- Patrick Imam, and Christina Kolerus
- Published Date:
- October 2013
©2013 International Monetary Fund
Cataloging-in-Publication Data Joint Bank-Fund Library
Senegal: financial depth and macrostability / Patrick Imam and Christina
Kolerus.—Washington, D.C.: International Monetary Fund, c2013.
p.: col. ill. ; cm.
Includes bibliographical references.
Series: African departmental paper
1. Banks and banking—Senegal. 2. Monetary policy—Senegal. 3. Financial institutions—Senegal. 4. Senegal—Economic policy. I. Kolerus, Christina.
II. International Monetary Fund.
Disclaimer: The views expressed in this book are those of the authors and should not be reported as or attributed to the International Monetary Fund, its Executive Board, or the governments of any of its member countries.
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This enhanced review of Senegal’s financial sector is one of several pilot reviews called for by the Executive Board in May 2012. The purpose of the reviews is to go beyond the traditional surveillance focus on banking system soundness and solvency by analyzing in more depth the interplay between financial development, macroeconomic and financial stability, and effectiveness of macroeconomic policies in low-income countries. Senegal is a member of the West African Economic and Monetary Union; a number of key macroeconomic and financial policies are designed and implemented at the union level. This study focuses on Senegal-specific issues. Another pilot study, to be prepared in the context of the next annual consultation on regional policies in early 2013, will focus on union-wide issues.
The financial system in Senegal, like in many other low-income countries, is dominated by the banking sector, with commercial banks representing about 90 percent of the financial system. A large number of microfinance institutions supply limited financial services targeting lower-income households. They help raise overall access to the financial system to about 20 percent of the population. Insurance companies account for most of the remainder of the domestic financial system. The regional securities and equity market is a marginal source of funding, except for the government. The interbank market remains underdeveloped.
The banking system appears to be relatively robust, with lending concentration and asset quality being the main risks. Financial soundness indicators suggest that banks are on average adequately capitalized, profitable, and liquid. Microprudential regulation of banks needs to be enhanced and supervision strengthened further. The authorities are encouraged to develop a holistic view of the financial system and systemic risk.
Financial depth has increased in recent years and is broadly in line with the country’s structural characteristics. However, a comparison with selected countries suggests substantial scope for further deepening, which would facilitate the conduct of fiscal policy, make it easier for agents to deal with volatility, and foster investment and growth.
There is broad agreement that the main obstacles to further financial development include large informational asymmetries, a poor business and judicial environment, an inadequate tax regime, regulatory and supervision issues, and inadequate skills. The authorities have a strategy to address a number of these issues, whose implementation they intend to accelerate. The regional authorities are working on the development of the interbank market and the strengthening of the public debt market, which they see as priorities.