TWO NEW BANKS MAKE SEVEN IN DJIBOUTIS GROWING FINANCIAL

UNCLAS SECTION 01 OF 02 DJIBOUTI 000439 SIPDIS SENSITIVE DEPARTMENT FOR AF/E E/EEB E.O. 12958: N/A TAGS: ECON EFIN EINV PREL DJ SUBJECT: TWO NEW BANKS MAKE SEVEN IN DJIBOUTIS GROWING FINANCIAL SERVICES MARKET REF: 08 DJIBOUTI 553 ¶1. (SBU) SUMMARY: Between 2006 and 2007, three new commercial banks joined the two historically dominant banks in Djibouti (reftel); and two additional banks opened their doors in 2008, bringing the total number to seven. The arrival of these new banks has spurred an active competition to court the small Djiboutian market with innovative banking services. However, many of the newly established banks are primarily interested in serving the international market drawn in by new state-of- the-art facilities at Djiboutis port, and in using Djibouti as a launching-point to gain entry into other regional markets, notably in Somalia. END SUMMARY. ¶2. (SBU) Djiboutis liberal economic policies, stable currency pegged to the dollar, and lack of foreign exchange restrictions have long attracted regional businessmen looking for a banking hub. As part of President Guellehs overall strategy to grow Djiboutis reputation as a full-service transport and logistics platform, the GODJ has recently promoted significant additional growth in the financial services sector. Three new banks--the Banque de Depot et de Credit de Djibouti (BDCD),the International Commercial Bank (ICB),and the Saba Islamic Bank (SIB)--opened in Djibouti in 2006 and 2007. These three newcomers joined two institutions which had long dominated the market, the Banque Indosuez Mer Rouge (BIMR),and the Banque Pour Le Commerce et LIndustrie (BCI) (reftel). -------------- COOPERATIVE AND AGRICULTURAL CREDIT BANK -------------- ¶3. (SBU) The Djibouti Branch of the Cooperative and Agricultural Credit Bank (CAC) has been operating for several months out of offices located in Djiboutis old port. The bank will be officially inaugurated once it moves to permanent offices in downtown Djibouti City, near the traditional banking district and in a more convenient location for businesspeople and foot traffic. CAC was created by the government of Yemen in 1982. According to the Djibouti CAC Branch Manager, CAC is the second largest bank in Yemen, where it has 54 branches. (NOTE. Djibouti and Yemen are closely linked by family and commercial ties, and an important minority of Djiboutians trace their family history to Yemen, and speak Arabic as a mother tongue. END NOTE.) The Branch Manager said that CAC would like to further expand into Saudi Arabia (Jeddah) and Doha (Qatar). Internationally, CAC has business arrangements with CommerzBank (Frankfurt),Citibank, the Bank of New York, the National Commercial Bank (Saudi Arabia),Doha Bank (New York),and the Arab Investment Bank (Bahrain) ¶4. (SBU) CACs Djibouti Branch Manager said that the banks mission in Djibouti was to deliver banking and financial services to both retail and corporate customers, and to offer clients the best managerial and technical systems. A range of e-banking services are a important part of CACs offerings in Djibouti, and the Branch Manager said that CAC was planning to install Automated Teller Machines (ATMs) at several sites throughout Djibouti City, and to offer Point-of-Sale card purchase options. Other services offered for corporate clients include management of payrolls, and cash delivery to and from business premises. For the individual market, CAC offers consumer loans at a zero percent interest rate, after arranging for a commission with the vendor. ¶5. (SBU) CACs Branch Manager praised the Central Bank of Djibouti as competent and professional. He also said that CAC had worked with the Djibouti National Investment Agency (ANPI) while establishing the Djibouti branch. According to the Branch Manager, CAC currently employs only Djiboutian national staff, with the exception of two expatriate managers. Every employee has a university degree, and receives two months of in-house training. -------------- SALAAM AFRICAN BANK -------------- ¶6. (SBU) President Guelleh inaugurated Salaam African Bank (SAB) on December 27, 2008. SAB operates under Islamic banking rules, and does not charge interest. It is headquartered in Djibouti. According to SABs Branch Manager, DJIBOUTI 00000439 002 OF 002 the banks goals are to become the leading provider of Sharia- compliant financial products and services in East Africa, mobilize the ideas and wealth of the regional Somali Diaspora, offer technologically advanced services, and contribute to the economic development of East African communities. SAB is held by a group of shareholders from the region, not all of whom are Somalis. ¶7. (SBU) According to the Branch Manager, SAB already provides e-banking services, and plans to offer SMS notifications of account actions, ATM machines, and linked credit cards. SAB is currently negotiating with state-run Djibouti Telecom to offer SMS notifications at a reduced tariff to SAB customers. SAB currently employs about 30 people, most of whom are Djiboutian. SABs Branch Manager said that SAB followed the Central Bank of Djiboutis procedures very closely, and has worked to adhere to the Know Your Customer standard. ¶8. (SBU) The Branch Manager said that SAB was trying to attract the Somali Diaspora, and other regional Diaspora groups. It is also targeting companies which may play a role in Somalia reconstruction efforts. (NOTE. Central Bank contacts confirmed that SAB appeared to do very well in the first quarter in terms of securing accounts among the Somali Diaspora. END NOTE.) SAB would like to open its next branch in Mogadishu, followed by a branch in Hargeisa. The Branch Manager said that staff for the Mogadishu branch were already in training. Djiboutian businesses present in Somalia, the Branch Manager noted, will benefit from these planned branches, especially if it lets them avoid carrying cash in and out of Somalia. SAB would be interested in opening an outlet in Ethiopia as well, the Branch Manager said, if Ethiopian law allowed it. -------------- COMMENT -------------- ¶9. (SBU) The two latest additions to Djiboutis banking landscape, like several other recent arrivals, appear to have chosen Djibouti not just for its relatively small, albeit growing, domestic market, but also for its strategic location and regional commercial ties. As the new competition helps Djibouti boost its profile as a regional financial hub, GODJ authorities are also moving to ensure that ordinary Djiboutians benefit from the new range of choices. To help reach this goal, the Central Bank recently established a policy guaranteeing the right to open a bank account at a commercial bank for any Djiboutian earning a monthly salary of at least 40,000 Djiboutian Francs (approximately USD 225). END COMMENT. SWAN