to SMEs. In addition to effective networks around the country, a number of MFIs are exporting their know-how and experiences to other countries in Africa. These service exports include business models, accounting systems and locally created software. ¶5. There are also numerous small, independent institutions which are structurally weak and pose a real challenge to the consolidation of the sector. They rarely comply with reporting requirements, largely escape the attention of the supervisory authorities, and often have weak financial structures. There is a MFI surveillance unit under the Ministry of Finance, but it lacks the necessary human and financial resources to supervise this quickly expanding sector. The BCEAO is working closely with the national authorities and the WAEMU Banking Commission to supervise large MFIs. ¶6. Senegal's Post Office has expanded financial services available in underserved areas by offering secure savings and money transfer services throughout the country and abroad. Deposit balances managed by the Post Office represent about two percent of bank deposits, with 510,000 clients. The Post Office is planning to create a subsidiary to take over its financial services and it has prepared an action plan that includes creating a bank, privatizing 75 percent of its capital, and offering retail lending and refinancing of MFIs. ¶7. Other financial institutions, such as insurance companies, a French-based venture capital firm, and a leasing company, are also present here. However, there remains a strong demand for non-bank investment opportunities. The Abidjan-based West African regional stock exchange, Bourse Regionale de Valeurs Mobilieres (BRVM),was created in September 1998 and has local branches in each WAEMU member country. The BRVM was expected to help alleviate the lack of long-term resources to finance capital goods investment, but has yet to have a significant impact in Senegal. DAKAR 00002503 002.2 OF 004 EXPORTING OF NON-FINANCIAL SERVICES -------------- ¶8. In addition to its strong position as a regional financial center, Senegal is also improving its position on non-financial services, particularly in the Information Communication and Technology (ICT) sector. Senegal has one of Sub-Saharan Africa's (SSA) deepest penetrations of Internet that provides both sufficient bandwidth and reasonable prices. Telephone landlines and cellular telephones provide good service and pricing. Senegal offers some of the most up-to-date and applicable ICT education and training in SSA. Out of this ICT base, Senegal has a growing computer software sector. Dakar is also becoming a significant location for international call centers (mainly French) and has the possibility to provide additional outsourcing of customer service operations. RECENT STATISTICAL TRENDS -------------- ¶9. 2005 witnessed few major developments or changes in Senegal's economic, trade and investment policies. Senegal maintained a relatively stable macroeconomic performance in 2005 despite higher world oil prices, with a real GDP growth rate of 6.1 percent, inflation at 2.5 percent, and an external current account deficit (excluding official transfers) of 7.1 percent of GDP. Senegal depends heavily on foreign assistance, which in 2005 represented about 2.7 percent of overall government budget (including both current expenditures and capital investments),or CFAF 314.8 billion (USD 572.3 million). For 2006, official statistics will likely show GDP growth falling below 4 percent and inflation increasing to over 3 percent. ¶10. Overall, Senegal's efforts at economic reform have met, though sometimes barely, their commitments to the international financial institutions. Senegal responded favorably to many of the Heavily Indebted Poor Countries (HIPC) benchmarks under the IMF/World Bank Poverty Reduction Growth Facility (PRGF) programs. On April 19, 2004, the IMF and the World Bank acknowledged Senegal's accomplishments by agreeing to a comprehensive debt reduction package under the enhanced HIPC initiative. Senegal achieved its HIPC completion point, in April 2004, permitting Paris Club debt reduction totaling USD 488 million in net present value for the period of 2004-2010. Senegal has also finalized a debt-relief agreement through the G-8 process. Senegal's PRGF ended in April 2006, and the Government is now in discussions on the possibility of a new non-borrowing arrangement with the IMF, such as a Policy Monitoring Arrangement. RECENT SIGNIFICANT FOREIGN INVESTMENT -------------- ¶11. There is no change in Senegal's foreign direct investment profile. France remains the largest trading partner and controls many sectors in the economy. Approximately 235 subsidiaries of French companies are present in Senegal and, while official statistics are not available, reportedly account for 25 percent of all formal enterprises in Senegal. French investors are present in the major multinational import-export firms, shipping companies, banking, food production, mechanical engineering, tobacco, agribusiness, petroleum distribution, industrial equipment, vehicles, chemicals and pharmaceuticals, tourism, insurance, telecommunications and water bottling. GOVERNMENT PROMOTION EFFORTS -------------- ¶12. GOS efforts at export promotion have not been effective despite positive actions by the GOS. The National Investment Agency (APIX), has taken part in a number of road shows to tout Senegal's assets to foreign investors. A public procurement code was approved and a Presidential Investors Council (PIC) composed of foreign and local investors was established. The PIC is designed to provide President Wade with useful feedback and recommendations to improve the business environment and attract investors. During 2003 and 2004, the National Assembly passed a series of bills to enable the implementation of some of the regulatory changes suggested by the PIC. The National Assembly also passed a Build-Operate-Transfer project code and established the infrastructure Council to ensure transparent procurement practices for large projects. ¶13. Senegal is currently eligible for African Growth and Opportunity Act (AGOA) benefits. The USG approved Senegal's apparel visa control system in April 2002, and the country is vying for foreign investors in the apparel sector in particular. Senegal's AGOA-facilitated exports remain low, due in part to a non-competitive textile sector and the overall lack of production capacity. (NOTE: Last week Stafford, a Canadian company, signed a partnership agreement with INDOSEN, a Senegalese garment producer, for a significant expansion and modernization of a local textile DAKAR 00002503 003.2 OF 004 factory. The goal is to export significant quantities of "work" shirts and trousers to the U.S. under AGOA. The first exports from this partnership could begin in late October. END NOTE.) REGIONAL INTEGRATION DEVELOPMENTS -------------- ¶14. Senegal is a signatory member of various free trade agreements such as the Economic Community of West African States (ECOWAS),the West African Economic and Monetary Union (WAEMU or UEMOA),the Lome Convention and the World Trade Organization. CONTACT INFORMATION -------------- ¶15. Mission Senegal's primary point of contact for further information is: Wallace R. Bain Economic Counselor E-mail: BainWR@state.gov. U.S. agencies should also copy: Ms. Aminata Wilane Dabo Admin Assistant, Economic Section WilaneA@state.gov. ¶16. Priority Senegal contacts are: Ms. Aminata Niane Director APIX 52-54 Rue Mohamed V Immeuble Lawar Dakar, Senegal Tel: +221 849 05 55 Fax: +221 823 17 02 E-mail: apix@sentoo.sn Ms. NDeye Khady Sy Coordinator, Bourses Regionale des Valeurs Mobilieres (BRVM) 1, Place de l'independence B.P. 22500 Dakar, Senegal Tel: +221 821 1518 Fax: +221 821 1506 E-mail: khadyrace2@yahoo.fr Mr. Gabriel Fall, Director Compagnie de Gestion Financiere et de Bourse (CGF-Finance) 12, rue Dr. Theze Immeuble Cumba Castel B.P. 1516 Dakar, Senegal Tel: +221 822 61 34/821 0317 Fax: +221 822 6135/823 3899 e-mail: cgfbrvm@telecomplus.sn Mr. Bounama Signate Managing Director Western Union Immeuble Sokhna Anta 5, rue Dr. Theze B.P. 129 Dakar, Senegal Tel: +221 839 96 Fax: +221 823 2005 Mr. Souleymane Soumare Managing Director Money Gram 97, avenue Andre Peytavin Dakar, Senegal Tel: +221 849 60 Fax: +221 823 82 38 e-mail: bst@bst.sn Mr. Mamadou Toure Managing Director Credit Mutuel du Senegal Rue 16, Malick Sy Dakar, Senegal Tel: +221 869 48 48 Mr. Mayoro Loum Managing Director ACEP DAKAR 00002503 004.2 OF 004 Amitie 1, villa 5077 Dakar, Sngal Tel: +221 825 29 32 Fax: +221 825 29 35 JACKSON