Central African Republic: Selected Issues and Statistical Appendix

This Selected Issues paper and Statistical Appendix analyzes economic developments over the past decade in the Central African Republic (CAR). It examines the regional integration efforts of the CAR in the context of the Central African Economic and Monetary Community (CEMAC). The paper presents an overview of the CEMAC customs union reform, and investigates the status of the implementation of the CEMAC trade reform in the CAR. The paper also evaluates the impact of the regional trade reform on the CAR’s trade performance, based on trade developments in the CAR during 1994–2002.


This Selected Issues paper and Statistical Appendix analyzes economic developments over the past decade in the Central African Republic (CAR). It examines the regional integration efforts of the CAR in the context of the Central African Economic and Monetary Community (CEMAC). The paper presents an overview of the CEMAC customs union reform, and investigates the status of the implementation of the CEMAC trade reform in the CAR. The paper also evaluates the impact of the regional trade reform on the CAR’s trade performance, based on trade developments in the CAR during 1994–2002.

II. The Financial Sector in the Central African Republic8

A. Overview

30. The financial sector of the Central African Republic (C.A.R.) comprises the national branch of the Banque des Etats de 1’Afrique Centrale (BEAC)—the regional central bank that also covers five other CEMAC countries—three commercial banks, a microfinance institution, two postal financial institutions (a postal savings bank and postal checking center), two insurance companies, two general insurance agents, a mutual insurance association, and a social security institution. There are no active organized financial markets, and no securities are traded. There are neither leasing companies nor term lenders. The regional supervisor of the banks and microfinance institutions is the Banking Commission of Central Africa (COBAC).9

31. The sector is still largely underdeveloped. Besides the illiquid claims arising from the various types of arrears of the state, the single most important domestic financial asset held by the public is currency, with deposits in commercial banks a distant second, implying that the central bank, not the commercially driven deposit banks, is the dominant financial intermediary in the C.A.R. (Table II. 1). The financial sector mobilizes little savings, allocates little capital, and provides only the most elementary payment and risk management services. This state of affairs points toward the weakness in the institutional underpinnings of financial sector activity, and specifically in the mechanisms for the enforcement of contracts and the monitoring of borrowers’ performance. According to bankers, slow and unpredictable judiciary processes in the C.A.R. hinder the collection of claims and increase the cost of financial intermediation. A comparison with the countries of the West African Economic and Monetary Union (UEMOA) and the Central African Economic and Monetary Community (CEMAC) indicates that, within the two CFA franc zones, the C.A.R. has the lowest ratio of deposits to GDP, as well as the highest share of currency in M2 (Table II.2).

Table II.1:

Domestic Financial Assets Held by the Public, End 2003 Estimates

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The liquidity held by the CMCA in currency (CFAF 0.1 billion) or in deposit with the banks (CFAF 0.9 billion) is already included in the money stock, so that the net contribution of the CMCA to the claims of the public on the financial intermediaires is CFAF 1.2 billion.

Table II.2.

Financial Intermediation in the Countries of the Two CFA Franc Zones, 2002

(In percent)

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32. Financial deepening is not occurring in C.A.R. From 1996 onwards, the year during which the nominal money stock reached a historical peak, to 2003, the money stock fell by 21, percent while nominal GDP rose by 35 percent. Money as a percentage of GDP, a crude indicator of financial deepening, fell from 24 percent in 1996 to 14 percent in 2003, in spite of the return to price stability after the devaluation of the CFA franc in 1994. Over the same period, deposits in the commercial banks as a percentage of GDP fell steadily from 4.3 percent to 3.3 percent in 2000, but recovered to about 4 percent thereafter (Table II.3). The capacity of the banks to mobilize additional deposits over the past three years, in very difficult circumstances, may have been due in part to the completion of the restructuring and privatization of 2 of the three banks in 1999, which included recapitalization.

Table II.3.

Financial Deepening Indicators, 1996–2003

(In percent)

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Excluding deposits of the state.

B. The Commercial Banks

33. The three commercial banks operating in the C.A.R. are the Banque Internationale pour la Centrafrique (BICA), the Banque Populaire Maroco-Centrafricaine (BPMC), and the Commercial Bank Centrafrique (CBCA). The government holds a minority participation in each of the three banks.10 The BICA has the biggest share of deposits (40 percent), while the CBCA has the biggest market share in term of credits (44 percent). The BPMC is the smallest bank, with a 23 percent market share in terms of both deposits and credits.

34. In light of the drying up of external assistance in the last two years, the government has increasingly resorted to financing from the domestic commercial banks, and public institutions have run down their deposits with banks. As a result, the government weighs heavily on those banks (at end-December 2003, credit to the public sector stands at 29 percent of the total domestic credit of commercial banks), and the banking sector is now facing a liquidity crisis. To alleviate this problem, the governor of the BEAC has exempted the banks in the C.A.R. from the reserve requirements since May 22, 2003.11 Although the banking system of the CEMAC as a whole is facing excess liquidity, the de facto fragmentation of the interbank money market and the perceived country risk attached to the C.A.R. inhibit a reallocation of liquidity to the C.A.R. banks.12

35. The banking sector is presently under considerable strain. Globally, for the two largest banks, the ratio of doubtful loans to gross credits stood at about 34 percent at end-2003. According to the banks, provisions cover on average 90 percent of the doubtful loans.13 Of the three commercial banks, BICA is classified by the COB AC as being in a very critical financial situation, with none of the prudential ratios based on net worth being met. BICA urgently needs to be recapitalized. To increase the equity eligible to meet the solvability ratio, it needs also to recover from major shareholder credits far in excess of what the regulations allow.14 CBCA is in a moderately fragile financial situation and does not meet the required liquidity ratio.15 BPMC is classified as being in a sound financial situation.

C. Microfinance

36. The microfinance sector in the C.A.R. comprises three types of organizations: savings and credit cooperatives; non governmental organizations (NGOs) engaged in microfinance in conjunction with other services; and donor projects with a credit component. The sector has been adversely affected by the political and military disturbances of the recent past. Of a total of 60 primary units known to exist in 1999, only 44 are still in existence.

37. The single most important organization active in the sector is the Credit Mutuel de Centrafrique (CMCA), a federation of 18 primary caisses, which account for 41 percent of the primary units of the sector, between 95 to 98 percent of the savings and credit transactions, and 80 percent of the members (Table II.4 summarizes the business profile of the CMC A). The CMCA was created in 1994, and grew rapidly up to 2000, when the membership’s deposits reached CFAF 2.2 billion, a level close to that observed at the end of 2003. Credits also increased rapidly to reach a stock of CFAF 600 million in 2000. After a sharp reduction in 2001 and 2002, the lending activity recovered in 2003. With doubtful credits representing 8.5 percent of the total outstanding, the CMCA appears better managed than most other microfinance institutions.16 In addition to savings and credit products, the CMCA offers some basic payment services for the payment of wages for the workers of 17 private enterprises.

Table II.4.

Crédit Mutuel de Centrafrique

(end-December 2003)

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38. The CMCA is not yet self-sustained, as it still receives subsidies and does not break even.17 It also suffered from destruction and looting during the recent conflict. It estimates the cost of reconstruction at CFAF 70 million (16 percent of 2002 gross revenue).

39. In April 2002, the COBAC issued a prudential framework applicable to the microfinance sector, and the new regulations are being put in place. According to this framework, all microfinance institutions will be required to obtain a license (agrément) from the Ministry of Finance, subject to the clearance of the COBAC which retains responsibility for prudential supervision.18 The Ministry of Finance established in December 2002 a special unit to fulfill its new responsibility of granting licenses. A professional association of microfinance institutions is to be established. The various organizations have two years to meet the new institutional requirements and prudential ratios.

D. Insurance

40. The insurance sector comprises two insurance companies and two general agents.19 The two companies are the Union Centrafricaine d’Assurance et de Réassurance (UCAR), which is the largest of the two (63 percent market share in 2001), and the Union des Assurances Centrafricaines (UAC). Coverage for automobile, fire, transport and other risks is available, but no term life insurance is offered.20 While these insurers suffered from the unfavorable environment in 2001 and 2002, they were still registering profits (Table II.5).

Table II.5.

Insurance Companies

(Millions of CFA francs, 2001)

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Source: Unpublished World Bank report on the financial sector of the C.A.R., 2003.

41. The prudential supervision of the insurance sector is the responsibility of the Conférence Interafricaine du Marché de 1’Assurance (CIMA). This regional regulator has not conducted an on-site inspection of the insurance companies in the C.A.R. in the last six years, an issue requiring immediate attention.

E. Social Security Agency

42. The social security agency, Office Centrafricain de Sécurité Sociale (OCSS), provides social security protection to private sector and public enterprise workers as well as workers employed by the state outside the civil service. Contributions amount to 20 percent of wages (18 percent paid by the employer and 2 percent paid by the worker). The three branches of responsibility of the OCSS are the family allowances, the workmen’s compensation scheme, and pensions. As of the end of 2003, the OCSS covers 3,551 employers with 27,034 employees. Benefits accrue to 11,234 beneficiaries. Quarterly benefits (of which almost three-fourths are pensions) amount to CFAF 432 million, an amount roughly in line with contributions due.21

43. The financial situation of the OCCS is in dire straits. The disastrous state of the finances of the public sector (and some private sector enterprises as well) led to the nonpayment of contributions, and the OCCS itself has large arrears to beneficiaries, and further arrears accumulation is likely (Table II.6). At end-December 2003, arrears in benefit payments amounted to CFAF 8.7 billion (of which CFAF 5 billion correspond to unpaid pensions). Contributions arrears amounted to CFAF 31.0 billion and other frozen claims on the public sector amounted to CFAF 5.5 billion. The looting and destruction due to the recent conflict—estimated, provisionally, at CFAF 610 million—further undermined the work of OCCS.

Table II.6.

Social Security: Office Centrafricain de Sécurité Sociale

(Millions of CFA francs)

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F. The Financial Services of the Post Office

44. The post office is responsible for the postal savings bank (the Caisse Nationale d’Epargne, CNE), whose liabilities are savings deposits recorded in passbooks, and a postal checking center (the Centre des Cheques Postaux, CCP), whose liabilities are current account deposits. The resources mobilized by these two units are channeled to the Treasury to finance general expenditures. The CNE, with liabilities to depositors amounting to CFAF 500 million, is currently inactive. The CCP has a little over 3,000 accounts, mainly held by individual depositors (but also by the Treasury and public enterprises). The deposits of the public with the CCP amount to CFAF 118 million at end 2003. The main function of the CCP is the payment of the salaries of about 3,000 civil servants through the post office network. The civil servants typically withdraw the totality of their salary and do not keep the funds on deposit in their account. Thus the CCP, although providing a useful payment service, is not important as a financial intermediary.

G. Summary and Conclusions

45. The financial system of the C.A.R. is very underdeveloped. Most of the resources mobilized by the system are mobilized by the central bank in the form of currency in circulation. The counterpart of these resources is the accumulation of net foreign assets or claims on the government, as very little refinancing of the banks occur. The system thus does not yet play a large role in the efficient allocation of savings through the pooling of risks and the search for higher return by market-oriented financial intermediaries. The efficiency gains from financial deepening remain largely untapped.

46. In the short term, the single most important obstacle to a better functioning of the financial system is the inability of the state to meet its financial obligations, which undermines both the liquidity of the banking system and the solvency of some financial intermediaries. The first step of a strategy to develop the financial sector needs to be the resolution of the current fiscal imbalances. Other elements of such a strategy should be the reduction of the cost and risk of intermediation through improvement in the judicial system and other mechanisms for the enforcement of contracts, and a strengthening of the prudential regulation and supervision of the various components of the financial sector. One positive aspect of the current situation is that, because of the regional character of the institutional framework covering banks and microfinance institutions, the prudential supervision function has not been compromised by the debilitating effects of the recent military conflict or the public finance crisis that is undermining the effectiveness of the state.


This section was prepared by Philippe Callier. It draws on information received in the context of the Article IV consultation discussions and on an unpublished World Bank report on the financial sector of the C.A.R. prepared in 2003. End-2003 estimates are based on provisional November and December data and are liable to revision.


The governor of the BEAC is, ex officio, president of the COBAC. The board of directors of the BEAC may modify the terms of the convention establishing the COBAC (a unanimous decision is required). The BEAC is mandated to ensure the functioning of the COBAC on the BEAC’s own budget.


The capital of BICA, which replaced the Banque Méridien BIAO (BMBCA) following the failure of the Meridien Group, is now held by the Belgolaise (35 percent), the BICA’s Chairman of the Board (28 percent), COFIPA, a group of African business people (15 percent), the government and public enterprises (10 percent), and private central Africans (12 percent). The Belgolaise sold its share but the transaction was rescinded by the COB AC which has the responsibility to clear such deals after assessing the suitability of prospective major shareholders (the Belgolaise ceased however to provide the managing director and cancelled its line of credit to BICA). The capital of the CBCA, which was created when the Union Bancaire en Afrique Centrale (UB AC) was sold to the Fotso Group of Cameroon, is held by the Fotso Group (51 percent), private central Africans (39 percent) an the government (10 percent). The capital of the third bank, the BPMC, created in 1991, belongs to the group of the Credit Populaire du Maroc, a major public sector institution in Morocco (62.5 percent), and the Central African state (37.5 percent).


Since February 2003, the required reserve ratios stand at 7.75 percent of demand deposits and 5.75 percent of term deposits for countries classified as countries with satisfactory liquidity (Cameroon, Congo, and Equatorial Guinea). For the countries with a fragile liquidity position (C.A.R., Chad, and Gabon), the corresponding ratios are 5 percent and 3 percent.


In response to this excess liquidity in the region as a whole, BEAC increased the required reserve ratios in February 2003, accepted deposits from banks under the reverse auction scheme, and, in December 2003, reduced its interest rate on auctions from 6.3 percent to 6.0 percent.


A credit for which a payment is overdue by more than three months (or six months for real estate credits) is defined as doubtful. Provisioning of doubtful claims guaranteed by the state is optional.


The remaining balance on this loan is CFAF 600 million, without the interests and charges. The nominal capital of the bank is CFAF 1.5 billion.


The liquidity ratio is a weighted average of short-term assets in percentage of a weighted average of short-term liabilities. The required minimum liquidity ratio is 100 percent.


For the 19 savings and credit caisses created in the context of UNDP’s project in Support of the Fight against Poverty, doubtful credits amount to 79 percent of the total outstanding credits (of CFAF 19 million). Since the end of the donor support, a part of the savings of the membership is at risk, given the fact that the operating costs absorb part of the resources of the caisses.


2003 subsidies include support from the French Development Agency and from the Centre International du Crédit Mutuel.


Institutions with less than CFAF 50 million ($94,000) will not be subjected to on-site inspection.


No additional information is available on the general agents.


UCAR offers, however, a life insurance product that is a complementary pension scheme.


There have been no official financial statements since 1997. In 1997, globally, the OCSS was registering a deficit. The family allowances and workmen’s compensation branches generated surpluses while the pension branch recorded a deficit. No actuarial study of the pension scheme has been done over the past 15 years.