Niger: Selected Issues and Statistical Appendix
Author: International Monetary Fund
Publication Date:
16 Jan 2007
eISBN:
9781451828733
Language:
English
Keywords:
ISCR; CR; Niger; Nigerien bank; penetration ratio; Niger's MFI activity; financial system; loan performance; Loans; Financial sector
Download PDF (1.6 MB)

This Selected Issues paper underlies the financial sector developments in Niger. The paper presents an overview of the financial sector of Niger and discusses the recent banking developments. It analyzes the recent trends in key microfinance indicators, and investigates reasons behind Niger’s relatively weak growth performance. It uses a growth accounting framework to assess the contribution to growth by factor inputs and total factor productivity (TFP) during 1963–2003. The paper also presents neoclassical growth model estimates of the role of macroeconomic variables and other factors in determining economic growth in Niger.

Abstract

This Selected Issues paper underlies the financial sector developments in Niger. The paper presents an overview of the financial sector of Niger and discusses the recent banking developments. It analyzes the recent trends in key microfinance indicators, and investigates reasons behind Niger’s relatively weak growth performance. It uses a growth accounting framework to assess the contribution to growth by factor inputs and total factor productivity (TFP) during 1963–2003. The paper also presents neoclassical growth model estimates of the role of macroeconomic variables and other factors in determining economic growth in Niger.

I. Financial Sector Developments

A. Overview of The Financial Sector

1. Niger is a member of the West African Economic and Monetary Union (WAEMU). The Central Bank of West African States (BCEAO) is responsible for both Niger’s monetary policy management and its banking regulation and supervision. Niger’s relatively underdeveloped financial sector comprises the central bank, 10 commercial banks, two specialized banks, the national social security fund, five insurance companies, three brokerage firms, about 170 microfinance institutions (MFIs), and (until the end of 2005) the postal institution.1 The WAEMU regional stock exchange has an office in Niamey, Niger’s capital.

2. Financial intermediation in Niger remains weak. Niger at year-end 2005 had the lowest ratios of broad money to GDP and deposits to GDP in the WAEMU. By authorities’ estimates, 80-90 percent of the population does not have access to financial services.

3. The banking sector dominates the financial system. Total assets of the financial system at year-end 2005 were CFAF 373 billion, or 21 percent of GDP (Table 1).2 Of total assets, banks accounted for 63 percent, nonbank financial institutions had 29 percent, the insurance sector had 5.3 percent, and MFIs had 2.7 percent. Two-thirds of banks are owned by non-Nigerien investors, and nonnationals have interest in three of the country’s four insurance companies (Table 2). One insurance company is wholly foreign-owned.

Table 1.

Niger, Total Assets of the Financial System, 20051

article image
Source: Nigerien authorities.

Excluding the National Social Security Fund (CNSS).

Table 2.

Niger: Distribution of Ownership of Commercial Banks and Specialized Financial Institutions

(Year-end 2005)

article image
Source: BCEAO.

Opened in 2005.

4. Niger’s financial sector experienced severe distress in the late 1980s and 1990s. Banks, the postal institution, the social security fund, and MFIs all faced financial crises. Many factors contributed to these difficulties; at a macro level, such factors include long periods of political and economic instability, slow or negative economic growth, chronic poverty, low savings levels, and years of meager donor activity.

5. Institutional factors have also hurt the sector. Such factors include an inefficient judicial system; poor financial sector policies, including lax banking supervision; a rigid interest rate structure; and sectoral credit allocation. Mismanagement, subsidized and directed lending (particularly in the late 1970s and 1980s), and governmental budgetary problems contributed to the failure of state-controlled financial institutions.

B. Recent Banking Developments

6. Along with the rest of the financial system, the banking sector has suffered much financial distress since the late 1980s. Besides factors that have affected the financial system as a whole, government arrears to banks and the private sector and the high cost of obtaining land titles have hurt the banking sector. Lending to the agricultural sector, which accounts for over 40 percent of GDP, has been constrained by lack of organization among farmers and the absence of adequate collateral.

7. The situation has improved since the 1999 elections. Improved political and socioeconomic conditions have made the environment more conducive to financial sector development. Further financial sector reforms implemented since then, including the restructuring of viable but financially-troubled banks and the liquidation of unviable banks, have also supported the banking sector’s recovery.

8. The number of banks and bank branches in recent years has increased rapidly. In the early 1990s there were over 60 bank branches, mostly specialized banking institutions, but the number fell drastically in the 1980s after the closure of the Banque de Développement de la République du Niger (BDRN) and the Caisse Nationale de Crédit Agricole (CNCA). After falling to 9 banks (including one specialized bank) in 2000, the number of banks climbed to 12 (10 retail banks and 2 specialized banking institutions) by mid-2006. From 2003 to mid-2006 the number of bank branches increased from 21 to 38 (Figure 1), reflecting aggressive marketing by the four largest banks owing to increased competition.

Figure 1.
Figure 1.

Niger: Growth in Number of Bank Branches, 2000-061

Citation: IMF Staff Country Reports 2007, 014; 10.5089/9781451828733.002.A001

Source: BCEAO1 June 2006

9. Niger’s newest banks—the Atlantic Bank, a regional bank based in Côte d’Ivoire, and the Regional Solidarity Bank (RSB)— opened in 2005. RSB’s operations, which target traditional bank clients as well as lower-income clients, could help increase access to bank services and interact with MFIs.

10. Niger’s banking system is majority foreign owned. Foreign shareholding at year-end 2005 constituted 66 percent of the banking sector’s total capital (Table 2). The foreign presence is dominated by regional-based groups representing western and northern Africa, which have increased their presence significantly in recent years. The only other major international presence is Belgium-based Belgolaise bank, which has holdings in the BIA, Niger’s largest bank.

11. The banking sector is highly concentrated. In 2001-05 a single bank held over one-quarter of total assets and accounted for between one-quarter and one-third of total bank deposits and loans (Table 3). The four largest banks accounted for 80-92 percent of the market in that period. The highly concentrated credit portfolio reflects the nature of the economic structure, including the predominance of activity in a few key areas, the presence of much informal activity, and the banking sector’s focus on corporate rather than on small and medium-sized enterprises.

Table 3.

Niger: Concentration Ratio of Banks, 2001-05

(Percent)

article image

12. The lending portfolio is concentrated among a few large enterprises. The 10 largest beneficiaries at year-end 2005 accounted for 27 percent of private sector credit. In recent years there has been a shift in the composition of credit, with an increase in the share of telecommunication companies, and a decrease in that of the uranium companies, traditionally the largest users of credit. At end-2005 the top three telecommunication companies accounted for 7.7 percent of total credit, the top two petroleum companies for 7.1 percent, and the mining companies for 6 percent. The change in the portfolio structure reflects, among other factors, completion of heavy investment by the main mining companies; and economic diversification. Some new private-sector-led initiatives in agriculture (new lines of products), mining (charcoal), and manufacturing (dairy products, leather, etc.) could further diversify the credit portfolio of firms. Most of these initiatives are still in an initial preparatory phase.

13. The distribution of credit does not reflect the relative importance of the various sectors of the economy. Despite its strong contribution to GDP, the agricultural sector has consistently received less than 1 percent of total credit (Figure 2). The trade sector has historically been by far the most important beneficiary; at year-end 2005, it accounted for 46 percent of private sector credit. Nevertheless, the share of credit to the trade sector fell in 2004 and 2005. In contrast, credit to transport, storage, and communications increased dramatically, from 4.2 percent in 2002 to over 16 percent in 2005, mostly owing to strong growth in the telecommunication sector following the establishment of mobile phone and internet services.

Figure 2.
Figure 2.

Niger: Distribution of Credit by Economic Activity, 2005

Citation: IMF Staff Country Reports 2007, 014; 10.5089/9781451828733.002.A001

14. The private sector has played a greater role in driving economic activity, as evidenced by its increasing share of total credit. The share of credit to the private sector at year-end 2005 was 63 percent, up from 40 percent in 1999 (Table 5). Meanwhile the government’s share of credit fell from 60 percent in 1999 to 37 percent in 2005.

15. The structure of bank credit by maturity has evolved over time. From 2003 to 2005, while the share of short-term credit fell by 13 percentage points, the share of medium-term credit almost doubled (Table 4; Figure 3). Principal factors behind this trend include (i) the major infrastructure investments made ahead of the December 2005 Francophonie Games; and (ii) increased investment by telecommunication firms.

Table 4.

Niger: Summary Balance Sheet of Banks and Specialized Financial Institutions, 2001-05

article image
Source: BCEAO.

Data do not match exactly due to rounding off.

Figure 3.
Figure 3.

Niger: Distribution of Bank Credit by Maturity, 2001-05

(Percent of total credit)

Citation: IMF Staff Country Reports 2007, 014; 10.5089/9781451828733.002.A001

Source: BCEAO.

16. Despite the opening of more banks, the penetration rate in Niger remains among the lowest in the region. The authorities estimate that only 10-20 percent of the population has access to banking services. Coverage is highly concentrated in Niamey. There, two- thirds of all bank branches serve a population of 808,000, or one branch for every 33,700 inhabitants, compared with one branch for every 844,000 inhabitants in areas outside the capital (Figure 1).

17. Given the low penetration rate, financial deepening has been modest. Most key indicators of financial depth have seen only modest growth in the past five years (Table 5). The ratios of credit to GDP and deposits to GDP have increased by only about 2 percentage points and the ratio of private sector credit to GDP by only about 1 percentage point since 2000. However, the ratio of broad money to GDP has risen by 5.6 percentage points.

Table 5.

Niger: Key Indicators of Financial Deepening

(Millions of CFA francs, unless otherwise indicated)

article image
Sources: Nigerien authorities; and BCEAO.

18. Niger’s limited financial deepening appears even more pronounced when compared with other WEAMU countries.’ Niger at year-end 2005 had the lowest ratios of broad money to GDP and deposits to GDP and the second-lowest ratios of total credit to GDP and private sector credit to GDP (Table 6), despite the opening of new banks.

Table 6.

Niger: Selected Financial Indicators of WAEMU Countries, 2005

(Percent)

article image
Sources: IFS and WEO.

19. The quality of Niger’s loan portfolio, however, appears relatively strong when compared with the regional data. Except for in 2003, the ratio of nonperforming loans (NPLs) to total loans in Niger has been lower than the WAEMU average (Figure 4).

Figure 4.
Figure 4.

Niger: Nonperforming Loans of Banks and Financial Institutions, Niger versus Rest of WAEMU, 2000-05

(Percent of total loans)

Citation: IMF Staff Country Reports 2007, 014; 10.5089/9781451828733.002.A001

Source: BCEAO

20. Nigerien banks perform satisfactorily in complying with the WAEMU prudential ratios. At year-end 2005, all Nigerien banks were fully compliant with three key WAEMU norms—the risk-weighted capital adequacy ratio, participation in nonbank companies’ capital, and the required ratio of credit to insiders-to-effective capital (Table 7). Eight of ten banks also met the required liquidity ratio. One bank did not meet the minimum effective capital requirement.

Table 7.

Niger: Selected Indicators of Compliance with WAEMU Prudential Norms, 2003-05

article image
Source: BCEAO.

21. Interest rates in Niger are been very stable in recent years. The BCEAO reduced the discount rate from 5.5 percent in July 2003 to 4.5 percent in March 2004 in three steps. More recently, the rate was increased to 4.75 percent in August 2006 (Figure 5). With the lower discount rate, and owing to increased competition, lending rates and deposit rates have since fallen. With the savings rate—the interest rate floor—unchanged, the interest rate spread has narrowed. As in the rest of the WAEMU, interest rates in Niger are partially regulated. Lending rates are set freely by banks up to a maximum of 18 percent (usury rate). The minimum passbook savings rate has been fixed at 3.5 percent for deposits up to CFAF 5 million since 1996; beyond that amount, banks and clients negotiate the interest rate.

Figure 5.
Figure 5.

Niger-Structure of Interest Rates, 2000-05

Citation: IMF Staff Country Reports 2007, 014; 10.5089/9781451828733.002.A001

22. Nigerien banks have relatively high profit margins, though operating costs tend to exceed the regional average. The average income on loans, net of cost of financial resources, in 2000-05 was 10.7 percent (Table 8), reflecting Niger’s low average cost of resources and its relatively high lending rates (see Figure 5) as well as its relatively large share of non-interest bearing (sight) deposits (Table 4). The high share of sight deposits reflects the dominance of the trade sector—which requires companies to be highly liquid given Niger’s lack of banking instruments—as well as the large informal sector. Although the average net income on loans in 2000-05 was marginally higher than the WAEMU average, operating costs were higher than in the rest of the region. Indeed, in 2000-05 the operating ratio—operating expenses as a percentage of net banking income—fluctuated between 68 percent and 75 percent, while the WAEMU average did not exceed 70 percent.

Table 8.

Niger: Bank Profitability, 2001-05

(Millions of CFAF)

article image
Source: WAEMU Banking Commission.

C. Financial Sector Reforms

23. The first major reforms of the financial sector were undertaken in the late 1980s and early 1990s. These reforms, which were implemented in the context of more comprehensive reforms by the BCEAO, included legal and institutional measures. At the regional level, reforms included the adoption of a regional banking law (1989), establishment of the regional Banking Commission (1990), and introduction of a new regional insurance code. A regional regulatory and supervisory framework for the microfinance sector was also adopted in 1996.

24. At the national level, reforms were centered on the restructuring of troubled but financially-viable banks as well as the liquidation of nonviable banks. Four banks were restructured—the Nigerien International Bank (NIB) in 1983, the Banque Arabe Lybienne Nigérienne pour le Commerce Extérieur et le Développement (Balinex) in 1993, the Banque Internationale de l’Afrique de l’Ouest (BIAO-Niger) in 1995, and the Banque Islamique pour le Niger (BIN) in 1996. Four other banks were liquidated—the BDRN, CNCA, the Banque Internationale pour le Commerce et l’Industrie du Niger (BICIN) in 1992, and the Bank of Credit and Commerce-Niger (BCC) in 1995. The four banks that were restructured reemerged as new banks: the NIB became the BOA; the BIAO-Niger, which was taken over by the Belgolaise group, is now the Banque Internationale pour l’Afrique (BIA); the Balinexreemerged as the Banque Commerciale du Niger (BCN); and the BIN became the Banque Islamique du Niger pour le Commerce et l’Investissement (BINCI). Not all, however, were immediately successful. The BINCI was placed under enhanced surveillance by the Banking Commission in 1996 after it registered huge losses and a deterioration in its capital base. During the period of enhanced surveillance, the bank improved its management and internal controls, which led to satisfactory compliance with key WAEMU prudential norms and, eventually, the lifting of enhanced surveillance in 2003. The BCN was placed under provisional administration in 2001 after years of weak profitability and high levels of nonperforming loans. Provisional administration was lifted in 2004 after restructuring and recapitalization.

25. Public financial institutions also have faced financial difficulties. In a further restructuring, Niger’s two oldest financial institutions—the Crédit du Niger (CDN) and the Caisse de Prêts Aux Collectivités Térritoriales (CPCT)—were placed under provisional administration in 1999. The CDN, which was established as a housing bank in 1957, mostly serves government employees who in the 1990s were paid irregularly. The accumulation of wage arrears eventually hurt CDN’s deposits and reduced its ability to recover debt from employees awaiting payment, pushing the institution toward bankruptcy. The failure of the CPCT, a specialized institution established to provide financial services (such as investment credit) to local governments, similarly stemmed from the government’s financial difficulties. Budgetary problems at all government levels in the 1990s strained CPCT’s balance sheet, ultimately forcing it under provisional administration. The ONPE has also met major financial difficulties, resulting in a freeze of postal deposits in the late 1990s.

26. In 2004 the authorities formulated a financial sector reform agenda, with assistance from the World Bank. To support this program, the World Bank in 2004 approved a US$14.8 million Financial Sector Development Project Loan (FSDP). The key elements of the reform agenda are (i) restructuring banks that remain under government control (CDN and CPCT)3; (ii) restructuring the ONPE; (iii) an actuarial audit of the Caisse Nationale de Securité Sociale (CNSS); (iv) reform of the insurance sector; and (iv) promotion and supervision of the microfinance sector.4 Though much remains to be done, there has been notable progress in implementing the reforms. Key developments and outstanding reform issues include:

  • Privatization of the CDN: The objective is to privatize the CDN by early 2007. Following an exercise to confirm the financial position and net indebtedness of the bank in 2005, an expert recruited in 2006 gave the government three options for finalizing the privatization. The government opted to privatize through an international offer. A precondition is for the CDN to establish a repayment schedule for its debt towards the central bank, which is close to be finalized. The international offer is expected to be launched in early 2007 with a view to completing the privatization by mid-2007.

  • Restructuring the ONPE: The ONPE is being split into two entities: Nigerposte and Finaposte, which will manage postal services and financial services, respectively. Nigerposte was created in March 2006, and its board approved in the same month the creation of the Finaposte. The entry into operation of the latter is conditional to recapitalizing the institution with a minimum amount of CFAF 1 billion, so as to meet the requirement for obtaining a financial license from the WAEMU Banking Commission, The government has committed to pay this amount before year-end 2006.

  • Reform of the CNSS: While an important part of the restructuring, CNSS reform has made little progress owing to the need to carry out an updated actuarial audit.

  • Restructuring of the CPCT: Owing to capacity constraints, the government has instead focused on restructuring the CDN and ONPE, delaying the CPCT restructuring until 2007.

  • Microfinance: The key reform in this area involves the creation of a new regulator agency for microfinance institutions (see next section).

D. The Microfinance Sector in Niger

Background and Context

27. Though dating back to 1989, Niger’s MFI activities only reached significant scale in the late 1990s, when many institutions moved to fill the service void left by the BDRN and CNCA.

28. The number of licensed MFIs shot up from 15 in 1997 to 72 in 1999 (Figure 6) By then, the role of MFIs, especially cooperatives formed in rural areas, in fighting poverty was widely accepted. In 2000, institutions based on direct credit arrived in Niger. More recently, institutions offering project-related credits financed by donor funds have joined the sector. As noted above, about 170 MFIs currently operate in Niger; about 70 operate without a license.

Figure 6.
Figure 6.

Niger: Number of Licensed Microfinance Institutions, 1996-2005

Citation: IMF Staff Country Reports 2007, 014; 10.5089/9781451828733.002.A001

Source: Nigerien authorities.

29. The following three modes of MFI operations in Niger are the most common:

  • Credit unions: About 140 credit unions provide credit to customers with savings accounts at the institution. The main players are MCEPEC and UMEC (networks) as well as TAMAIKO, MECREF, and NGADA (autonomous institutions).

  • Direct credit institutions: These institutions, which amount to 10, provide credit without requiring borrowers to have a savings account with the institution. The most prominent ones are SICR-KOKARI and AQUADEV/ASUSU CIIGABA.

  • Project-related institutions: Rather than providing only financial services, these 20 institutions typically support the implementation of specific projects and thus do not continue operating after such projects are completed.

30. The regulatory framework for Niger’s microfinance sector is similar to that in the rest of the WAEMU. The framework consists of the Parmec Law (which was approved in 1996 to regulate savings institutions and credit unions) as well as instructions from the BCEAO that govern the production of financial statements. At the national level, the Ministry of Economy and Finance’s Microfinance Monitoring Unit supervises MFI activities. Supervision by this unit has been ineffective owing to, among other factors, lack of capacity, and inadequate human and financial resources. Indeed, the exact number of MFIs is unknown, and many such institutions operate without a license. A new MFI Regulatory Agency, expected to be established by year-end 2006, along with a comprehensive MFI survey—for which the results are expected to be published in the first half of 2007—should help address these weaknesses.

31. Several major MFIs have experienced financial difficulties in recent years. Two large institutions—the Movement des Caisses d’Epargnes et de Crédit (MCPEC) (a network) and TAIMAKO (an autonomous MFI)—have been under provisional administration since 2001.5 These two MFIs accounted for over 19 percent of total MFI beneficiaries in 2004. A third institution, ADDACHE, which has also been under provisional administration, is close to liquidation. Though not under administration, Union des Mutuelles de l’Epargne et de Crédits (UMEC), which had about 9 percent of total MFI membership in 2004, is in financial difficulties and could face liquidation.

32. Nonetheless, some MFIs have been successful, including the autonomous institutions of MCREF (a mostly women-based MFI), the SICR KOKARI, TANAADI, and the AQUADEV groups. Generally, the MFIs with competent management and strong internal control have been the most successful.

33. Several factors have contributed to the poor state of many institutions. At the level of MFIs, mismanagement, lack of qualified personnel, of adequate procedures and accounting systems have negatively affected performance. Supervision has also been inadequate, because of lack of audits and inspections, and failure to take necessary and decisive action against delinquent MFIs.

34. To address these weaknesses, the microfinance sector has benefited from significant donor assistance. The International Fund for Agricultural Development (FIDA), through the Rural Financial Sector Development Project (RFSDP), and the World Bank, through the FSDP, have provided financial and technical assistance to various structures, including MFIs, the Association of Nigerien Professional Microfinance Institutions (ANIPMF), and the MFI Monitoring Unit. The World Bank has also assisted a number of MFIs through the Private Irrigation Project (PIP II) by providing direct subsidies, as well as utilizing the services of MFIs in implementing other project-related activities. Beyond the RFSDP and the FSDP, the Luxembourg Agency for Cooperation and Development (Lux Development) and Canadian-based Desjardins International Development (DID) have also assisted the microfinance sector; however, these efforts have been more targeted.6 The Lux Development has been involved mostly in the artisanal sector through the intermediary of MFIs, while the DID has focused on the restructuring of the MCEPEC.

E. Recent Trends in Key Microfinance Indicators

35. Key indicators point to a steady growth in MF activities, despite the sector’s financial weaknesses. From 1998 to 2005, MFI membership rose by over 50 percent, deposits almost doubled, and credit grew by almost two and a half times. (Table 9). The social impact of MFIs over that period has been significant.

Table 9.

Niger: Selected Indicators of Microfinance Institutions, 2000-051

article image
Source: Nigerien authorities; unless otherwise indicated.

Except for indicators of population, number of families and penetration ratio, the data are based only on results of MFIs that reported to the Ministry of Economy and Finance, and may therefore not be fully representative of the entire sector.

For 2000-03 the source is BCEAO. For 2004-05, staff estimates are based on various data sources, including the Association of Professionals of Microfinance Institutions of Niger (ANIP-MF), individual MFIs, and the Ministry of Economy and Finance’s Microfinance Monitoring Unit.

Data on the number of women are staff estimates based on the proportion of women in total beneficiaries reported to the MEF by MFIs (2000-03). For 2004-05 the data is based on the proportion of women reported by the ANIP-MF relative to total beneficiaries of the Association.

The population data reported here differs from those reported in BCEAO publications on Microfinance Institutions in Niger because population data used here arethose obtained from the Nigerien National Institute of Statistics (NIS).

The penetration rate also differs from what is reported by the BCEAO. Here data on population and the number of families are based on National Institute of Statistics NIS data. For 2001 and 2005, data on the number of families are provided by the NIS. The number of families in 2001 in this table is based on the ratio of the number of families to population in 2001. For 2002-04 the number of families is calculated based on an annual growth rate of 4.5 percent based on INS estimates.

36. MFIs have had a positive impact on the poor. One measure of this is access by women. As shown in Table 9, the number of women beneficiaries more than tripled in 2000-05. As a share of the total membership, women members accounted for about half of total beneficiaries at year-end 2005, compared with only one third in 2000. Another measure of the impact on the poor is outreach. The number of MFI service points totaled 177 at year-end 2005, which represents about 90 percent of service outlets of the entire financial system.

The impact on employment has also been positive. In 2000-04, employment by MFIs grew by 47 percent, to 332 employees. Reflecting the faster growth of MFIs relative to the rest of the financial system, the percentage of MFI employment as a share of total employment rose to 38 percent at year-end 2004, compared with 30 percent in 2000.

37. The penetration ratio—another measure of social impact—has risen steadily, but remains low. This indicator, which is measured by the ratio of the number of families to total beneficiaries, rose from 6.3 percent in 2000 to almost 12 percent in Niger in 2005.

Nevertheless, it remains significantly lower than in the rest of the WAEMU. In 2000—the most recent data available for the zone as a whole—Niger’s penetration ratio was dwarfed by that in the rest of WAEMU. In Benin, the penetration rate was 78 percent and in Côte d’Ivoire—which had the second lowest rate—it was twice as high as in Niger (Table 10).

Table 10.

Niger: Penetration Ratio of Microfinance Institutions in the WAEMU, 2000

article image
Sources: Nigerien authorities; and BCEAO.

The data for Niger is based on 6.8 persons per family, which is the number provided by the Niger’s National Institute of Statistics for 2001. For other countries it is based on 6 members per family based as provided by the BCEAO.

38. Indicators of financial deepening among Nigerien MFIs are also remarkably low compared with the rest of the region. Key indicators of financial depth—total deposits and total credit as a share of GDP—have only experienced significant growth very recently. In 2005 the deposit-GDP ratio rose to 0.23 percent and the credit-to-GDP ratio rose to 0.35 percent (Figure 7). In 2003-04, Niger’s ratio for these indicators was the lowest in the WAEMU region (Table 11).

Figure 7.
Figure 7.

Niger: Indicators of Financial Intermediation of MFIs (Percent)

Citation: IMF Staff Country Reports 2007, 014; 10.5089/9781451828733.002.A001

Source: Nigerien authorities.
Table 11.

Niger: Selected Financial Indicators of Microfinance Institutions in WAEMU countries, 2003-04

(Percent)

article image
Source: BCEAO.

39. The quality of the sector’s loan portfolio has improved considerably overall since 2002; however, individual MFI loan performance is worrisome. For all MFIs, the ratio of NPL to total credit fell from 15 percent in 2003 to just over 4 percent in 2004 (Figure 8). Data for the sector as a whole for 2005 are inconclusive; however, based on results reported by the MFI Monitoring Unit,7 8 out of 79 MFIs exceeded the ratio by 10 percent. The ratio of NPLs on donor credit was even worse, averaging 35 percent; for one of the networks, this ratio was a staggering 63 percent. A comparison of NPLs with the rest of the WAEMU confirms Niger’s poorer quality of MFI loan portfolios: in each year during 2001–04, Niger’s ratio was higher than in the rest of the WAEMU.

Figure 8.
Figure 8.

Niger: Nonperforming Loan of Nigerien Microfinance Institutions, 2000-04

(Percent of Total Loans)

Citation: IMF Staff Country Reports 2007, 014; 10.5089/9781451828733.002.A001

Source: Nigerien authorities.

40. Only about half of all MFIs recorded in 2005 positive financial results. Of the 79 MFIs that reported data to the Ministry of Economy and Finance, 28 recorded operating losses. That number rises to 39—half of all the MFIs that reported results—when subsidies are excluded. Out of the 20 MFIs whose balance sheet exceeds CFAF 100 million, two are in serious financial difficulties. One reported losses of CFAF 15.5 million, and the second has negative working capital of CFAF 2.4 million. Of the 79 respondents, 14 declared they had negative equity, while six others said they had negative working capital, meaning that one-quarter of MFIs operating costs exceed deposits and member savings. Many MFIs rely too heavily on external resources, and have a weak deposit mobilization. TAIMAKO, MCEPEC, and UMEC posted losses in 2005. (The two networks were only profitable in project-related activities managed on behalf of donors). Some of the MFIs in financial difficulty, however, are considered viable and could recover with adequate financial support.

41. Because of poor financial management, much-needed external financial assistance has been held back. The World Bank’s PIP (II) has assisted a number of MFIs, including MCEPEC and UMEC. Besides utilizing the services of MFIs in implementing its activities, the project has provided subsidies to MFIs. However, after a World Bank review mission in 2005 concluded that MFIs had not appropriately used the financial support received, this component of the project was suspended. Management issues also played a key role in the cessation of assistance by the French Development Agency (FDA), which cost the sector over €2 million in assistance.8 The FDA co-financed the first phase of the RFSDP; however, after being dissatisfied with MFI mismanagement and financial crises, it ceased offering assistance in 2005.

42. The multiple challenges faced by the microfinance sector prompted the authorities to adopt in March 2004 a national strategy for the microfinance sector. This was expected to be implemented through nationwide consultation among key stakeholders, including the state, donors, management, and members of MFIs. The objective was to revive MFIs that are facing financial problems. However, the implementation of the strategy has so far been slow.

43. In the context of the national strategy, the government and other stakeholders (MFIs, donors, NGOs, etc.) prepared an eight-point action plan in 2005:

  • carry out an exhaustive survey of MFIs and collection of data;

  • formalize administrative, accounting, and financial procedures for MFIs and for the operations of various organisms;

  • revise credit policies of MFIs to ensure that these are better adapted to the current context and objectives of the sector;

  • improve the financial viability of MFIs;

  • provide support to MFIs to allow them to produce key documentation required for short- and medium-term planning (annual budgets, business plans, etc.);

  • strengthen the management and supervision of MFIs;

  • strengthen institutional capacity of individual MFIs, networks, the ANIP/MF, support and management structures, and supervisory and monitoring structures; and

  • improve reporting systems and management information systems of MFIs and set up a database of MFIs.

44. Implementation of this action plan is still at an early stage but there has been some progress. A comprehensive survey of MFIs, expected to be completed in 2007, will provide the basis for the surveillance function of the new Microfinance Supervisory Agency, which is expected to be established by decree by year-end 2006. A pilot committee established to create the legal and institutional framework for the new agency submitted its proposals to the government in June 2006. This agency will fall under the aegis of the Ministry of Economy and Finance and will function under the rules and regulations of the WAEMU.

45. Efforts to improve the financial viability of MFIs are being implemented mostly by restructuring institutions that are under administration. The restructurings of MCPEC and TAIMAKO are progressing (with the MCEPEC restructuring being supported by the World Bank (through the PDSF), FIDA (through the PDSFR), and the DID. The strategy adopted for restructuring TAIMAKO is to transform member deposits into capital, which would allow it to reduce its debt. The restructuring of these institutions will help reestablish their financial health and expand services, and could encourage further assistance from development partners.

F. Conclusions

46. The financial sector is underdeveloped, and key financial indicators lag those in other countries in the region. Nevertheless, positive developments have emerged in recent years. Indeed, the improved socioeconomic environment has resulted in several foreign banks opening in Niger and increased prospects in extractive industries, in agriculture and agribusiness, and in the services sector offer opportunities for financial sector innovation. Financial sector reforms continue and are being supported by the World Bank (through the Financial Sector Development Project (FSDP)) and other donors.

47. In a country with so few banks, especially in rural areas, MFIs can play an important role in filling the financial services gap. So far, however, the contribution of Niger’s MFIs have been undermined by mismanagement and financial problems. Key reforms under way in the regulatory and supervisory framework should help address these deficiencies. Success in attracting more external financial support and greater assistance in improving MFI capacity and professionalism would also enhance the microfinance sector’s performance

References

  • BCEAO, 2006, “Operations and Results of Banks and Financial Establishments during 2005,” September.

  • BCEAO, 2006, “Situation of Microfinance in Member States of the WAEMU at end-June 2006,” September.

  • BCEAO, 2006, “Report of the President of the National Committee of the Credit du Niger for the Second Quarter of 2006”, September.

  • BCEAO, 2002, “Monograph of Decentralized Financial Systems, Niger.”

  • BCEAO, 2005, “Monograph of Decentralized Financial Systems, Niger.”

  • Government of Niger, 2004, “Contribution of the Technical Assistant on Annual Activity Reports of Decentralized Financial Systems.”

    • Search Google Scholar
    • Export Citation

  • Government of Niger, 2005, “Contribution of the Technical Assistant on Annual Activity Reports of Decentralized Financial Systems.”

    • Search Google Scholar
    • Export Citation

  • Government of Niger, (Ministry of Economy and Finance), 2005, “Common Action Plan for Stabilization and Recovery of Decentralized Financial Systems in Niger,” September.

    • Search Google Scholar
    • Export Citation

  • Government of Niger, (Ministry of Economy and Finance), 2005, “Report of Working Group on Financial Sector,” November.

  • Government of Niger, (Ministry of Economy and Finance), (Microfinance Monitoring Unit, Ministry of Economy and Finance), 2006, “Note on Microfinance in Niger,” October.

    • Search Google Scholar
    • Export Citation

  • Luxembourg Agency for Cooperation and Development (Lux. Development S.A.), 2005 “Evaluation Report of Management Agreement of the Development Program for Artisanal Activities in Niger.”

    • Search Google Scholar
    • Export Citation

  • Nigerien Association of Professional Microfinance Institution (ANIP-MF), 2005, “2004 Activity Report,” April.

  • Nigerien Association of Professional Microfinance Institution (ANIP-MF), 2005, “Analysis of 2004 Performance of MFI member of the ANIP-MF.”

    • Search Google Scholar
    • Export Citation

  • Nigerien Association of Professional Microfinance Institution (ANIP-MF), 2006, “2005 Activity Report,” May.

  • Nigerien Association of Professional Microfinance Institution (ANIP-MF), 2006, “Financial Situation December 31, 2005,” March.

  • WAEMU Banking Commission, Annual Report, 2003, 2004 and 2005.

  • WAEMU, 2003, “Database of Decentralized Financial Systems, 2000,” July.

1

The National Postal and Saving Institution (ONPE) is being split into two entities that will separately manage postal and financial activities.

2

In interpreting the various ratios relating to total assets, readers should note that MFI assets could be higher because not all MFIs reported results of their activities to the Microfinance Monitoring Unit of the Ministry of Economy and Finance (MEF), including the 70 or so institutions that currently operate without a license.

3

The Fund has collaborated closely with the World Bank in completing studies of the CDN and CPCT.

4

The restructuring of the BINCI was part of the original project; however, because enhanced surveillance of BINCI was lifted in 2003, such a restructuring is not covered by the project.

5

Only the parent entity of MCEPEC is under administration; most members of the network are in sound financial health. Many members of UMEC are also financially sound.

6

The DID is a Canadian group specializing in providing technical assistance to community-based investment in emerging and developing countries. It is present in 20 countries in Africa, Latin America, the Caribbean, Asia, East Europe, and Central Europe.

7

The latest data reported by the BCEAO and the authorities for 2005 differ greatly. While the BCEAO reports a deterioration in the overall ratio of NPL to total credit, the authorities’ data show an improvement. A statement of the overall ratio of NPLs to total credit in 2005 is thus likely to be inaccurate at this stage.

8

The DAF initially planned to contribute €3.4 million, an amount that was reduced to €1.9 million in 2004. At the time of its pull-out, only €1.5 million had been disbursed.

References

  • Barro, R. J., 1995, “Inflation and Economic Growth,” Bank of England Quarterly Bulletin, Vol 35 (May), pp. 166–76.

  • Benhabib, J., and M. M. Spiegel, 1994, “The Role of Human Capital in Economic Development: Evidence from Aggregate Cross-Country Data,” Journal of Monetary Economics, Vol 34 (October), pp.143–73.

    • Search Google Scholar
    • Export Citation

  • Bosworth, B., and S. Collins, 2003, “The Empirics of Growth: An Update” (unpublished; Washington: Brookings Institutions).

  • Krugman, P. 1994, “The Myth of Asia’s Miracle,” Foreign Affairs, Vol 73 (November/December), pp.62–78.

  • Nachega, J.-C.T. and T. Fontaine, 2006, ” Economic Growth and Total Factor Productivity in Niger,” IMF Working Paper 06/208 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation

  • Pritchett, L., 2001, “Where Has All The Education Gone?” World Bank Economic Review, Vol 15 (3), pp. 367–91

  • Sacerdoti, E., S. Brunschwig and J. Tang, 1998, “The Impact of Human Capital on Growth: Evidence from West Africa,” IMF Working Paper 98/162 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation

  • Senhadjii, A. 2000, “Sources of Economic Growth: An Extensive Growth Accounting Exercise,” IMF Staff Papers, Vol 47 (November) pp. 129–158.

    • Search Google Scholar
    • Export Citation

  • Young, A., 1992, “A Tale of Two Cities: Factor Accumulation and Technical Change in Hong Kong and Singapore,” in NBER Macroeconomics Annual, 1992, ed. by O. J. Blanchard and S. Fischer (Cambridge, Massachusetts, and London: MIT Press).

    • Search Google Scholar
    • Export Citation

Niger: Basic Data

article image
article image
article image
article image
Sources: Ministry of Finance and Economy; and IMF staff estimates.
Table 1.

Niger: Gross Domestic Product at Constant 1987 Prices, 1998–2005

article image