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Chad

6. Financial Sector

Capital Markets and Portfolio Investment

Chad’s financial system is underdeveloped.  There are no capital markets or money markets in Chad.  A limited number of financial instruments are available to the private sector, including letters of credit, short- and medium-term loans, foreign exchange services, and long-term savings instruments.

Commercial banks offer credit on market terms, often at rates of 12 to 25 percent for short-term loans.  Medium-term loans are difficult to obtain, as lending criteria are rigid. Most large businesses maintain accounts with foreign banks and borrow money outside of Chad.  There are ATMs in some major hotels, N’Djamena airport, and in some neighborhoods of N’Djamena.

Chad does not have a stock market and has no effective regulatory system to encourage or facilitate portfolio investments.  A small regional stock exchange, known as the Central African Stock Exchange, in Libreville, Gabon, was established by CEMAC countries in 2006.  Cameroon, a CEMAC member, launched its own market in 2005. Both exchanges are poorly capitalized.

The GOC does not restrict payments and transfers for current international transactions. Access to credit is available, but is prohibitively expensive for most Chadians in the private sector.

Money and Banking System

Chad’s banking sector is small and continues to streamline lending practices and reduce the volume of bad debt. The Chadian banking rate is even lower than the average rate in the CEMAC, sub-region estimated at 12%, due to the lack of means to afford a bank account and the lack of culture aimed at popularizing the banking system. Chad’s four largest banks have been privatized. The former Banque Internationale pour l’Afrique au Tchad (BIAT) became a part of Togo-based Ecobank; the former Banque Tchadienne de Credit et de Depôt was re-organized as the Societe Generale Tchad; the former Financial Bank became part of Togo-based Orabank; and the former Banque de Developpement du Tchad (BDT) was reorganized as Commercial Bank Tchad (CBT), in partnership with Cameroon-based Commercial Bank of Cameroon.  There are two Libyan banks in Chad, BCC (formerly Banque Libyenne) and Banque Sahelo-Saharienne pour l’Investissement et le Commerce (BSCIC), along with one Nigerian bank (UBA, United Bank for Africa). In 2018, the GoC funded a new bank Banque de l’Habitat du Tchad (BHT) with the GoC as majority shareholder with 50 percent of the shares and two public companies, the National Social Insurance Fund (CNPS) and the Chadian Petroleum Company (SHT), each holding 25 percent.

 Chad, as a CEMAC member, shares a central bank with Cameroon, Central African Republic, Republic of Congo, Equatorial Guinea, and Gabon – the Central African Economic Bank (BEAC, Banque des Etats de l’Afrique Centrale), headquartered in Yaounde, Cameroon.   

Foreigners must establish legal residency in order to establish a bank account.

Foreign Exchange and Remittances

Foreign Exchange

The government does not restrict converting funds associated with an investment (including remittances of investment capital, earnings, loan repayments, lease payments, royalties) into a freely usable currency at legal market-clearing rates.  There are no restrictions on repatriating these funds, although there are some limits associated with transferring funds. Individuals transferring funds exceeding USD 1,000 must document the source and purpose of the transfer with the local sending bank.  Companies and individuals transferring more than USD 800,000 out of Chad need BEAC authorization to do so. Authorization may take up to three working days. To request authorization for a transfer, companies and individuals must submit contact information for the sender and recipient, a delivery timetable, and proof of the sender’s identity.  There were no reports of other capital outflow restrictions in 2017. Businesses can obtain advance approval for regular money transfers.

Chad is a member of the African Financial Community (CFA) and uses the Central African CFA Franc (FCFA) as its currency.  The FCFA is pegged to the Euro at a fixed rate of one Euro to 655.957 FCFA exactly (100 FCFA = 0.152449 Euro). In 2018, the CFA/USD exchange rate fluctuated between 565 and 625 FCFA as a function of the performance of the USD against the Euro.  There are no restrictions on obtaining foreign exchange.

Remittance Policies

There are no recent changes to or plans to change investment remittance policies.  There are no time limitations on remittances, dividends, returns on investment, interest, and principal on private foreign debt, lease payments, royalties, or management fees. 

Chad does not engage in currency manipulation.

Chad is a member state of the Action Group against Money Laundering in Central Africa (GABAC), which is in the process of becoming a Financial Action Task Force (FATF)-style regional body.  On the national level, the National Financial Investigation Agency (ANIF) has implemented GABAC recommendations to prevent money laundering and terrorist financing.

Sovereign Wealth Funds

The GOC does not currently maintain a Sovereign Wealth Fund. 

Congo, Democratic Republic of the

6. Financial Sector

Capital Market and Portfolio Investment

The Congolese financial system continues to improve with new regulations and guidelines seeking to maintain stability and consolidate the system.  Although reforms have been initiated, the Congolese financial system remains small, heavily dollarized, characterized by fragile balance sheets, and cumbersome to use.  The GDRC backed away from its short-lived (2013-2016) de-dollarization program, and further reforms are needed to strengthen the financial system, support the expansion of the financial sector, and spur economic growth.  Shock resilience is undermined by inadequate risk-based controls, weak enforcement of regulations, low profitability, and excessive reliance on demand deposits.  The system is also characterized by a significant concentration of credit and exposure to systemic failure in the event of the insolvency of a large borrower.

Financial inclusion is increasing, but substantial progress is needed to develop payment systems, facilitate the use of financial services, and strengthen regulation of the non-banking sector. Consolidation and strengthening of microfinance along with reform of the pension sub-sector and continued privatization of the insurance sector could facilitate the expansion of financial services and attract long-term investors.

The DRC’s capital market remains underdeveloped and consists mainly of the issuance of treasury bonds.  There are no stock exchanges operating in the country, although a small number of private equity firms are actively investing in the mining industry.

The institutional investor base is not well developed, with only an insurance company and a state pension fund as participants.  The Central Bank of Congo (BCC), developed a market for short-term bonds, but most of these bonds are bought and held by local Congolese banks.  In the absence of private debt securities, the fixed-rate market is limited to government-issued treasury bonds with maturities of up to 28 days traded through commercial banks.

Access to the primary market is limited to commercial banks holding securities accounts at the BCC, and all investors, including institutional and individual investors, must submit bids through banks.  Commercial banks, which dominate the investor base, may trade in treasury bills in the secondary market, but in order to do so, bids and prices for which they agree to trade must be transparent and publicized.  There is no market for derivatives in the country.

The DRC suffers from a weak and fragile financial infrastructure.  National payment systems are not governed by central legislation, although the DRC’s National Payments and Settlement Committee is in the process of proposing legal reform through a draft bill that was proposed in 2016, has been adopted by the DRC Senate, and, as of the date of this report, is before the National Assembly for a second reading.

The Central Bank worked for a decade to implement reform on the national payment system via a gradual and interactive approach that identified and corrected deficiencies at each stage. This culminated with the Central Bank inaugurating in September 2017 an automated system that supports customer transfers, regulation of monetary policy operations, and the processing of transactions for the regional payment system-REPSS, set up by COMESA member countries. The system also includes an interbank automated clearing module for check payments, collections, and bills of exchange.

Borrowing options for small and medium enterprises (SME) are limited.  Maturities for loans are usually limited to 3-6 months, and interest rates typically hover around 16-21 percent.  Several companies complain that the inconsistency of the legal system, the often-cumbersome business climate, and the difficulty in obtaining inter-bank financing discourages banks from providing long-term loans.  There are limited possibilities to finance major projects in the domestic currency, the Congolese franc (CDF).  The Central Bank sets minimum capital requirements for local banks in CDF or its equivalent in USD.  Prior to 2016, the average was roughly USD 12 million per bank, but the economic downturn prompted the Central Bank to mandate an increase to USD 30 million by January 2019.  Foreign currency deposits account for almost 90 percent of bank holdings.

As for the insurance sector, the DRC Insurance Authority, ARCA, began implementing privatization of the sector in 2018, granting licenses to four private insurance companies.  These approvals came four years after passage of the 2015 Insurance Reform Law, and three years after the decree establishing ARCA as the regulator of the insurance sector.  Once the state owned insurance company SONAS is fully privatized, the DRC insurance sector should operate under competitive market conditions.  While analysts estimate that the DRC insurance market could be worth roughly USD 5 billion in ten years’ time, the current Congolese insurance market comprises roughly USD 80 million worth of insurance premiums for a penetration rate of only 0.5 percent.

Portfolio investment is absent in the DRC.  Cross-shareholding and stable shareholding arrangements are also not common.  There are occasional complaints about unfair privileges extended to certain investors in profitable sectors such as mining and telecommunications.

Money and Banking system

The Congolese financial system is growing but it remains fragile and operates primarily through the Central Bank.  The financial sector is comprised of 17 licensed banks, a national insurance company (SONAS), the National Social Security Institute (INSS), one development bank, SOFIDE (Société Financière de Development), a savings fund (CADECO), 102 microfinance institutions and cooperatives, 95 money transfer institutions which are concentrated in Kinshasa, Kongo Central, North and South Kivu and the former Katanga provinces, three electronic money institutions, and 23 foreign exchange offices. There is no secondary equity or debt market.

The Congolese Central Bank developed a charter of compliance with international financial rules that has been accepted by virtually all banks operating in DRC.  The stricter regulatory regime put in place after the global financial crisis increased bank compliance costs, however, and the resultant “de-risking” saw the bank lose two of its three remaining correspondent banks.  It currently works with one correspondent bank, Citigroup. All foreign banks accredited by the Congolese Central Bank are considered Congolese banks with foreign capital and fall under provisions and regulations covering the credit institutions’ activities in the DRC.

The financial system is mostly banking-based with aggregate holdings estimated at USD 5.1 billion, about 95 percent of the overall holdings of the financial system. Bank deposits account for about 90 percent of total deposits, with the balance held by microfinance institutions.  Among the five largest banks, four are local and one is controlled by foreign holdings.  The five largest banks hold almost 65 percent of bank deposits and more than 60 percent of total bank assets.

Bank financing is dominated by the collection of deposits, nearly 90 percent of which are denominated in U.S. dollars and held in demand accounts.  Bank operations are highly dollarized and financed largely by demand deposits.  Nearly 95 percent of loans are in dollars, and clients are mainly companies seeking working capital primarily for daily operations and import/export activities.  National and local government entities have significant balances in some banks (deposits in dollars used for investments) and also borrow funds from a few banks to finance administrative expenses.  Statistics on non-performing loans do not seem reliable.  According to the Central Bank’s regulatory framework, many banks only record the balance due rather than the total amount of the non-performing loan.

Transactions involving correspondence with associated foreign banks represent a significant part of the activities of DRC banks.  Correspondent accounts represent more than 30 percent of bank assets and more than 95 percent of interbank market activity.  They allow banks to settle transactions denominated in dollars, reflecting efforts to limit risks.  The profitability of the banks is fragile and has deteriorated over the last year, reflecting high operating costs and exchange rates.  Fees charged by banks are a major source of their revenues.

The banking system faces challenges in terms of net income and profitability.  In 2018, the banking system recorded a steady increase in net banking income and confirmed a strengthening and enrichment of banks.  Yet, the banking sector struggled to offset the increase in its cost/income ratio and the deterioration in the quality of its loan portfolio.

The DRC has roughly USD 4.6 billion of deposits in the banking system, up from USD 3.7 billion in 2017.  The 2018 Mining Code increased the percentage of export revenue that mining companies are required to repatriate from 40 percent to 60 percent.  This likely accounts for a good proportion of the increase in deposits, and will contribute to a further increase in 2019.  An estimated USD 10 billion of savings exist outside of banks informally.  Most deposits in the formal system are U.S. dollar-denominated.  A slight increase in bank penetration occurred after 2011 as the GDRC switched public employee payments from cash to bank transfers.

Bank penetration is roughly 6 percent or about 3.9 million accounts, which places the country among the most under-banked nations in the world.  Based on its strategic plan, the Central Bank seeks to increase the number of bank accounts to more than 20 million by 2030.  Banks are increasingly offering savings accounts that pay approximately 3 percent interest, but few Congolese hold savings in banks.

The overall balance sheet of the banks amounted to roughly USD 6.9 billion in 2018.  Credit volume is estimated at roughly USD 2.8 billion in comparison to USD 1.9 billion in 2017.  Credit remains scarce, short-term, and highly concentrated.  Domestic credit granted by banks increased from USD 1.9 billion in 2017 to USD 2.8 billion in 2018.  In 2018, the largest depositors in the banking system are private enterprises and households with 48 and 40 percent of deposits, respectively.  Public enterprises and central administration deposits comprise six percent and four percent, respectively.

Foreign Exchange and Remittance

Foreign Exchange

As part of broad economic reforms begun in 2001, the DRC adopted a free-floating exchange rate policy and lifted various restrictions on business transactions, including in the mining sector.  The international transfer of funds takes place freely when channeled through local commercial banks.  On average, bank declaration requirements and payments for international transfers take less than one week to complete.

The Central Bank is responsible for regulating foreign exchange and trade.  The only currency restriction imposed on travelers is a USD 10,000 limit on the amount an individual can carry when entering or leaving the DRC.  The GDRC requires that the Central Bank license exporters and importers.  The DRC’s informal foreign exchange market is large and unregulated and has tended to offer exchange rates not widely dissimilar from the official rate.  In practice, the nation’s economy remains highly dollarized.

On September 25, 2014, the Central Bank put into place new foreign exchange regulations. These regulations declared the Congolese franc (CDF) as the main currency in all transactions within the DRC.  Payment of fees related to education, medical care, water and electricity consumption, residential rents, and national taxes were mandated to be paid in CDF.  In the last several years, this requirement has been relaxed and where the parties involved and the appropriate monetary officials agree, exceptions may, and routinely are, made.

Any payments exceeding USD 10,000 must be executed within the banking system, unless there is no presence of banking entities.  The largest, albeit rarely used, banknote in circulation is the CDF 20,000 note (approximately USD 12.36).  Far more common are the CDF 500 and CDF 1,000 notes worth approximately USD 0.30 and USD 0.61 respectively.  U.S. banknotes printed after 2008 are readily accepted in virtually all transactions, with the exception of one-dollar bills.  Banks provide accounts denominated in either currency.  In September 2013, the GDRC embarked on a process of “de-dollarizing” the economy by requiring that tax records be kept in CDF and tax payments from mining companies be paid in CDF.  In March 2016, however, as a result of a dollar shortage, the GDRC began requiring mining and oil companies to pay their customs fees and taxes in U.S. dollars.

The economic forecast calls for continuing inflation and currency depreciation over the long term, but the currency has remained stable since August 2017.  The annualized inflation rate, which was stable at an average 1.4 percent from 2013 through 2015, increased to 54 percent in 2017 and decreased to 7.2 percent in 2018.  As of April 2018, foreign exchange reserves totaled USD 1 billion or 4.2 weeks of import cover in comparison to the 2017 level of USD 859 million 2.9 weeks of cover.  If government revenues from the extractive sectors continue to increase, the Central Bank will again have the option to support the CDF and maintain currency stability.

Remittance Policies

Although there is no legal restriction on converting or transferring funds related to investment, new exchange regulations will increase the time for in-country foreigners to repatriate export and re-export income from 30 to 60 days.  Foreign investors may remit through parallel markets when they are legally established and recognized by the Central Bank.

Sovereign Wealth Funds

The DRC has no reported Sovereign Wealth Funds, though the 2018 Mining Code discusses a Future Fund that is to be capitalized by a percentage of mining revenues.

Congo, Republic of the

6. Financial Sector

Capital Markets and Portfolio Investment

ROC maintains a neutral attitude toward foreign portfolio investment and does not widely practice foreign portfolio investment.

ROC does not have a stock exchange. ROC-based companies may seek regional listing on the Douala Stock Exchange (DAC), which merged with the CEMAC Zone Stock Exchange (BVMAC). The regional central bank, BEAC, determines monetary and credit policies within the CEMAC framework to ensure the stability of the common regional currency.

Existing policies facilitate the free flow of financial resources, though complex products are not widely used.

The government and central bank respect IMF Article VIII and do not impose restrictions on international payments and transfers.

The central bank (BEAC) monitors credits and market terms. Foreign investors can easily obtain credit on the local market.  As an immature financial market, the ROC offers a limited range of credit instruments.

Money and Banking System

ROC’s banking sector lags behind regional peers. The regulatory body of the Central Bank of Central African States (BEAC), the Banking Commission of Central Africa (COBAC), supervises the Congolese banking sector.  Banking penetration likely remains in the five-to-seven percent range, although a government survey conducted in 2015 estimated a rate of 25-30 percent. High intermediation costs and high collateral requirements limit the pool of customers.  The 13 banks that operate in ROC suffer from strained liquidity and generally have deposits that outpace credit. Microfinance banks and electronic banking remain the fastest growth areas in the banking sector.

The current economic crisis and the government’s consecutive years of fiscal deficits have additionally strained the banking sector over the past five years.

Non-performing loans remained steady at approximately five percent in 2018.

Fiscal transparency issues limit any estimate of the total assets controlled by ROC’s largest banks.  The assets of the largest banks have likely decreased significantly in recent years as a result of the economic crisis.

ROC participates in the Central African Economic and Monetary Community (CEMAC) zone and the Central Bank of the Central African States (BEAC) system.

Foreign banks and branches may operate in ROC and constitute the majority of banking operations in ROC. BEAC banking regulations govern foreign and domestic banks in ROC. No banks have left ROC in the past three years.

No known restrictions exist on a foreigner’s ability to establish a bank account.

Foreign Exchange and Remittances

Foreign Exchange

No known legal restrictions or limitations exist against converting, transferring or repatriating funds associated with an investment, including remittances. CEMAC regulations require banks to record and report the identity of customers engaging in transactions valued at over USD 10,000. Financial institutions must maintain records of large transactions for a minimum of five years. The General Director of Monies and Credit (DGMC) within the Ministry of Finance oversees exchange control. Investors may remit on a legal parallel market with approval from the DGMC. The Central Bank (BEAC) recently began monitoring fund transfers larger than USD 100,000.

Foreign investors may hold local bank accounts and report no difficulty obtaining foreign assets (currencies) from any of the major commercial banks, which include French, Chinese, Moroccan, or African banks. No U.S.-based banks operate in ROC, but transfers directly to and from the United States are possible.

ROC and other CEMAC member states use the Central African CFA Franc (FCFA, sometimes abbreviated XAF) as a common currency. The CFA is pegged to the Euro as an intervention monetary unit at a fixed exchange rate of EUR 1: CFA 655.957. This agreement guarantees the availability of foreign exchange and the unlimited convertibility of the CFA Franc. It also provides considerable monetary stability to the ROC and other CEMAC countries. The exchange rate between the CFA Franc and the U.S. dollar fluctuates according to the exchange rate between the Euro and the U.S. dollar.

Remittance Policies

There have been no recent changes or plans to change investment remittance policies that either tighten or relax access to foreign exchange for investment remittances.

No known time limitations on remittances exist.

Sovereign Wealth Funds

ROC maintains no formal Sovereign Wealth Fund (SWF), although the Parliament adopted a law enabling the creation of a SWF. The law envisages establishment of the SWF at the BEAC and acquiring mostly risk-free foreign assets.

No official sovereign wealth fund exists.

Gabon

6. Financial Sector

Capital Markets and Portfolio Investment

The Gabonese government encourages and supports foreign portfolio investment, but Gabon’s capital markets are poorly developed.  Gabon has been home to the Central Africa Regional Stock Exchange, which began operation in August 2008.  However, the Bank of Central African States is in the process of consolidating the Libreville Stock Exchange into a single CEMAC zone stock exchange to be based in Doala, Cameroon by July 2019.

There are no existing policies that facilitate the free flow of financial resources into the product and factor markets.

On June 25, 1996, Gabon formally notified the IMF that they accepted the obligations of Article VIII, Sections 2, 3, and 4 of the IMF Articles of Agreement. Article VIII, Sections 2 and 3 provides that members shall not impose or engage in certain measures, namely restrictions on making payments and transfers for current international transactions, discriminatory currency arrangements, or multiple currency practices, without the approval of the Fund.

Foreign investors are authorized to get credit on the local market and have access to all the variety of credits instruments offered by the local banks, without any restrictions.

Money and Banking System

The banking sector is composed of seven commercial banks and is open to foreign institutions.  It is highly concentrated, with three of the largest banks accounting for 77 percent of all loans and deposits.  The lack of diversified economy has constrained bank growth in the country, given that the financing of the oil sector is largely undertaken by foreign international banks.  Access to banking services outside major cities is limited.

The IMF December 2018 report indicated “the banking sector appears broadly sound and profitable,” although the non-performing loan ration was relatively high at 11.3 percent in the first quarter of 2018.  Three public banks are under liquidation. Protracted low oil prices have had an impact on banking activities. Furthermore, CEMAC regulations on currency transfer established in 2000 began to be enforced in earnest in late 2018, restricting access to foreign currency.  At least one commercial bank lost its dollar correspondent banking relationship in 2018.   Gabon estimated the net deposit money of banks in the third quarter of 2018 at 435 billion CFA (USD 725 million).

Gabon shares a common Central Bank (Bank of Central African States) and a common currency, the Communauté Financière Africaine (CFA) Franc, with the other countries of CEMAC.  The CFA is pegged to the euro.

Foreign banks are allowed to establish operations in the country.  There is one U.S. bank (Citigroup) present in Gabon. There are no restrictions on a foreigner’s ability to establish a bank account.

Gabon’s financial system is shallow and financial intermediation levels remain low compared to other developing countries.  The government plays an important role in the financial sector. It controls two of the nine banks and has a stake in most of the others.  Domestic credit is limited and expensive in Gabon. The microfinance sector is only just starting to emerge in the country with few regulated microfinance institutions (MFIs) registered, covering only a limited segment of the population.  However, a substantial number of informal, unregulated MFIs are believed to operate in the country. Banks, even though highly liquid, are extremely prudent in providing credit. The majority of the population lacks access to any type of financial services, as even traditional informal mechanisms, prevalent in other African economies, are scarce.  In efforts to increase access to finance, Gabon has recently supported the establishment of a development and growth fund to support small and medium enterprises, as well as the creation of a specialized agency to promote private investment.

Foreign Exchange and Remittances

Foreign Exchange Policies

The Bank of Central African States’ policy on foreign exchange requirements is in flux.  Please contact the Embassy for additional information.

Gabon’s currency is CFA, which is convertible and tied to the Euro (EUR 1 equals CFA 656).  As of March 2019, 1 U.S. dollar is roughly equivalent to CFA 612.

Remittance Policies

There government recently changed investment remittance policies to tighten access to foreign exchange for investment remittances.  There is no time limitation on capital inflows or outflows.

Sovereign Wealth Funds

Gabon created a Sovereign Wealth Fund (SWF) in 2008.  Initially called the Fund for Future Generations (Fonds des Génerations Futures) and later the Sovereign Funds of the Gabonese Republic (Fonds Souverain de la République Gabonaise), the current iteration of Gabon’s SWF is referred to as Gabon’s Strategic Investment Funds (Fonds Gabonaise d’Investissements Stratégiques, or FGIS).  As of September 2013, the most recent FGIS report, the FGIS had a reported USD 2.4 billion in assets and was actively making investments.  The FGIS has the goals of allowing future generations to share income derived from the exploitation of Gabon’s natural resources, diversifying risk by investing surplus revenue, contributing to economic development, and encouraging investment in strategic sectors of Gabon’s economy.  Officially, 10 percent of Gabon’s annual oil revenues are dedicated to the sovereign wealth fund. Details regarding the FGIS’ assets and investments are not publicly available. Gabon’s sovereign wealth fund does not follow Santiago principles, nor does Gabon participate in the IMF-hosted International Working Group on SWFs.

Kenya

6. Financial Sector

Capital Markets and Portfolio Investment

Though relatively small by Western standards, Kenya’s capital markets are the deepest and most sophisticated in East Africa.  The Kenyan capital market has grown rapidly in recent years and has also exhibited strong capital raising capacity. The bond market is underdeveloped and dominated by trading in government debt securities.  The government domestic debt market, however, is deep and liquid. Long-term corporate bond issuances are uncommon, leading to a lack of long-term investment capital.

Foreign investors can obtain credit on the local market; however, the number of available credit instruments is relatively small and the government’s interest rate cap since 2016 continues to constrain the availability of credit.  Legal, regulatory, and accounting systems are generally aligned with international norms. The Kenyan National Treasury has launched its mobile money platform government bond to retail investors locally. The name of the product is M-Akiba, through which local Kenyans are able to purchase bonds as small as USD 30 on their mobile phones.  The product was enthusiastically received and generated 400,000 new accounts in the first two weeks of its issuance. The GOK expects to issue USD 10 million over this platform in 2019 in an effort to deepen financial inclusion and financial literacy.

The Central Bank of Kenya (CBK) is working with regulators in EAC member states through the Capital Market Development Committee (CMDC) and East African Securities Regulatory Authorities (EASRA) on a regional integration initiative and has successfully introduced cross-listing of equity shares.  The combined use of both the Central Depository System (CDS) and an automated trading system has moved the Kenyan securities market to globally accepted standards. Kenya is a full (ordinary) member of the International Organization of Securities Commissions Money and Banking System.

Money and Banking System

The Kenyan banking sector in 2018 included 47 commercial banks, one mortgage finance company, 14 microfinance banks, eight representative offices of foreign banks, 74 foreign exchange bureaus, 18 money remittance providers, and three credit reference bureaus.  Kenya also has 12 deposit-taking microfinance institutions. Of Kenya’s 47 banking institutions, 28 are locally owned and 13 are foreign owned. Major international banks operating in Kenya include Citibank, Barclays, Bank of India, Standard Bank (South Africa), and Standard Chartered.

In March, 2017, CBK lifted its moratorium on licensing new banks, issued in November 2015 following the collapse of Imperial Bank and Dubai Bank.  The CBK’s decision to restart licensing signaled a return of stability in the Kenyan banking sector. JPMorgan Chase has expressed interest in setting up a representative office in Nairobi and Qatari National Bank (QNB) is interested in arranging a Sukuk (sovereign bond) for Kenya. In 2018, Societé Generale (France) also set up a representative office in Nairobi.

In August 2016, President Kenyatta signed into law the Banking Act (2016), which caps the maximum interest rate banks can charge on loans at four percent above the CBK’s benchmark lending rate.  It further provides a floor for the deposit rate held in interest earning accounts to at least 70 percent of the CBK benchmark rate. The cap has hurt the GOK’s ability to raise funds in the local debt market.  The cap also has slowed the consumer and small and medium business credit market. The International Monetary Fund and other observers have warned that the restrictions will result in a continuing contraction in the availability of credit.  In March 2019, the Supreme Court found the interest rate cap to be unconstitutional, but suspended its ruling for 12 months to provide Parliament an opportunity to review the cap.

In the ongoing land registry digitization process, the Kenyan Government is working on a database, known as the single source of truth (SSOT), to eliminate fake title deeds in the Ministry of Lands.  The SSOT database development plan is premised on blockchain technology – distributed ledger technology – as the primary reference for all land transactions. The SSOT database would help the land transaction process to be efficient, open, and transparent.

The percentage of Kenya’s total population with access to financial services through conventional or mobile banking platforms is approximately 80 percent.  According to the World Bank, M-Pesa, Kenya’s largest mobile banking platform, processes more transactions within Kenya each year than Western Union does globally.  In September 2018, 30 million Kenyans were using mobile phone platforms to transfer money, according to the Communication Authority of Kenya. The 2017 National ICT Masterplan envisages the sector contributing at least 10 percent of GDP, up from 4.7 percent in 2015.  Several mobile money platform have achieved international interoperability, allowing the Kenyan diaspora to conduct financial transactions in Kenya from abroad.

Foreign Exchange and Remittances

Foreign Exchange Policies

Kenya has no restrictions on converting or transferring funds associated with investment.  Kenyan law requires the declaration to customs of amounts greater than KSH 1,000,000 (approximately USD 10,000) or the equivalent in foreign currencies for non-residents as a formal check against money laundering.  Kenya is an open economy with a liberalized capital account and a floating exchange rate. The CBK engages in volatility controls aimed exclusively at smoothing temporary market fluctuations. Between June 2015 and June 2016, the Kenyan shilling declined 3.5 percent after a sharp decline of 15 percent during the same period in 2014/2015.  In 2018, foreign exchange reserves remained relatively steady. The average inflation rate was between 3.7-5.7 percent in 2018 and the average rate on 91-day treasury bills had fallen to 7.75 percent in 2018. According to CBK figures, the average exchange rate was KSH 101.3to USD 1.00 in 2018.

Remittance Policies

Kenya’s Foreign Investment Protection Act (FIPA) guarantees capital repatriation and remittance of dividends and interest to foreign investors, who are free to convert and repatriate profits including un-capitalized retained profits (proceeds of an investment after payment of the relevant taxes and the principal and interest associated with any loan).

Foreign currency is readily available from commercial banks and foreign exchange bureaus and can be freely bought and sold by local and foreign investors.  The Central Bank of Kenya Act (2014), however, states that all foreign exchange dealers are required to obtain and retain appropriate documents for all transactions above the equivalent of KSH 1,000,000 (approximately USD 10,000).  As of March 2018, the CBK has licensed 18 money remittance providers following the operationalization of the Money Remittance Regulations in April 2013.

Kenya is listed as a country of primary concern for money laundering and financial crime by the State Department’s Bureau of International Narcotics and Law Enforcement.  Kenya was removed from the inter-governmental Financial Action Task Force (FATF) Watchlist in 2014 following progress in creating the legal and institutional framework to combat money laundering and terrorism financing.

Sovereign Wealth Funds

Kenya is in the process of establishing a sovereign wealth fund under the Kenya National Sovereign Wealth Fund Bill (2014).  The fund would receive income from any future privatization proceeds, dividends from state corporations, oil and gas, and minerals revenues due to the national government, revenue from other natural resources, and funds from any other source.  The bill remains under internal review and stakeholder consultations.

The Kenya Information and Communications Act (2009) provides for the establishment of a Universal Service Fund (USF).  The purpose of the USF is to fund national projects that have significant impact on the availability and accessibility of ICT services in rural, remote, and poor urban areas.  The USF has amassed sizeable assets, but to date, the fund and its managing committee have not been able to mobilize it for use on any project.

Madagascar

6. Financial Sector

Capital Markets and Portfolio Investment

There is no stock exchange in Madagascar, though the private Mercantile Exchange Madagascar (MEX), launched crypto-currencies (bitcoin and ethereum) in January 2018.

The Central Bank and the Ministry of Finance require documents prior to any transfer of currency to foreign countries.  There is no ceiling imposed to international transactions but justification remains mandatory.

Credit is allocated on market terms and the Government/Central Bank does not cap.  The Central Bank uses indirect tools to limit credit/loans, such as reserve requirements ratio (13 percent of deposits) imposed on banks.  Foreign investors are able to get credit on the local market if they have an officially registered company/subsidiary located in the country.

The private sector has access to a variety of credit instruments, such as short, medium, and long-term loans in different categories (e.g., credit lines and leasing).  The Government does not limit the amount of credit available.

Money and Banking System

Madagascar’s financial sector is comprised of 11 commercial banks, one of which is local, with the rest subsidiaries of foreign banks, mostly based in Mauritius, France, and mainland Africa.  The top four banks account for more than 80 percent of assets and deposits. Only 12 percent of the population has a bank account, which includes accounts with microfinance institutions. The vast majority of the banking clientele is therefore represented by corporate or professional entities.

The sector is stable and highly profitable with a return on equity of approximately 31 percent.  The overall assets of all banks amount $2.1 billion. Following the IMF recommendation for further independence, the Central Bank has adopted a new chart in which two Deputy Governors assist the Governor, one dealing with the monetary policy and the other with all administration affairs.

In order to establish a bank account, foreigners must have established residency status.

Foreign Exchange and Remittances

Foreign Exchange

To date, there is no restriction on capital inflows and outflows; however, justification is mandatory before sending money overseas.

Funds must be converted into any world currency.  U.S. dollars and Euros are the most used foreign currencies.

The Central Bank performs a managed floating exchange rate. The exchange rate is neither fixed nor pegged to any major foreign currency.  However, the Central Bank allows it to fluctuate within a band of 2 percent (up or down) in a daily basis in order to avoid abrupt variation.  Therefore, whenever the local currency tends to fall beyond 2 percent within a day, the Central Bank intervenes by selling its reserve to respect the maximum acceptable daily variation rate.

Remittance Policies

There are no restrictions on converting or transferring funds associated with foreign investment, including remittances of investment capital, earnings, loan repayments, and lease payments.

There are no plans to change remittance policies that have tightened or relaxed access to foreign exchange for investment remittances.  There is no limitation on the inflow or outflow of funds for remittances of profits, debt service, capital, and returns on intellectual property.

Sovereign Wealth Funds

No Sovereign Wealth Fund (SWF) or Asset Management Bureau (AMB) exist in the country, aside from the Privatization Trust Fund established in 1996, whose sole function is to manage the State’s minority shares in privatized enterprises in preparation for their auction to the local private sector.  All of the Privatization Trust Fund’s investments are domestic, given that the shares it holds are the remaining minority shares of the State resulting from the privatization of earlier state-owned companies. The fund adopts a passive role as a portfolio investor and does not take an active role in the management of the assets in which it holds shares.

Malawi

6. Financial Sector

Capital Markets and Portfolio Investment

The Malawi government recognizes the importance of foreign portfolio investment and has made efforts to provide a platform for such investment through the establishment of a Malawi Stock Exchange (MSE, www.mse.co.mw  ).

The Malawi Stock Exchange (MSE www.mse.co.mw  ) hosts about a dozen listed companies with a total market capitalization of USD 1.76 billion as of December 31, 2018.  Most of these companies are local. The demand and supply of shares for existing listed companies is limited. The RBM regulates the MSE, which is governed by the Companies Act, Capital Market Development Act (1990), Capital Market Development Regulations (1992) as amended in 2013, and the Securities Act (2010).

Foreign investors can buy and sell shares at the stock market without any restrictions.  Trading in shares can either be direct or through any one of four established brokers. There is a secondary market in government securities, and both local and foreign investors have equal access to purchase these securities.

Malawi respects obligations under IMF article VIII and therefore refrains from imposing restrictions on making payments and transfers for current international transactions or from engaging in discriminatory currency arrangements or multiple currency practices without IMF approval.

Liquidity for stock market participation is not a major problem with a variety of credit instruments on hand.  Credit is generally allocated on market terms. The main problem is the cost of credit given high rates of inflation in recent years, though currently below 10 percent.  Foreign investors may utilize domestic credit, but proceeds from investments made using local resources are not remittable.

Money and Banking System

According to the Institute of Bankers in Malawi, only 25 percent of the adult population in Malawi uses banking services.  Access to credit remains one of the biggest challenges for businesses and particularly SMEs, mostly due to the cost of credit (the base-lending rates in March 2019 was 14.9 percent).  There is a huge potential for using mobile banking technology to increase financial access in Malawi.

Malawi has a generally sound banking sector, overseen and regulated by the RBM — the central bank. In 2018, there were nine full-service commercial banks with over 150 branches across the country.  The banking sector remained profitable and stable with adequate liquidity and capital positions throughout 2018. Prudential regulations have limited net foreign exchange exposure and non-performing loan rates continue to fall, though spreads continue to be high.  The sector, however, is highly concentrated. Total bank assets as of December 2018 were estimated at USD 2.2 billion, 46 percent of which fell under two banks, National Bank (USD 571 million) and Standard Bank (USD 434 million).

The RBM plays a critical role in ensuring efficiency, reliability, and integrity of the payment system in Malawi.  It is also a supervisory authority over commercial banks and other financial institutions including insurance companies.

There are no restrictions on foreign banks in Malawi.  The Banking Act provides the regulations applicable to commercial banks and other financial institutions and provides a supervisory mandate to the Reserve Bank.  As at December 2018, four of nine banks were foreign owned.

The RBM maintains correspondent banking relationships with almost all central banks across the world and 14 major banks in Asia, Europe, Africa, and the United States.  Major commercial banks in Malawi also maintain correspondent banking relationships with banks from Europe, Asia, the United States, and within Africa.

Malawian banks require that a foreigner possess a TEP or business residency permit before opening a bank account.

Foreign Exchange and Remittances

Foreign Exchange

Government policy seeks to ensure the availability of foreign exchange for business transactions and remittances in order to attract investors and spur economic growth.  Commercial banks may operate as forex dealers. Investors have access to forex with no legal limitation, both to pay for imports and to transfer financial payments abroad.  Specifically, there are no licensing requirements to import forex and full repatriation of profits, dividends, investment capital, and interest and principal payments for international loans is permitted, once the loan and/or investment is registered with the RBM.  Malawian investors seeking foreign financing must seek permission from the RBM before acquiring an international loan.

The Malawi Kwacha (MWK) is convertible into major world currencies such as the U.S. Dollar, British Pound, Euro, Japanese Yen, Chinese Yuan, and South African Rand, as well as key regional and trading partners’ currencies.  Since May 7, 2012, the value of the local currency, the MWK, has floated freely against major world currencies. Float aside, the MWK/USD rate has remained remarkably stable over the two years to April 2019. Foreign exchange is available throughout the year and Malawi’s official foreign exchange reserves, as of April 2019, are sufficient to cover approximately three months of imports.

Remittance Policies

Investment remittance policies in Malawi have not changed in the past year.  There are no restrictions on remittance of foreign investment funds (including capital, profits, loan repayments, and lease repayments) as long as the capital and loans were obtained from foreign sources and registered with the RBM (www.rbm.mw  ).  The terms and conditions of international loans, management contracts, licensing and royalty arrangements, and similar transfers require initial RBM approval.  The RBM grants approval according to prevailing international standards; subsequent remittances do not require further approval. All commercial banks are authorized by the RBM to approve remittances, and approvals are automatic if the applicant’s accounts have been audited and sufficient forex is available.

Sovereign Wealth Funds

Malawi does not have a Sovereign Wealth Fund or similar entity.

Niger

6. Financial Sector

Capital Markets and Portfolio Investment

Niger’s government welcomes foreign portfolio investment where possible.

Niger’s capital markets are extremely underdeveloped and there is no stock market. Although an effective regulatory system exists, and policies in fact encourage portfolio investment, there is little market liquidity and hence little opportunity for such investment. The agency UMOA-Titres (AUT), a regional agency to support public securities issuance and management in the WAEMU (bonds market), is dedicated to helping member states use capital markets to raise the resources they need to fund their economic development policies at reasonable cost.

There are no limits on the free flow of financial resources.

The government works closely with the IMF to ensure that payments and transfers overseas occur without undue restrictions. Credit is allocated on market terms and foreigners do not face discrimination.

Credit is allocated on market terms through large corporations. Although foreign investors are generally able to get credit on the local market, limited domestic availability tends to drive investors to international markets. To access a variety of credit instruments, the private sector often looks to multinational institutions in Niger or international sources for credit. Private actors in the agriculture, livestock, forestry, and fisheries sectors (which account for more than 40 percent of GDP) receive less than one percent of total bank credit.

Money and Banking System

Less than three percent of Nigeriens have a bank account and the debt rate of the financial sector, measured by the ratio money supply, is at 24.1 percent in 2012 (the average for the sub-region is 32 percent).The banking sector in Niger is generally healthy and well capitalized.

As of December 31, 2017, the resources mobilized by the banking system amounted to 1096.5 billion CFA (1.9 billion USD), an increase of 63.1 billion cfaf (112.5 million USD) or 6.1 percent compared to the same period of 2016. This evolution mainly explained by the increase in net capital of banks by 34.9 billion cfaf (62.3 million USD) or 27.3 percent and the increase of borrowing deposits by 16.3 billion CFA (29 million USD) or 2.0 percent. Demand deposits represent more than half of the total resources of the sector throughout the period under review. Foreign banks control about 80 percent of the sector’s assets, with SONIBANK, BIA Niger, Ecobank and Bank of Africa (BOA) being the largest banks operating in the country.

The Central Bank of West African States governs Niger’s banking institutions and sets minimum reserve requirements through its national Central Bank representation.

There are no restrictions on a foreigner’s ability to establish a bank account, and foreign banks and their subsidiaries operate within the economy without undue restrictions. Niger is a part of the West African Economic and Monetary Union (WAEMU), which utilizes the CFA, pegged to the Euro at 655.61 CFA per euro.

Foreign Exchange and Remittances

Foreign Exchange

There are no restrictions or limitations placed on foreign investors in converting, transferring, or repatriating funds associated with an investment, including remittances.

Funds are freely convertible into any world currency. However, the government must approve currency conversions above 2 million CFA (approximately 3,413 USD).

The exchange rate is determined via the euro’s fluctuations on the international currency market. The CFA is pegged to the euro.

Remittance Policies

Niger’s Investment Code offers the possibility to transfer income of any kind, including capital investment and the proceeds of investment liquidation, regardless of the destination.

There are no limitations or waiting periods on remittances, though the Ministry of Finance must approve currency conversions above 2 million CFA (approximately 3,250 USD).

Sovereign Wealth Funds

Niger does not maintain a Sovereign Wealth Fund (SWF), and does not subscribe to the Santiago Principles. The government has plans for a build-up of reserves at the Central Bank of West African States (BCEAO) using oil revenues.

Nigeria

6. Financial Sector

Capital Markets and Portfolio Investment

The NIPC Act of 1995 liberalized Nigeria’s foreign investment regime, which has facilitated access to credit from domestic financial institutions.  Foreign investors who have incorporated their companies in Nigeria have equal access to all financial instruments. Some investors consider the capital market, specifically the Nigerian Stock Exchange (NSE), a financing option, given commercial banks’ high interest rates and the short maturities of local debt instruments.

After a strong performance in 2017, the NSE experienced significant contractions and decline in 2018, losing nearly 20 percent on its all-share index year-on-year.  The stark reverse in performance was mostly attributed to government regulatory uncertainty and the 2019 presidential elections. As of December 2018, the NSE had 169 listed companies and a total market capitalization of USD 32.5 billion, a 13.9 percent decrease from 2017.  The Nigerian government has considered requiring companies in certain sectors such as telecoms, oil and gas or over a certain size to list on the NSE, as a means to encourage greater corporate participation and sectoral balance in the NSE, but those proposals have not been enacted to date.

The government employs debt instruments, issuing bonds of various maturities ranging from two to 20 years.  Nigeria has issued bonds to restructure the government’s domestic debt portfolio from short-term to medium- and long-term instruments.  Some state governments have issued bonds to finance development projects, while some domestic banks have used the bond market to raise additional capital.  The Nigerian Securities and Exchange Commission (NSEC) has issued stringent guidelines for states wishing to raise funds on capital markets, such as requiring credit assessments conducted by recognized credit rating agencies.

Money and Banking System

The Central Bank of Nigeria (CBN) currently licenses 21 deposit-taking commercial banks in Nigeria.  Following a 2009 banking crisis, CBN officials intervened in eight of 24 commercial banks (roughly one-third of the system by assets) due to insolvency or serious undercapitalization and established the government-owned Asset Management Company of Nigeria (AMCON) to address bank balance sheet disequilibria via discounted purchases of non-performing loans.  The Nigerian banking sector emerged stronger from the crisis thanks to AMCON and a number of other reforms undertaken by the CBN, including the adoption of uniform year-end IFRS financial reporting to increase transparency, a stronger emphasis on risk management and corporate governance, and the nationalization of three distressed banks. In 2013 the CBN introduced a stricter supervision framework for the country’s top eight banks, identified as “Systemically Important Banks” (SIBs) as they account for more than 70 percent of the industry’s total assets, loans and deposits, and their failure or collapse could disrupt the entire financial system and the country’s real economy.  These eight banks are: First Bank of Nigeria, United Bank for Africa, Zenith Bank, Access Bank, Ecobank Nigeria, Guaranty Trust Bank, Skye Bank, and Diamond Bank. Under the new supervision framework, the operations of SIBs are closely monitored with regulatory authorities conducting stress tests on the SIBs’ capital and liquidity adequacy. Moreover, SIBs are required to maintain a higher minimum capital adequacy ratio of 15 percent. In September 2018, the CBN revoked the operating license of Skye Bank Plc, due to the deterioration of its share capital and its board’s failure to recapitalize the bank. The CBN reported that total non-performing loans (NPLs) grew by 14.8 per cent in 2017 while they dropped to 14.2 percent of outstanding loans at the end of 2018.  Nigerian government and private sector analysts assess that the volume of non-performing loans may be higher than these figures, owing in part to banks not reporting non-performing insider loans made to banks’ owners and directors.

The CBN supports non-interest banking.  Several banks have established Islamic banking operations in Nigeria including Jaiz Bank International Plc, Nigeria’s first full-fledged Non-Interest Bank which commenced operations in 2012.  There are five licensed merchant banks – Altitude Microfinance Bank Limited, Coronation Merchant Bank Limited, FBN Merchant Bank, FSDH Merchant Bank Ltd and Rand Merchant Bank Nigeria Limited.

The CBN has issued regulations for foreign banks regarding mergers with or acquisitions of existing local banks in the country.  Foreign institutions’ aggregate investment must not be more than 10 percent of the latter’s total capital.

Foreign Exchange and Remittances

Foreign Exchange Policies

Foreign currency for most transactions is procured through local banks in the inter-bank market.  Low value foreign exchange may also be procured at a premium from foreign exchange bureaus, called Bureaus De Change.  Nigerian, American, and other foreign businesses have frequently expressed strong concern about the CBN’s foreign exchange restrictions, which they report prevent them from importing needed equipment and goods and from repatriating naira earnings.  Foreign exchange demand remains high because of the dependence on foreign inputs for manufacturing and refined petroleum products.

In 2015 the CBN published a list of 41 product categories which could no longer be imported using official foreign exchange channels; the number of categories has since been increased to 43.  Affected businesses (American and Nigerian) have complained publicly and privately that the policy in effect bans the import of some 700 individual items and severely hampers their ability to source inputs and raw materials.  While the CBN has often referred to the list as temporary, the restriction remains in place, with an additional item added in 2018, bringing the number to 43. In February 2019, the Governor of the Central Bank commented that the Bank is currently considering adding more items to the list and bringing the number as high as 50 items.

https://www.cbn.gov.ng/out/2015/ted/ted.fem.fpc.gen.01.011.pdf 

In 2017, the CBN began providing more foreign exchange to the interbank market via wholesale and retail forward contract auctions, in order to meet some of the demand that had been forced to the parallel market.  These actions satisfied some of the pent-up demand for dollars in the economy and resulted in a strengthening of the naira at the parallel market from a low of 520 naira to the dollar in January 2017 to around 390 naira to the dollar in April 2017.  The CBN also established an “investors and exporters” window in 2017 which allows trades through that window to occur at around 360 naira to the dollar. This, combined with increased oil revenue, has boosted CBN reserves and helped stabilize the foreign exchange market.  Most trade happens at the investors and exporters window, which provides the value of the naira quoted by financial markets globally, while the CBN continues to peg the official interbank rate at 305 naira to the dollar for government transactions. The CBN also maintains separate window for “invisibles” such as education and medical expenses abroad, and a retail window which subsidizes imports of petroleum products, raw materials, agricultural equipment and the aviation sector.

Remittance Policies

The NIPC guarantees investors unrestricted transfer of dividends abroad (net a 10 percent withholding tax).  Companies must provide evidence of income earned and taxes paid before repatriating dividends from Nigeria. Money transfers usually take no more than 48 hours.  In 2015, the CBN implemented restrictions on foreign exchange remittances. All such transfers must occur through banks. Such remittances may take several weeks depending on the size of the transfer and the availability of foreign exchange at the remitting bank.  Transfers of currency are protected by Article VII of the International Monetary Fund (IMF) Articles of Agreement (http://www.imf.org/External/Pubs/FT/AA/index.htm#art7  ).

Sovereign Wealth Funds

The Nigeria Sovereign Investment Authority (NSIA) is the manager of Nigeria’s sovereign wealth fund.  It was created by the Nigeria Sovereign Investment Authority Act in 2011 and began operation the following year with seed capital of USD 1 billion.  Its most recent annual report (calendar year 2017) reported total assets of nearly USD 533.88 million, an almost 27 percent increase over 2016. It was created to receive, manage, and grow a diversified portfolio that will eventually replace government revenue currently drawn from non-renewable resources, primarily hydrocarbons.

The NSIA is a public agency that subscribes to the Santiago Principles which are a set of 24 guidelines that assign “best practices” for the operations of Sovereign Wealth Funds globally. The NSIA invests through three funds:  the Future Generations Fund for diversified portfolio of long term growth, the Nigeria Infrastructure Fund for domestic infrastructure development, and the Stabilization Fund to act as a buffer against short-term economic instability.  NSIA does not take an active role in management of companies. The Embassy has not received any report or indication that the activities of the NSIA limit private competition.

Rwanda

6. Financial Sector

Capital Markets and Portfolio Investment

Rwanda’s capital markets are relatively immature and lack complexity.   Many U.S. investors express concern that local access to affordable credit is a serious challenge in Rwanda.  Interest rates are high for the region, banks offer predominantly short-term loans, collateral requirements can be higher than 100 percent of the value of the loan, and Rwandan commercial banks rarely issue significant loan values.  The prime interest rate is 16-18 percent. Large international transfers are subject to authorization. Investors who seek to borrow more than USD 1 million must often engage in multi-party loan transactions, usually leveraging support from larger regional banks.  Credit terms generally reflect market rates, and foreign investors are able to negotiate credit facilities from local lending institutions if they have collateral and “bankable” projects. In some cases, preferred financing options may be available through specialized funds including the Export Growth Fund, BRD, or FONERWA.

Only eight companies have publicly listed and traded equities in Rwanda.  Rwanda Capital Market Authority was established in 2017 to regulate the capital market, commodity exchange and related contracts, collective investment schemes, and warehouse receipts.  Most capital market transactions are domestic. While offers can attract some international interests, they are rare. Rwanda is one of a few sub-Saharan African countries to have issued sovereign bonds.  Four new local currency bonds for USD 61.8 million in total were issued in 2018, with an average annual yield of 12.1 percent. BNR has implemented reforms in recent years that are helping to create a secondary market for Rwandan treasury bonds.  In November 2018, the IMF completed its tenth review of Rwanda’s economic performance under the Policy Support Instrument, which can be found here: https://www.imf.org/en/Publications/CR/Issues/2018/11/30/Rwanda-Tenth-Review-Under-the-Policy-Support-Instrument-Press-Release-Staff-Report-and-46407

Money and Banking System

Rwanda’s financial sector remains highly concentrated.  Around 76 percent of all bank assets are held by five of the largest commercial banks (Bank of Kigali, BPR Atlas Mara, I&M Bank, COGEBANQUE, and Equity Bank).  The largest, partially state-owned Bank of Kigali (BoK), holds more than 30 percent of all assets. The banking sector holds around 65 percent of total financial sector assets in Rwanda.  Non-performing loans constitute 6.9 percent of all banking sector assets as of June 2018. Foreign banks are permitted to establish operations in Rwanda, with several Kenyan-based banks in the country.  Atlas Mara Limited acquired a majority equity stake in Banque Populaire du Rwanda (BPR) in 2016. BPR/Atlas Mara has the largest number of branch locations and is Rwanda’s second largest bank after BoK. In total, Rwanda’s banks have assets of USD 3 billion, according to the BNR, the country’s Central Bank.  The IMF gives the BNR high marks for its effective monetary policy. BNR introduced a new monetary policy framework in 2019, which shift its tools toward inflation-targeting monetary framework in place of a quantity-of-money framework.

The private sector has limited access to credit instruments.  Prospective account holders are expected to provide proof of residency.  Most Rwandan banks are conservative and risk-averse, trading in a limited range of commercial products, though additional products are becoming available as the industry matures and competition increases.  Rwanda has not lost any correspondent banking relationships in the past three years, and all banks are expected to conform to Basel prudential principles. Most financial services in Rwanda are VAT-exempt. 

BNR reported that commercial banks made a total net profit of USD 26 million in 2018, but their liquidity ratio was 49 percent (compared to BNR’s required minimum of 20 percent), suggesting reluctance toward making loans.  Local banks often generate significant revenue from holding government debt and from charging a variety of fees to banking customers. Credit cards are becoming more common in major cities, especially at locations frequented by foreigners, but are not used in rural areas.  Rwandans primarily rely on cash or mobile money to conduct transactions.  

In 2018, the capital adequacy ratio grew to 21.4 percent from 20.8 percent over the year, well above the minimum of 15 percent, suggesting the Rwanda banking sector continues to be generally risk averse. The number of debit cards in the country grew 8 percent year over year to 945,000 (only 18 percent of Rwandans have bank accounts), and the number of mobile banking customers grew 22 percent to 1,266,000. 

Foreign Exchange and Remittances

Foreign Exchange

In 1995, the government abandoned a dollar peg and established a floating exchange rate regime, under which all lending and deposit interest rates were liberalized.  BNR publishes an official exchange rate on a daily basis, which is typically within a 2 percent range of rates seen in the local market. Some investors report occasional difficulty in obtaining foreign exchange.  Rwanda generally runs a large trade deficit, estimated at 10 percent of GDP in 2018. The Rwandan franc depreciated against the U.S. dollar by 8.9 percent in the fiscal year ending June 2017, and 3.5 percent in the fiscal year ending June 2018, according to BNR.

Transacting locally in foreign currency is prohibited in Rwanda.  Regulations set a ceiling on the foreign currency that can leave the country per day.  In addition, regulations specify limits for sending money outside the country; BNR must approve any transaction that exceed these limits.  

Most local loans are in local currency.  In December 2018, BNR issued a new directive on lending in foreign currency which requires the borrow to have a turnover of at least RWF 50 million or equivalent in foreign currency, have a known income stream in foreign currency not below 150 percent of the total installment repayments, and the repayments must be in foreign currency.  The collateral pledged by non-resident borrowers must be valued at 150 percent of the value of the loan. In addition, BNR requires banks to report regularly on loans granted in foreign currency.  

Full guidance can be accessed here: https://www.bnr.rw/fileadmin/AllDepartment/FinancialStability/lawsandregulations/DIRECTIVE_No_09-2018.pdf  

Remittance Policies

Investors can remit payments from Rwanda only through authorized commercial banks.  There is no limit on the inflow of funds, although local banks are required to notify BNR of all transfers over USD 10,000 to mitigate the risk of potential money laundering.  A withholding tax of 15 percent to repatriate profits is considered high by a number of investors given that a 30 percent tax is already charged on profits, making the whole tax burden 45 percent.  Additionally, there are some restrictions on the outflow of export earnings. Companies generally must repatriate export earnings within three months after the goods cross the border. Tea exporters must deposit sales proceeds shortly after auction in Mombasa, Kenya.  Repatriated export earnings deposited in commercial banks must match the exact declaration the exporter used crossing the border. Rwandans working overseas can make remittances to their home country without impediment. It usually takes up to three days to transfer money using SWIFT financial services.  The concentrated nature of the Rwandan banking sector limits choice, and some U.S. investors have expressed frustration with the high fees charged for exchanging francs to dollars.

Sovereign Wealth Funds

In 2012, the Rwandan government launched the Agaciro Development Fund (ADF), a sovereign wealth fund that includes investments from Rwandan citizens and the international diaspora.  In November 2018, the fund was worth USD 58.8 million.  The ADF operates under the custodianship of BNR and reports quarterly and annually to the Ministry of Finance and Economic Planning, its supervisory authority.  ADF is a member of the International Forum of Sovereign Wealth Funds and is committed to the Santiago Principles.  ADF only operates in Rwanda.  In addition to returns on investments, citizens and private sector voluntary contributions, and other donations, ADF receives RWF 5 billion every year from tax revenues and 5 percent of proceeds from every public asset that is privatized.  The fund also gets 5 percent of royalties from minerals and other natural resources each year.  The government has transferred a number of its shares in private enterprises to the management of ADF including those in the BoK, Broadband Systems Corporation (BSC), Gasabo 3D Ltd, Africa Olleh Services (AoS), Korea Telecom Rwanda Networks (KTRN), and the Dubai World Nyungwe Lodge.  ADF invests mainly in Rwanda. While the fund can invest in foreign non-fixed income investments, such as publicly listed equity, private equity, and joint ventures, the AGDF Corporate Trust Ltd (the fund’s investment arm) held no financial assets and liabilities in foreign currency, according to the 2017 annual report.

Seychelles

6. Financial Sector

Capital Markets and Portfolio Investment

Seychelles welcomes foreign portfolio investment.  The Seychelles Securities Act (https://www.fsaseychelles.sc/images/files/Securities%20Act%202007.pdf) provides the legal framework for the Seychelles stock market.  The Seychelles Securities Exchange, owned by South Africa’s Quote Africa Group, has operated since 2012.  The exchange is also known as Trop-X or MERJ. Listing and trading are available in U.S. Dollars, Euros, Pounds Sterling, Seychelles Rupees, and South African Rand.  Leadership at the exchange are reportedly considering whether to support crypto-assets and instruments issued on blockchain platforms. Portfolio investment in Seychelles is limited by the small size of the economy and banking sector.  The buying and selling of sizeable positions may have an outsized impact on the Seychelles Rupee and the economy in general. There are no restrictions on trading by foreigners. By the end of 2018, the shares of 27 companies were listed on the three equities boards of Trop-X and total market capitalization amounted to USD 282 million.  Trop-X is also a partner exchange of the Sustainable Stock Exchanges Initiative.

Existing policies do facilitate the free flow of financial resources in and out of the economy.  The government of Seychelles respects IMF Article VIII by refraining from restrictions on payments and transfers for current international transactions.  Foreign investors are able to obtain credit on the local market and through the Seychelles banking system, and a variety of credit instruments are available to both local and foreign investors.

Money and Banking System

Seychelles has a two-tier banking system that separates the central and commercial bank functions and roles.  Commercial banks, both domestic and foreign, are regulated and supervised by the Central Bank of Seychelles (CBS).  According to the Central Bank of Seychelles Act 2004, the CBS is responsible for the formulation and implementation of Seychelles’ Monetary and Exchange Rate policies.  The Central Bank of Seychelles is the only administrative body responsible for receiving applications for banking licenses, whether domestic or offshore, and issuing the corresponding licenses.

As of mid-2019, there were seven commercial banks in operation:  Bank of Baroda, Barclays Bank, Mauritius Commercial Bank (Seychelles), Nouvobanq, Seychelles Commercial Bank, Al Salam Bank Seychelles Ltd, and Bank of Ceylon.  SBM Bank (Seychelles) received its banking license in December 2016 but has not yet commenced operations. According to a 2016 report by the Central Bank of Seychelles, 94 percent of Seychellois use banks.  Seychelles also has three non-banking financial institutions: the Seychelles Credit Union, a savings and credit cooperative society; the Development Bank of Seychelles, which provides flexible financing for businesses and projects to promote economic growth and employment; and the Housing Finance Corporation, a government-owned company that provides financing to Seychellois for the purchase of land, the construction of homes, and financing home improvements.

Seychelles has a number of laws that govern the financial services sector:  Financial Institutions Act 2004, Anti-Money Laundering Act 2006, Data Protection Act, Mutual and Hedge Fund Act 2007, and Central Bank Act 2004.  The Seychelles banking sector is generally healthy, though it is limited by small size and reliance on correspondent bank relationships. Due to concerns about money-laundering and illicit finance in the Seychellois financial sector, some local banks have lost their correspondent bank relationship with foreign banks, a phenomenon known as de-risking, making it difficult for local banks to perform international transactions.  In 2017, the Central Bank and the Financial Services Authority visited foreign financial centers to address de-risking. The government is actively working with international experts, including the World Bank and International Monetary Fund, to ensure Seychelles is not perceived as high risk jurisdiction. According to the Central Bank of Seychelles’ Annual Report 2018, a policy paper for amendments to the Anti-Money Laundering Act was presented and approved by Cabinet in the last quarter of 2018.  The new Act, which would address deficiencies identified in the most recent Mutual Evaluation Report of the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG), is expected to be debated by the legislature in 2019. The Board of the Central Bank has also granted approval for the setting up of a dedicated AML/CFT Supervision Unit.

According to the Central Bank, in January 2019 non-performing loans to total gross loans in the Seychelles banking sector stood at 3.5 percent, and foreign currency deposits totaled 7,126 million Seychelles Rupees (USD 508 million).

A wide range of financial services such as checking accounts, savings accounts, loans, transactions in foreign currencies, and foreign currency accounts are available in the banking system.  Foreigners and foreign/offshore firms must establish residency or proof of business registration to obtain a bank account.

Foreign Exchange and Remittances

Foreign Exchange

Since the IMF reform package of 2008-2013, the GOS places no restrictions or limitations on foreign investors converting, transferring, or repatriating funds associated with investment.  Funds are freely converted. Seychelles maintains a floating exchange rate for the Seychelles Rupee (SCR), which has mostly fluctuated between SCR 12 and SCR 15 to USD 1 over the past five years.  In 2018, the SCR remained fairly stable against the USD with an average exchange rate of SCR 13.9 to USD 1.

Remittance Policies

Foreign exchange controls were removed in 2008 and foreign investors are free to repatriate their profits and other incomes.  The Embassy is unaware of any planned changes to remittance policies, time limits on remittances, or use of any legal parallel market.

Sovereign Wealth Funds

Seychelles does not maintain any sovereign wealth funds.  However, in his State of the Nation address in March 2018, the President said that a law would be presented to the National Assembly later during the year to establish a sovereign wealth fund.  As at March 2019, this had not materialized.

Tanzania

6. Financial Sector

Capital Markets and Portfolio Investment

Tanzania’s Dar es Salaam Stock Exchange (DSE) is a self-listed publicly-owned company.  In 2013, the DSE launched a second tier market, the Enterprise Growth Market (EGM) with lower listing requirements designed to attract small and medium sized companies with high growth potential.  As of December 2017, DSE’s total market capitalization reached USD 10.5 billion, a 20.6 percent increase over the previous year’s figure. The Capital Markets and Securities Authority (CMSA) Act facilitates the free flow of capital and financial resources to support the capital market and securities industry.  Tanzania, however, restricts the free flow of investment in and out of the country, and Tanzanians cannot sell or issue securities abroad unless approved by the CMSA.

Under the Capital Markets and Securities (Foreign Investors) Regulation 2014, there is no aggregate value limitation on foreign ownership of listed non-government securities.  Despite progress, the country’s capital account is not fully liberalized and only foreign individuals or companies from other EAC nations are permitted to participate in the government securities market.  Even with this recent development allowing EAC participation, ownership of government securities is still limited to 40 percent of each security issued.

Tanzania’s Electronic and Postal Communications Act 2010 amended in 2016 by the Finance Act 2016 requires telecom companies to list 25 percent of their shares via an initial public offering (IPO) on the DSE.  Of the seven telecom companies that filed IPO applications with the CMSA, only Vodacom’s application received approval. In 2017, Vodacom planned to offer its shares from March 9 to April 19, but lack of demand required it to extend the offering period to July 28.  Moreover, to spur demand, the GoT opened the IPO to foreign investors who purchased 40 percent of the total shares offered.

As part of the Mining (Minimum Shareholding and Public Offering) Regulations 2016, large scale mining operators were required to float a 30 percent stake on the DSE by October 7, 2018.  On February 24, 2017, however, the GoT surprised the industry by amending the regulations so that the 30 percent stake had to be floated by August 23, 2017, rather than October 7, 2018. However, some mining companies have not listed on the DSE.

Money and Banking System

Finscope’s 2017 Financial Inclusion Report revealed that Tanzania’s financial inclusion rate increased to 65 percent in 2017 from 58 percent in 2013, primarily because of increased mobile phone usage.  However, participation in the formal banking sector still remains low. In 2017, low private sector credit growth and high non-performing loan (NPL) rates were persistent problems. In March 2017, the Bank of Tanzania (BoT) cut its discount rate to 12 percent from 16 percent to boost lending and economic growth, the first time it had cut interest rates since 2013.  In April 2017, the BoT reduced commercial banks’ statutory minimum reserves (SMR) requirement from 10 to 8 percent. These measures did not adequately spur lending, so in August 2017, the BoT reduced its discount rate for the second time from 12 to 9 percent. Despite these measures, private sector credit growth was lower than expected and NPL rates in December 2017 remained more than double the BoT’s targeted 5 percent rate.

In 2018, the BoT continued to address problems in the banking sector.  In January 2018, the BoT closed five community banks for under capitalization and gave an additional three until June 2018 to raise capital.  In its February 14, 2018 Tanzania Country Partnership Framework FY18-FY22, the World Bank reported that Tanzania’s “financial sector is stable despite high nonperforming loans…, which must be addressed.”  In a February 19, 2018 Circular titled “Measures to Increase Credit to Private Sector and Contain Non-Performing Loans,” the BoT issued guidelines to boost lending and reduce NPLs.

As of March 31, 2018, the banking sector was composed of 41 commercial banks, 6 community banks, 5 microfinance banks, 3 development financial institutions, 3 financial leasing companies and 2 credit bureaus. The two largest banks are CRDB Bank and National Microfinance Bank (NMB), which represent almost 30 percent of the market.  Private sector companies have access to commercial credit instruments including documentary credits (letters of credit), overdrafts, term loans, and guarantees. Foreign investors may open accounts and earn tax-free interest in Tanzanian commercial banks.

The Banking and Financial Institution Act 2006 established a framework for credit reference bureaus, permits the release of information to licensed reference bureaus, and allows credit reference bureaus to provide to any person, upon a legitimate business request, a credit report.  Currently, there are two private credit bureaus operating in Tanzania – Credit Info Tanzania Limited and Dun & Bradstreet Credit Bureau Tanzania Limited.

Foreign Exchange and Remittances

Foreign Exchange Policies

Tanzanian regulations permit unconditional transfers through any authorized bank in freely convertible currency of net profits, repayment of foreign loans, royalties, fees charged for foreign technology, and remittance of proceeds. The only official limit on transfers of foreign currency is on cash carried by individuals traveling abroad, which cannot exceed USD 10,000 over a period of 40 days. Investors rarely use convertible instruments.

In 2018 and 2019, the Bank of Tanzania inspected all forex shops in the country and ultimately found that most of them did not meet the requirements of new laws governing the businesses.  As a result, more than ninety percent of the Forex bureaus in country were closed. The government then licensed the commercial banks and Tanzania Post Corporation to open forex shops.

Remittance Policies

There are no recent changes or plans to change investment remittance policies that either tighten or relax access to foreign exchange for investment remittances.

Sovereign Wealth Funds

Tanzania has not established a sovereign wealth fund.

Uganda

6. Financial Sector

Capital Markets and Portfolio Investment

The government generally welcomes foreign portfolio investment and has put in place a legal and institutional framework to manage such investments.  The Capital Markets Authority (CMA) licenses brokers and dealers and oversees the Uganda Securities Exchange (USE), which is now trading the stock of 18 companies.  Liquidity remains constrained to enter and exit sizeable positions on the USE. Capital markets are open to foreign investors and there are no restrictions for foreign investors to open a bank account in Uganda.  The government imposes a 15 percent withholding tax on interest and dividends. Foreign-owned companies may trade on the stock exchange, subject to some share issuance requirements. The government IMF Article VIII and refrains from restricting payments and transfers for current international transactions.  Credit is allocated on market terms and foreign investors are able to access credit. However, the private sector remains crowded out of domestic debt markets due to extensive domestic government borrowing.

Money and Banking System

Formal banking participation remains low, with twenty percent of Ugandans having access to deposits in bank accounts.  While only some five million Ugandans hold bank accounts, some 22 million use mobile money transfers to accomplish basic financial transactions.  In 2018, the government imposed new taxes on the use of mobile money, resulting in a drop in mobile money transactions. Uganda’s banking and financial sector is generally healthy, though non-performing loans remain a problem.  According to the Bank of Uganda’s latest Financial Stability Report 2018, Uganda’s non-performing loan rate stood at 4.4 percent at the end of June 2018, while total bank assets grew to USD 7.3 billion from USD 6.8 billion year over year.  Competitiveness and innovation are steadily increasing in Uganda’s banking sector, but lending to the private sector is still relatively low, largely because of perceived high risk (limited collateral) among potential borrowers, and the government crowding out the private sector in the bond market.  The Bank of Uganda regulates the banking sector. Foreign banks may establish branches in Uganda. Uganda does not have restrictions on a foreigner’s ability to establish a bank account.

Foreign Exchange and Remittances

Foreign Exchange

Uganda keeps open capital accounts, and there are no restrictions on capital transfers in and out of Uganda.  If, however, an investor benefited from tax incentives on the original investment, he or she will need to seek a “certificate of approval to “externalize” the funds.  Investors may convert funds associated with any form of investment into any world currency. The Ugandan shilling (UGX) trades on a market-based floating exchange rate.

Remittance Policies

There are no restrictions for foreign investors on remittances to and from Uganda.  The Financial Intelligence Authority and Bank of Uganda may delay remittances if investigating money laundering concerns or terrorist finance.

Sovereign Wealth Funds

In 2015, the government established the Uganda Petroleum Fund to receive and manage all government revenues from the oil and gas sector.  By law, the government must spend a portion of proceeds from the fund on oil-related infrastructure, with parliament appropriating the remainder of revenues through the normal budget procedure.  In early 2019, the Auditor General found that the government had already made significant withdrawals from the fund without parliamentary approval as required by law.

Zambia

6. Financial Sector

Capital Markets and Portfolio Investment

Government policies generally facilitate the free flow of financial resources to support the entry of resources in the product and factor market.  Banking supervision and regulation by the Bank of Zambia (BoZ) has improved slightly over the past few years. Improvements include revoking licenses of some insolvent banks, denying bailouts, limiting deposit protection, strengthening loan recovery efforts, and upgrading the training of and incentives for bank supervisors.  High domestic lending rates and the limited accessibility of domestic financing constrain business. High returns on government securities encourage commercial banks to invest heavily in government debt to the exclusion of financing productive private sector investments.

The Lusaka Stock Exchange (LuSE), established in 1993, is structured to meet international recommendations for clearing and settlement system design and operations.  There are no restrictions on foreign participation in the LuSE, and foreigners may invest in stocks on the same terms as Zambians. The LuSE has offered trading in equity securities since its inception and, in March 1998, the LuSE became the official market for selling Zambian government bonds.  Investors intending to trade a listed security or government bond are now mandated to trade via the LuSE. The market is regulated by the Securities Act of 1993 and enforced by the Securities and Exchange Commission (SEC) of Zambia. Secondary trading of financial instruments in the market is very low or non-existent in some areas.  As of the beginning of 2018, there are 22 companies listed on the LuSE with a portfolio worth about K63 billion (USD 6.6 billion).

Existing policies facilitate the free flow of financial resources into the product and factor markets.  The government and the BoZ respect IMF Article VIII by refraining from restrictions on payments and transfers for current international transactions.  Credit is allocated on market terms and foreign investors can get credit on the local market, although local credit is relatively expensive and most investors therefore prefer to obtain credit outside the country.

Money and Banking System

The financial sector is comprised of three sub-sectors according to financial sector supervisory authorities.  The banking and financial institutions sub-sector is supervised by the BoZ, the securities sub-sector by the SEC, and the pensions and insurance sub-sector by the Pensions and Insurance Authority.  Zambia’s banking sector is considered relatively well-developed in the African context, but the sector remains highly concentrated. There are currently 19 banks in Zambia with the largest four banks holding nearly two-thirds of total banking assets.  The dominance of the four largest banks in deposits and total assets has been diluted by increased market capture of smaller banks and new industry entrants, an indication of growing competitive intensity in this segment of the banking market. Government policies generally facilitate the free flow of financial resources to support the entry of resources in the product and factor market.  There continued to be a steady increase in electronic banking and related services over the last few years. As stated above, banking supervision and regulation by the BoZ has improved slightly over the past few years. The Banking and Financial Services Act, Chapter 387, and the Bank of Zambia Act, Chapter 360, govern the banking industry.

The BoZ’s current policy rate, as of February 2019, is 9.75 percent.  The commercial lending rate ranged between 23 and 26 percent as of 2018, among the highest in the region.  The persistence of high interest rates led the government to urge commercial banks to reduce their lending rates in order to stimulate private sector growth and the economy as a whole.  One factor inhibiting more affordable lending is a culture of tolerating loan default, which many borrowers view as a minor transgression. Non-performing loans (NPLs) in the sector are growing with some estimates as high as 15 percent.  The government itself is a contributor as it is in arrears of about USD 1.3 billion to many contractors who reportedly hold a high percentage of the NPLs.

Lender data reporting remains erratic and credit rating information is not widely available.  In addition, high returns on government securities encourage commercial banks to invest heavily in government debt, to the exclusion of financing productive private sector investments.  Banking officials acknowledge that they need to upgrade the risk assessment and credit management skills within their institutions in order to better serve borrowers. At the same time, they argue that widespread financial illiteracy limits borrowers’ ability to access credit.  Banks provide credit denominated in foreign currency only for investments aimed at producing goods for export. Banks provide services on a fee-based model and banking charges are generally high. Home mortgages are available from several leading Zambian banks, although interest rates are still very high.

To operate a bank in Zambia, the bank must be licensed by the Registrar of Banks, Financial Institutions, and Financial Businesses (“the Registrar”) whose office is based at the BoZ.  The decision to license banks lies with the Registrar. Foreign banks or branches are allowed to operate in country as long as they fulfill BoZ requirements and meet the minimum capital requirement of USD 100 million for foreign banks and USD 20 million for local banks.  According to the BoZ, many banks in the country have correspondent banking relationships; it is difficult to assess how many there are or whether any bank has lost any correspondent banking relationships in the past three years. It is also difficult to analyze if any of those correspondent relationships are currently in jeopardy as the daily management of those relationships are carried out by the individual banks and not by the BoZ.

The Non-Bank Financial Institutions (NBFIs) are licensed and regulated in accordance with the provisions of the Banking and Financial Services Act of 1994 (BFSA) and related Regulations and Prudential Guidelines.  As key players in the financial sector, NBFIs are subject to regulatory requirements governing their prudential position, consumer protection, and market conduct in order to safeguard the overall soundness and stability of the financial system.  The NBFIs comprise 8 leasing and finance companies, 3 building societies, 1 credit reference bureau, 1 savings and credit institution, 1 development finance institution, 80 bureau de change, 1 credit reference bureau, and 34 micro-finance institutions.

Private firms are open to foreign investment through mergers and acquisitions.  The CCPC reviews and handles big mergers and acquisitions. The High Court of Zambia may reverse decisions made by the Commission.  Under the CCPA, foreign companies without a presence in Zambia and taking over local firms do not, however, have to notify their transactions to the Commission, as it has not established disclosure requirements for foreign companies acquiring existing businesses in Zambia.  In the past decade, some mergers and acquisitions include Bharti Airtel’s purchase of Zain/Celtel Zambia, the acquisition of a huge U.S. multinational energy corporation’s assets in Zambia by Engen Petroleum, a large U.S. retailer takeover of Game Stores through the acquisition of Massmart Holdings Limited of South Africa, Barrick Gold Corp takeover of Equinox Lumwana Copper Mines, the purchase of BP shares in Southern Africa, including BP Zambia, by Puma Energy, the Jinchuan Group Limited takeover of Metorex Chibuluma Copper Mine, Atlas Mara’s acquisition of Finance Bank Zambia and subsequent combination with BANC ABC, and private equity house EMR Capital’s purchase of eighty percent of indirect interest in Lubambe Mine, held equally by African Rainbow Minerals (ARM) and Vale International.

Foreign Exchange and Remittances

Foreign Exchange Policies

There are currently no restrictions or limitations placed on foreign investors converting or transferring funds associated with an investment (including remittances of investment capital, earnings, loan repayments, and lease payments) into freely usable currency and at a legal market-clearing rate.  Investors are free to repatriate capital investments, as well as dividends, management fees, interest, profit, technical fees, and royalties. Foreign nationals can also transfer and/or remit wages earned in Zambia. Funds associated with investments can be freely converted into internationally convertible currencies.  The BoZ pursues a flexible exchange rate policy, which generally allows the currency to freely float, though it has intervened heavily to support the local currency, the kwacha, in 2014 to 2016. Transfers of currency are protected by IMF Article VII.

In March 2014, the government announced the revocation of SI Number 33 (mandating use of the kwacha for domestic transactions) and SI Number 55 (monitoring foreign exchange transactions).  The government experienced challenges implementing these statutory instruments and – along with problems of fiscal management and weakening global copper prices – the SIs were perceived as undermining confidence in Zambia’s economy and currency, leading to sharp depreciation of the kwacha.  The decision to revoke the SIs was widely praised in the business community. The kwacha, however, has remained weak in historical terms against the dollar and in early April 2019 was trading between 12-12.5 kwacha per dollar.

Over-the-counter cash conversion of the kwacha into foreign currency is restricted to a USD 5,000 maximum per transaction for account holders and USD 1,000 for non-account holders.  No exchange controls exist in Zambia for anyone doing business as either a resident or non-resident. There are no restrictions on non-cash transactions. The exchange rate of the Zambian national currency is mostly determined by market forces; because the volume and value of exports from Zambia are overwhelmingly related to the extractive industries sector, mining companies’ financial transactions play a major role in exchange rate determination.

Remittance Policies

There are no recent changes or plans to change investment remittance policies that tighten or relax access to foreign exchange for investment remittances.  There are no restrictions on converting or transferring funds associated with an investment (including remittances of investment capital, earnings, loan repayments, or lease payments) into freely usable currency at the legal market clearing rate.  Foreign investors can remit through a legal parallel market, including one utilizing convertible, negotiable instruments such as dollar-denominated government bonds issued in lieu of immediate payment in dollars. There are no limitations on the inflow or outflow of funds for remittances of profits or revenue and there is no evidence to show that Zambia manipulates the currency.  Zambia is a member of the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG), which conducted an assessment of the implementation of anti-money laundering and counter-terrorist financing (AML/CTF) measures in Zambia in November 2007. ESAAMLG coordinates with other international organizations concerned with combating money laundering, studying emerging regional typologies, developing institutional and human resource capacities to deal with these issues, and coordinating technical assistance where necessary.  Zambia has demonstrated commitment to establish an AML/CTF framework. The enactment of the Prohibition and Prevention of Money Laundering Act and the Anti-Terrorism Act, establishment of the Anti-Money Laundering Investigations Unit and the Financial Intelligence Center as the sole designated national agencies mandated to handle AML/CTF and other serious offences, and September 2018 accession to the Egmont Group reflect this commitment.

Sovereign Wealth Funds

The GRZ had planned to launch a Sovereign Wealth Fund (SWF) following the 2015 reincorporation of the Industrial Development Corporation (IDC) as the parastatal holding company, but has yet to establish the fund.

Investment Climate Statements
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