MACIG Connect Series
Michel Losembe (ML): BIAC started off life as BIAZ, Banque Internationale d’Afrique au Zaire. It was a subsidiary of a state-owned French bank, Banque Internationale pour Afrique de l’Ouest (BIAO), which ran substantial operations across 15 countries in West Africa. Initially, the bank’s sole focus was corporate banking and everything was run from one office in Kinshasa. In the 1990s, the French state began to privatize several public assets and open up the banking sector. Most of BIAO’s branches were sold off to French banks, but it was difficult to find a buyer for the Congolese operation because of the ongoing civil war. In 2003, the business was eventually sold to an established family of American businessmen in the DRC. They began to broaden the bank’s scope and open branches across the country, catering to retail clients as well as corporations. At this time there were only five banks in the DRC and the combined sum of all their balance sheets did not reach $100 million. It was necessary to build up the financial sector from scratch.
Between 2004 and 2012, BIAC opened over 50 branches and several more selling points that may become full branches. Approximately 70% of all Western Union (WU) flows in the country are directed through BIAC. This association with WU has been an integral part of our strategy for moving into new areas: we establish a WU desk in a community and if there is a consistent level of activity through the office, then we will develop it into a small BIAC branch. In this way we have managed to boost financial inclusion and route more payments from the informal sector to the formal sector.
Financial services are still fairly new to the DRC. What do you perceive as the main challenge to the sec-tor’s continued growth?
ML: Finding the right people is one of the toughest challenges facing DRC’s financial sector. Fifteen years ago, there were between 200 and 300 bank employees in the entire country; today, there are more than 10,000, divided between 18 banks. It is necessary to train these people and educate them in financial prod-ucts to a level where they are able to offer a high-level service to clients. Banks are still reliant on expatriate workers to run their operations.
Katanga’s mining industry remains the economic motor driving the Congolese economy. What involve-ment does BIAC maintain with companies in the sector?
ML: The reality is that if Katanga were an independent country, its GDP would be growing at approximately 30% per year. Probably one third of the DRC’s economic activity is generated in the region. Over the last decade copper production has increased from around 100,000 metric tons per year (mt/y) to more than 1 million mt/y, and there are many more minerals to be exploited.
A mine is a huge investment, running into billions of dollars, and no Congolese banks are currently able to offer financing on this scale. However, we are able to manage the funds and take care of all local payments and reporting. Mines are heavily reliant on imports, both in terms of supplies and their human resources. This can result in a situation whereby the mine site feels like a foreign entity dropped on to Congolese soil. BIAC is able to help mines develop local roots and genuinely implant themselves into the local economy.
Only around 8% of the Congolese population makes use of financial services. What kind of strategies is BIAC using to grow your market share among people who have never used a bank before?
ML: BIAC was a pioneer in promoting financial inclusion, by opening branches in communities that had never seen representation from a bank before. After we took this first step, many other banks followed. The importance of physical representation in small towns should not be underestimated. In the Bantu culture, there is a strong emphasis placed on a tangible presence, something that you can hold in your hand. Rather than set up a bank account, it is more common to invest your money in building a house of another physical asset. The introduction of mobile phones to the DRC has gone a long way to changing this mentality. The idea of paying for airtime, which is not a physical object, has encouraged more trust in financial services. We believe that there is great potential to further develop mobile banking here: there are 20 million SIM cards in the DRC, which could potentially become 20 million bank accounts.
We worked closely with the telecoms companies to introduce mobile payments for government employees. The scheme has been largely successful but the process may have been implemented too quickly. For example, a soldier in a remote outpost in a rural village might receive a text message explaining that he has received his salary to his account, but there is no ATM or bank in sight. He cannot monetize his electronic transfer and is unable to buy anything from local businesses. In cases such as this, it is more appropriate to continue using cash payments. In future, we believe that small businesses will adopt mobile payments but for now there are some practical restrictions.
The banking industry has grown by 25% over the last three years. Looking ahead, what is your vision for the future of BIAC in the DRC?
ML: We want to be the largest retail bank in the country. We want to cover the entire national territory and be as close as possible to the communities that we serve. A solid banking system is a catalyst for economic growth and poverty reduction, and BIAC is committed to developing this network. We are a private company and we need to make a profit but our most important priority is to boost economic growth and improve the quality of life of the DRC’s population over the medium term.
The DRC is still viewed with some suspicion by many outsiders who consider it too risky as an investment destination. How would you respond to these negative sentiments?
ML: The DRC is a first stage emerging market, and there are obviously many challenges that the country must overcome. Many outsiders criticize our institutions and the fact that they are not as robust as those in developed countries, but development is a process. As a country we have successfully conducted two general elections with the third scheduled to take place in 2016. With each successive government cycle comes a kind of institutional renewal, which leaves our country progressively stronger and more credible within the international community. A similar process can be observed in the economy. Growth rates hover between 5% and 6% every year and we are shooting for double-digit growth in the near future. Economic activity may be overly concentrated in one region, and wealth is not evenly distributed, but at least we are growing. A combination of infrastructure investment and solid fiscal policy will soon lead to a critical mass whereby the economy is tipped into irreversible growth and the DRC’s true potential will be unleashed.
This interview was part of research being conducted by GBR for its upcoming Mining in Africa Country Investment Guide (MACIG) 2016. A pre-release report on the Central African Copperbelt was released in May 2015 and can be accessed here. To participate in this report, please contact Molly Concannon at email@example.com or +260 96 248 6457.