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AFRICAN DEVELOPMENT BANK GROUP
COTE D’IVOIRE
FINANCIAL SECTOR ADJUSTMENT PROGRAMME
Project Performance Evaluation Report (PPER)
OPERATIONS EVALUATION DEPARTMENT
(OPEV)
4 December 1997
TABLE OF CONTENTS
Page
CURRENCY, ACRONYMS AND ABBREVIATIONS
PREFACE
PROGRAMME BASIC DATA
i
iii
iv
I.
EVALUATION SUMMARY
II.
CONTEXT
10
2.1
2.2
2.3
2.4
2.5
10
11
12
12
12
2.6
2.7
III.
14
3.1
3.2
3.3
14
14
3.6
3.7
3.8
3.9
V.
13
13
PROGRAMME OUTPUTS AND RESULTS
3.4
3.5
IV.
Economic Context
Background to Policy-based Lending Operations
Formulation
Justification of the Programme
Objectives and Scope at Appraisal
(logical framework)
Financial Provisions - Bank and others
Evaluation Approach and Methodology
1
Loan Effectiveness
Implementation Schedule
Programme Costs, Disbursements and the
Use of Counterpart Funds
Logical Framework Approach
Compatibility of Bank Strategies and
Policies with those of the Country
Compatibility with Regional Economic
Integration
Reform Measures
Institutional Performance and Monitoring
Compliance with the Conditions and
Provisions of the Loan Agreement
14
15
15
16
24
26
26
PROGRAMME EVALUATION AND IMPACT
26
4.1
4.2
4.3
4.4
26
30
31
32
Impact of the Reforms
Social and Economic Impact
Institutional Impact
Impact on the Female Population
PROGRAMME SUSTAINABILITY
32
5.1
5.2
32
33
Sustainability of Results and Impacts
Programme Development
VI.
VII.
PERFORMANCE RATING
33
6.1
6.2
6.3
6.4
33
33
33
34
Implementation Performance
Bank Performance
Assessment of Project Outcome
Overall Assessment
CONCLUSIONS, LESSONS AND RECOMMENDATIONS
34
7.1
7.2
7.3
7.4
34
35
35
37
Conclusions
Lessons
Recommendations
Follow-up measures
ANNEXES
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Retrospective Programme Matrix
Economic and Financial Indicators from 1990-1998
Summary Sources and Application of Banks' Funds from 1990-1995
Financial Situation of the four (4) Principal Commercial Banks from 1990 to 1995
Insurance Directorate Tables on the Equity Capital of Insurance Companies and their
Consolidated Situation (1992-1995)
SONARECI - Collection of Debts and Transfer of Assets from 1993-1996
BVA Statistics
Some Performance Indicators of the Four (4) Principal Commercial Banks
Prudential Ratios of the Four (4) Principal Commercial Banks
Performance Ratings for the Implementation, the Bank and the Project Results
10.1
10.2
10.3
Implementation Performance
Bank Performance
Project Outcome
--------------------------------------------------------------This report was prepared by Messrs H. MANAI, Senior Financial Analyst and G. CAYERBARROZ, Financial Economist (Consultant) following a mission to the Bank's Headquarters from 2
September to 25 October 1996. Further information concerning the report may be obtained from Mr
G.M.B. KARIISA, Director, OPEV (4052) or Mr. H. MANAI (4516).
i
CURRENCY, ACRONYMS AND ABBREVIATIONS
Currency Equivalents
At Appraisal
(December 1991)
On Completion
(July 1995)
At the Time of the Audit Mission
(September 1996)
Currency Unit = CFA Franc (CFA.F)
UA 1 = CFAF 370.482
UA 1 = CFAF 761.319UA1=CFA.F 744.370
Currency Unit = French Franc (FF)
UA 1 = FF 7.4096
UA 1 = FF 7.613
UA 1 = FF 7.443
Weights and Measures
1 Km :
1 ha :
Kilometre
Hectare
=
=
1 000 metres (m)
10 000 square metres (m²)
Acronyms and Abbreviations
ADB
: African Development Bank
BCEAO
: Central Bank of West African States
BIAO-CI
: Banque internationale de l'Afrique de l'Ouest-Côte d'Ivoire
BICICI : Banque internationale pour le commerce et l'industrie
en Côte d'Ivoire
BIDI
: Banque ivoirienne de développement industriel
BIS
: Bank for International Settlements
BNDA : Banque nationale de crédit agricole
BVA
: Bourse des valeurs d'Abidjan (Abidjan Stock Exchange)
CAA
: Caisse autonome d'amortissement (Sinking Fund)
CFA.F : Franc of the African Financial Community
CFD
: Caisse française de développement
CIMA
: Inter-African Insurance Market Conference
CNPS
: Caisse nationale de prévoyance sociale (Social Security Fund)
COOPEC
: Coopérative d'épargne et de crédit (Savings and Credit Fund)
CREP
: Caisse rurale d'épargne et de prêts (Rural Savings and Lending Fund)
EMSP
: Economic Management Support Project
EU
: European Union
FAC
: Fonds d'aide et de coopération
FISAP : Financial Sector Adjustment Programme
GDP
: Gross Domestic Product
IBRD
: International Bank for Reconstruction and Development
IMF
: International Monetary Fund
IRVM
: Impôt sur le revenu des valeurs mobilières (Tax on income from
stocks and shares)
NGO
: Non-governmental Organization
ii
OHADA
: Organisation de l'harmonisation du droit des affaires en Afrique
(Organization for the Harmonization of Business Law in Africa)
PCR
: Project Completion Report
PPAR
: Programme Performance Audit Report
SME
: Small and Medium-size Enterprise
SGBCI : Société générale de banques en Côte d'Ivoire
SGI
: Société de gestion et d'intermédiation (Management and Intermediation
Company)
SIB
: Société ivoirienne de banque
SONARECI : Société nationale de recouvrement de Côte d'Ivoire
STABEX
: Fonds de stabilisation des exportations (Export Stabilization Fund)
TPS
: Taxe sur prestations de service (Service Tax)
UCITS : Undertaking for Collective Investments in Securities
UNIDO
: United Nations Industrial Development Organization
UNDP : United Nations Development Programme
VAT
: Value Added Tax
WADB: West African Development Bank
WAEMU
: West African Economic and Monetary Union
iii
PREFACE
1.
This Programme Performance Audit Report (PPAR) concerns the Financial Sector Adjustment
Programme (FISAP) of Côte d'Ivoire for which the African Development Bank (ADB) granted a loan of
UA 50.0 million in March 1992.
2.
The programme goal, which was in keeping with the 1992-1995 Medium-Term Plan, was to
support the economic recovery drive through the promotion, in an appropriate environment, of a solvent
and diversified financial system. The specific programme objective was to improve the internal
performance of the financial sector through the restructuring and reorganization of the banking and
insurance systems, reform of the legal system and the revitalization of the Stock Exchange.
3.
The loan was intended to support the implementation of the financial sector reforms as set out in
the Government's Policy Letter, and cover the country's external financing requirements in 1992 and 1993.
It was also intended to help to restore the principal macroeconomic balances of Côte d'Ivoire during that
period. The loan represented 4% of the requirements identified in the programme and the counterpart
funds were to enable the State to honour its obligations to the BIAO-CI.
4.
A completion report (PCR) was prepared by the Bank following a completion mission in July
1995.
5.
This report was prepared following a Bank audit mission at its headquarters from 9 September to
25 October 1996. It refers to the appraisal and completion reports and is based on: a) the information
available in the programme files at the Bank; b) statistical, economic and financial information gathered
during the mission; and c) discussions and meetings between the audit mission and the authorities and the
principal officials of the ministries concerned by the programme, the representatives of the World Bank,
the Caisse française de développement in Côte d'Ivoire, as well as with Bank staff members.
6.
The PPAR completes the observations, analyses and conclusions of the completion report and
contains an evaluation of the performance, results and sustainability of the effects of the programme on the
macroeconomic and sectoral plans, particularly during the 1992-1996 period. It draws conclusions and
lessons and formulates recommendations for the Borrower and the Bank to consolidate the benefits of the
programme and with regard to its short and medium-term development.
7.
Copies of the PPAR have been sent for comment to the Ivorian Government, the cofinanciers, and
the Bank's operations departments. These comments will be taken into consideration in the final version of
the report.
iv
PROGRAMME BASIC DATA
A.
Preliminary Data
Country
Programme
Loan
Borrower
Executing Agency
B.
:
Republic of Côte d'Ivoire
:
Financial Sector Adjustment (FISAP)
:
B/CIV/PASF/92/21
:
Ivorian Government
:
Ministry responsible for the Economy, Finance and Planning at the
Office of the Prime Minister
Loan Basic Data
ESTIMATED
ACTUAL
Official Request
N/A
Loan Amount
UA 50 million
UA 50 million
Interest
variable
Statutory Commission
1% per year on amounts disbursed and outstanding
Commitment Charge
1% per year on the undisbursed part of the loan
Duration
Twenty (20) years
Grace Period
Five (5) Years
Repayment Terms
Thirty (30) half year payments
Disbursement Modalities
Two (2) tranches of UA 30 and 20 million
Appraisal
N/A
December 1991
Loan Negotiations
N/A
24 February 1992
Approval by the Board
N/A
23 March 1992
Signature of the Loan
N/A
10 April 1992
Loan effectiveness
N/A
03 June 1992
C.
FISAP Basic Data
1. Programme Cost
Components
Estimated
(billions of
CFA.F)
Actual
(billions of
CFA.F)
Estimated
(millions
of UA)
Actual
(millions of
UA)
Difference
(millions of
UA)
266.3
229.8
720.0
620.0
-100.0
Banking Restructuring
54.6
78.5
150.0
211.8
+61.8
Liquidation of Banks
164.3
164.2
440.0
443.0
3.0
21.0
18.2
60.0
49.0
-11.0
506.2
490.8
1370.0
1323.8
-46.2
Payment of Government Arrears
Insurance Sector
Total
ESTIMATED
ACTUAL
DIFFERENCE
2. Duration of FISAP
March 1992-March 1993 June 1992-January 1994
3. Date of Disbursement of
the First Tranche
June 1992
10 June 1992
-
7 months
v
4. Date of Final Disbursement
of the Second Tranche March 1993
January 1994
7 months
5. Financing Plan
Donors
Commitments
billions of
CFA.F
%
millions of
UA
billions of
CFA.F
%
m UA
bil.
CFA
ADB
50.0
18.0
3.6
50.0
18.0
3.5
0.0
0.0
IBRD
146.0
54.0
10.7
146.0
92.5
18.0
0.0
38.5
CFD
50.0
18.0
3.6
50.0
18.0
3.5
0.0
0.0
6.0
2.2
0.4
6.0
2.2
0.4
0.0
0.0
BCEAO
502.0
186.0
36.7
502.0
186.0
36.2
0.0
0.0
Government
582.0
215.6
42.6
472.0
174.8
34.0
-110.0
-40.8
Private
Shareholders
34.0
12.4
2.4
60.0
22.1
4.3
+27.0
+9.7
1370.0
506.2
100
1286.0
513.6
100
-83.0
+7.4
Total
Performance Indicators
1. Number of Extensions
of the Final Disbursement Date
2. Status of the Programme
3. Implementation Performance
4. Performance of ADB
5. Assessment of FISAP Results
6. Overall Assessment
E.
F.
Differences
millions
of UA
STABEX
D.
Disbursements
N/A
Completed
Satisfactory
Unsatisfactory
Satisfactory
Satisfactory
Missions
N°
Types of mission
No. of
persons
1
Appraisal
5
2
Monitoring
1
3
Mid-term Review
5
4
Completion
5
Post-Evaluation
Date
Number
of weeks
Staff/
weeks
Dec. 1991
3
15
1992
2
2
January 1993
3
15
1
July 1995
6
6
2
Sept-Oct.
1996
7
14
Disbursements (millions of UA)
Estimated
Actual
vi
Total disbursed50
Amount Cancelled
Undisbursed Balance
Repayment
50
-
Annual Disbursements
1992
1993
1994
Total
G.
Estimated
Actual
30.00
20.00
____
50.00
30.00
19.75
0.25
50.00
Other projects/programmes financed by the Bank Group in the financial sector or as part of
the sectoral/structural adjustment in Côte d'Ivoire
Project/programme
Year of
Approval
Loan
(millions
of UA)
Status
Completion
Date
PPAR
Mission Date
(Forecasts)
Line of credit to
BIDI
1976
2.0
Completed
1983
None
Energy Sector
Adjustment
Programme
1988
120.0
Completed
1990
1991
Agricultural Sector
Adjustment
Programme
1990
115.0
Completed
1994
1996
Human Resources
Sector Adjustment
Programme
1992
57.37
Completed
1993
Awaiting
PCR
I.
EVALUATION SUMMARY
1.
Objective and Scope
1.1
The Performance Audit Report concerns the Financial Sector Adjustment Programme (FISAP) of
Côte d'Ivoire for which the African Development Bank (ADB) granted a loan of UA 50 million in March
1992.
1.2
The goal of the FISAP is to support the economic recovery drive through the promotion of a
solvent, diversified and efficient financial system. Its specific objective is to improve the internal
performance of the financial sector through the restructuring and reorganization of the banking and
insurance systems, the reform of the legal system and the revitalization of the stock exchange.
1.3
The loan is intended to support the implementation of the reforms in the financial sector as set out
in the Government's policy letter, and to cover the country's external financing requirements in 1992 and
1993. The loan represented 4% of the identified programme requirements and the counterpart funds
should enable the State to honour its obligations to BIAO-CI.
2.
Implementation Performance
2.1
The Government easily fulfilled the many conditions of effectiveness. The implementation period
was fairly well respected. Only some measures were implemented behind schedule, thus demonstrating
the Government's will to implement the programme. One disbursement was made seven (7) months
behind the original schedule. Since the public debt was overestimated at the time of appraisal, there was a
shortfall with regard to costs.
2.2
Regarding compliance with the provisions of the loan agreement, the Borrower has not yet
provided certain documents, namely the audit of the loan account and the completion report. Although an
interministerial monitoring committee has been established, it has been impossible to obtain the planned
quarterly status reports.
3.
Institutional Performance
3.1
The success of this programme was due to the performances of the Borrower and the executing
agency. The Government cooperated closely with the donors both during the preparatory and
implementation phases of the FISAP. A FISAP Monitoring Committee was established at the Ministry for
the Economy and Finance. It grouped together the government services directly involved in the reforms as
well as the BCEAO.
3.2
The performance of the banks, insurance companies, the CAA and the stock exchange were
outstanding. These institutions were able to implement structural and organizational reforms and develop
a new commercial policy which has resulted in the achievement of very satisfactory financial results over
the last financial year. The reappearance of surplus liquidity in the economy (a substantial increase in
bank deposits) combined with stringent management of overheads is promoting the achievement of
positive results for all the financial organizations concerned by the FISAP.
3.3
The programme was prepared by the World Bank and the executing agency. Only at the end of
that phase did the Bank intervene. Its intervention, as well as the appraisal of the programme, were carried
3
out locally on the basis of the documents supporting the request. Its purpose was to provide financial
support for the restructuring and recapitalization of the BIAO-CI which was in a hopeless financial
situation, since its liquidation had been envisaged.
4.
Impact of the Programme
4.1
The macroeconomic and financial management approach adopted, consolidated by an adjustment
of external competitiveness (change in the parity of the CFA franc) has produced the highest GDP growth
rate in over 10 years, the doubling of domestic savings, the recovery of investment which did not however
reach the planned target of 18% of GDP. With regard to public finance, there is a primary surplus, the
level of domestic debt is continuing to fall and the arrears have been settled. However, external debt
remains of concern with a debt/GDP ratio of 183% as at the end of 1995.
4.2
The impact was greatest on the financial system. The banking environment improved with new
regulations concerning the prudential ratios and compulsory reserves, and the establishment of the
Banking Commission responsible for controlling the banking sector. The commercial banks have been
restructured and reorganized. Public sector banking arrears have either been settled on a cash basis, or
securitized. Doubtful debts and disputed claims have been analyzed: these have either been classified as
bad debts and written off, or been settled in or out of court. The banks' equity capital, considerably eroded
by the losses accumulated over several financial years, has been reconstituted by a call for capital from
shareholders.
4.3
The insurance companies which have been loss-making for many years have been reorganized and
also recapitalized. Insurance regulations are standardized within the franc zone and there is a regional
body of controllers. The Deposits Department of the CAA has been restructured, provided with capital
and made liable to the prudential rules applicable to the banking sector. The Abidjan Stock Exchange,
revitalized by the privatization of the public enterprises, will shortly be transformed into the WAEMU
stock exchange, with branches in every member state.
4.4
Not all aspects of the financial system have lived up to expectations. Rural financial
intermediation has made little progress under the provisional replacement organizations: CREP, social
funds, etc. The capital market has not developed and the reforms of the legal system have not produced
concrete results regarding ease of access to justice and the speeding up of its procedures.
5.
Sustainability
5.1
Now, all the banks established in Côte d'Ivoire have fairly stable balance sheet structures and the
income statements for the last two years, in particular for 1995, are very satisfactory. The same
observation may be made for the insurance and stock exchange sectors. There is a positive return on
equity capital. These results are not, however, irreversible. Overall, the banking and financial sectors are
dependent on phenomena which are exogenous to the sectors themselves as well as to the Ivorian
economy. The macroeconomic situation is determinant in assessing the sustainability of the results
obtained. The overdependence of the Ivorian economy on two or three export products remains
worrisome. Furthermore, the external debt burden remains prejudicial to any development.
5.2
The results however are sustainable at the institutional level. The establishment of prudential rules,
4
the introduction of compulsory reserves and the establishment of the regional banking commission to
ensure compliance with these norms will prevent any repetition of past errors which have threatened the
Ivorian banking system. The restructured banks have equity capital in conformity with the prudential
rules. On the domestic front, they have introduced appropriate management instruments with the
strengthening of computer resources and the establishment of internal auditing. To harmonize the
structures of its Deposits Management Department with those of the banks, the CAA has established an
initial capital fund and is required to comply with the prudential rules.
5.3
The structures and regulations concerning the Stock Exchange will be sustained mainly through the
forthcoming establishment of the Abidjan Regional Stock Exchange. The restructuring of the insurance
sector (29 companies in 1996 compared with 41 in 1990) and the strengthening of the Insurance
Directorate at the Ministry for the Economy and Finance supervised by increasingly community-oriented
legislation and controls within the framework of CIMA is evidence of the sustainability of the reforms.
5.4
From a legal standpoint, different laws aimed at improving access to justice and speeding up its
process were adopted by the legislator in 1992 and 1993. The reorganization of the legal system has
begun, but there are insufficient financial and human resources.
6.
Conclusions
6.1
The situation in the financial sector was profoundly changed during the implementation of the
FISAP and in the following two years. Improvements, especially of an institutional nature were observed
at the end of 1993 and are attributable to the FISAP. The financial performance subsequently achieved
cannot easily be attributed to the FISAP or the devaluation alone. It is clear that the two are interlinked
and it can be suggested that the achievements of the FISAP have been strengthened by the effects of the
devaluation just as the results of the devaluation have been enhanced by the existence of an improving
financial environment. It is, therefore, too early to assess the real impact of the FISAP. Indeed, the actual
impact of the programme and the attribution of the impacts noted cannot be accurately assessed until the
effect of the change in parity has declined.
6.2
At present, those sectors which required the implementation of the FISAP are better off, although
the situation is not irreversible: surplus liquidity, equity capital reconstituted to an acceptable level,
positive results etc. in an improving macroeconomic environment.
6.3
The ratings, with the exception of the bank's performance, are satisfactory. The four
implementation performance indicators each received a score of 3. The project result ratings ranged from
1 to 4 depending on the indicator and the overall average stands at 2.86. The assessment of the relevance
and achievement of objectives was given a score of 2.6 for the authors of the audit report do not consider
the objectives to have been fully achieved, in particular with regard to competitiveness. The institutional
development was achieved in conformity with the forecasts and received the average score of 3. The same
applies to the assessment of the sustainability of the impact of the programme which, unless upset by
external factors, appears to be progressing. On the other hand the Bank's performance only scored 1.75
since it had not taken part in the identification and since its participation in the preparation and supervision
phases had been inadequate.
7.
Lessons, Recommendations and Follow-up Actions
5
A) Lessons
7.1
Any reform programme must follow a logical and sequential framework. The existence of an
already prepared macroeconomic framework and the restoration of the principal budgetary balances must
be established beforehand. The quality and competence of the executing agency is moreover, a basic
element in the success of the programme.
7.2
In view of the urgency of the problems noted, the reorganization of the banking sector was
primarily intended to enhance the position of the four (4) principal banks. Greater attention should have
been paid to all the components of the financial sector (financing, intermediation, risk management and the
development of new products).
B) Recommendations
7.3
To consolidate the results of the FISAP, it is recommended that the Government pursue the reforms
initiated by it, namely:
7.4
a)
The restructuring of the Stock Exchange through the privatization of its management and
the establishment of SGIs, separate from the banks. The regionalization of its activities
should be continued;
b)
In the judicial sector, it should implement its programme to establish and build new courts
in the Abidjan suburbs, and recruit and train more magistrates in the economic, financial
and commercial areas;
c)
Develop the capital market which was outlined at the time of appraisal and which was not
implemented during the FISAP;
d)
Promote the emergence of long-term resources through the creation of medium and longterm savings products with a yield above the rate of inflation and accompanied by tax
benefits;
e)
Encourage the banks to increase their equity capital by gradually raising the minimum
prudential ratios to the level of international standards in particular the debt ratio; and
f)
Extend and deepen the economic, social, legal and financial cooperation agreements, which
will permit greater integration of the Ivorian economy both inside and outside the
subregion;
It is principally recommended that the Bank:
a)
Support the Government's efforts to find solutions to the problem of creating agricultural
sector financing organizations and in the implementation of ongoing studies;
b)
Pursue the policy dialogue with the country with a view to deepening the financial sector
6
reforms;
7.5
7.6
c)
Remind the Borrower to comply with the provisions of the loan agreement concerning the
production of activity, audit and completion reports; and
d)
Encourage exchanges of information with the other donors in order to improve the
coordination of operations at the identification, preparation and other stages of a
programme.
C)
Follow-up Actions
At Government level
a)
As part of the continuing reforms of the judicial system, the Government is required to step
up the financial and human resources of the Ministry of Justice and conduct studies with a
view to establishing the judicial structures provided for by WAEMU and OHADA.
b)
Deepening of the FISAP reforms and establishment of an action plan as well as a realistic
schedule for the adoption of the international standards recommended by the Basel
agreements of 1988.
c)
In view of the many ongoing adjustment programmes being implemented by the
Government, the establishment of a structure to monitor and evaluate these programmes
will be necessary to strengthen the dialogue between the Government and the local
structures and the donors.
At Bank Group level
a)
b)
It will, in the context of improving the quality of Bank Group operations, be necessary to
strengthen the operational guidelines through:
-
the preparation of verifiable sectoral indicators of economic and social performance
with a view to using them in project and programme logical framework matrices;
-
the definition of conditions for coordination with the other donors and cofinanciers
in order to permit joint appraisal and completion missions; and
-
the establishment of specific guidelines for the conduct of mid-term review
missions which would further involve the Government and its executing agencies;
The Bank's services shall strengthen policy dialogue with the country in the following
areas:
-
financial intermediation in the rural sector and the establishment of appropriate
7
financing structures for the sector;
c)
-
development of the financial sector (deepening of the reforms undertaken within the
framework of private sector adjustment, a reduction in the costs of financial
intermediation, the promotion of small and medium-size enterprises and the
development of the capital market); and
-
strengthening of the legal environment (deepening of the reform of the judicial
system and the establishment of appropriate judicial structures).
The Bank shall keep informed of the outputs and results of adjustment programmes being
implemented and support the efforts of the Ivorian Government to reduce its external debt.
8
MATRIX OF RECOMMENDATIONS AND FOLLOW-UP ACTIONS
PRINCIPAL
OBSERVATIONS
CONCLUSIONS
&
RECOMMENDATIONS
FOLLOW-UP ACTIONS
RESPONSIBILITY
1)- The appraisal report did not mention the
terms of coordination with the other donors.
- Step up the Bank's involvement in
policy-based lending programmes and
foster exchanges of information with the
other donors to improve the coordination
of operations.
- Incorporate in the operational guidelines on
the preparation of SAPs, the conditions
necessary for coordination among donors.
- Bank (Country Operations and
Operations Policy departments)
2)- The quantitative sector goals and the
expected results of the reforms were not
specified in the appraisal report.
-Prepare a separate logical framework
matrix (objectively verifiable indicators)
from the matrix of reform measures.
- Improve the quality of appraisal reports
through objectively verifiable indicators and
include the logical framework matrix in the
PCR.
- idem -
3)- The social impact of the programme was
not properly grasped.
-The social impact should be properly
grasped from the programme preparation
stage and specific measures incorporated.
- Enhance the quality of appraisal reports by
incorporating social indicators.
- idem -
- Enhance the guidelines regarding
supervision and the mid-term review.
- Bank and Government of Côte
d'Ivoire
- Sensitize the Borrower to the importance of
follow-up reports.
- idem -
Formulation & Justification of the Programme
Programme Implementation
4)- The mid-term review is inadequate to
ensure the ongoing supervision of the
programme.
- The mid-term review should be
conducted jointly with the Borrower, and
supervision missions should be carried out
by the Bank.
Compliance with the Provisions of the Loan
Agreement
5)- The Ivorian Government has not submitted
the quarterly activity reports and the
completion report to the Bank. Nor has it
carried out the audit of accounts.
- In the overall programme costs, make
provision for the cost of the audit and
ensure compliance with the general
provisions of the Loan Agreement.
- Apply the appropriate operations guidelines.
- Bank and Government of Côte
d'Ivoire
9
Evaluation of Programme Performance &
Results
6)- Financial disintermediation in rural areas.
The establishment of temporary structures or
institutions for the financing of this sector has
not filled the vacuum left by the liquidation of
the BNDA.
7)- Present capital supply and demand
conditions and the transparency of these
movements are not conducive to the
development of this market and penalize the
SMEs.
- Find solutions to the problem of
establishing agricultural sector financing
organizations and implementing the
recommendations of the studies being
conducted.
- Incorporate this measure in the context of
country dialogue.
Bank
Departments)
- Create medium-term savings products in
keeping with the financing requirements of
the economy, in particular the SME
investments.
- Obtain information from the Government
and the World Bank concerning the
achievements of the Private Sector
Adjustment Programme.
Bank
(Operations
Departments and Government
of Côte d'Ivoire)
- Introduce tax incentives to encourage
long-term savings and increased use of
leasing.
- Deepen the reforms planned for the
development of the private sector.
- idem -
- Reduce financial intermediation costs
while fostering competition and opening it
to the outside (WAEMU).
- Incorporate these measures in the country
dialogue framework with a view to deepening
the financial sector reforms.
- idem-
- Establish a jurisdictional body within
the
Stock
Exchange
Commission,independent of the economic
operators .
8)- The measures taken to strengthen the
judicial system have not produced the expected
results.
- Continue the reforms of the PAGE and
step up the human and financial resources
of the Ministry of Justice.
- Step up action in favour of judicial
integration within the framework of
WAEMU and OHADA.
9)- The equity ratios of the financial
institutions (Banks, Insurance Companies) and
enterprises do not yet comply with the relevant,
generally recognized international standards.
-Gradually bring the existing prudential
standards
into
line
with
those
recommended by the 1988 Basel
Agreements.
(Operations
-idem- idem -
- Step up policy dialogue with the country
concerning the reform of the judicial system.
- Conduct studies and establish the judicial
structures provided for by WAEMU and
OHADA.
- Prepare an action plan and schedule which
would achieve this objective within a
reasonable period.
- Bank/Government of Côte
d'Ivoire
Ivorian Government
- Government of Côte d'Ivoire
and BCEAO
10
Sustainability
10)- The sustainability is dependent on the
macroeconomic framework of the programme,
diversification of the economy and the external
environment.
- Deepen the economic reforms to create
an appropriate environment for investment
and pursue the efforts to diversify the
economy.
- Closely monitor the achievements within the
framework of the different existing
programmes.
- Find appropriate solutions to the problem
of the external debt.
- Monitor the ongoing discussions on the
reduction of the external debt.
- Create the necessary structures for the
monitoring and appraisal of adjustment
programmes.
- Step up dialogue with local institutions and
the donors.
- Bank, Government of Côte
d'Ivoire and other Co-financiers
- idem -
11)- The success of such a programme requires
the active participation of the organizations
concerned and the availability of a competent
structure to bear the cost of the whole
programme cycle.
- Government of Côte d'Ivoire
11
II.
CONTEXT
2.1
Economic Context
2.1.1
The economic and social development of Côte d'Ivoire was particularly outstanding during
the 1960s and 1970s with an average annual growth rate of almost 7.1% of GDP in real terms and a
considerable improvement in all the macroeconomic and social indicators. This relative prosperity was
achieved as a result of the favourable commodity prices during the period and the development of export
crops such as coffee, cocoa and wood, as well as favourable prices, which, for over twenty years permitted
a substantial build up of financial surpluses which served to develop basic infrastructure and the industrial
as well as the commercial and service sectors. The sharp fall in coffee and cocoa prices from 1980
plunged the country into a long economic recession from 1986-1993. This crisis prompted the
Government to design, as from 1981, with the assistance of the donors, a series of structural adjustment
programmes in 1981-1983, 1984-1987, and 1988-1993 respectively. These programmes, implementation
of which was complicated both by the deterioration in the international situation and the inadequacy of the
internal implementing structures, did not produce all the expected results to permit the recovery of the
Ivorian economy.
2.1.2
The principal features of the economic recession in Côte d'Ivoire during the 1987-1993
period were a considerable fall in State income, massive recourse to borrowing and the worsening of the
internal and external imbalances. The trend of the principal economic aggregates over that period
reflected the worsening Ivorian economic situation. While inflation remained low at around 1.2% from
1987-1993, real GDP contracted by 4% and real GDP per inhabitant by 23%. Production of export crops
stagnated owing to the fall in producer prices. Secondary and tertiary sector activities declined owing to
falling domestic demand as a result of falling incomes and the difficulties of the financial sector. Against
that background, the budgetary constraints prevented greater rationalization of the tax system and the
incentive framework. The efforts to diversify productive activities were thwarted by the lack of
competitiveness of the economy. The savings and investment rates were too low to permit the rapid
restoration of sustained growth, the expansion of the labour market and increased income per inhabitant.
2.1.3
The accumulation of payment arrears reduced the flow of external capital and the
mobilization of the country's internal resources, especially from 1991-1993. In view of the limitations of
internal adjustment and its distortions, the franc zone countries decided to step up their internal adjustment
efforts by modifying the parity of the CFA franc which was set at CFA francs 100 for FF 1 as from 12
January 1994. Owing to the change in parity the Government obtained an Enhanced Structural
Adjustment Facility (ESAF) and began the implementation of its Macroeconomic and Structural
Adjustment Programme (MESAP) for the 1994-1996 period.
2.1.4
The objectives of the MESAP, which was supported by the Bank Group, the World Bank
and the IMF, as well as other donors, aimed primarily at: a) raising the growth rate to 6% as from 19951996; b) increasing external competitiveness; c) achieving a primary surplus of 3% of GDP in 1996; d)
developing all the country's human resources; and e) strengthening the measures for the protection of the
most vulnerable sections of the population. The achievement of these objectives was in keeping with the
proposed economic integration of the countries of the West African Economic and Monetary Union
(WAEMU) the treaty establishing which entered into force on 1 August 1996.
2.1.5
The financial sector was gradually affected by the consequences of the fall in economic
activity experienced since 1980, a period of crisis for the Ivorian economy. At the end of 1988, the need
to restructure the financial sector was beginning to be felt owing to the financial situation of the banks in a
period of underliquidity and a deteriorating portfolio. In fact, to finance part of its budgetary deficit which
had attained 17% of GDP in 1989, the State had accumulated arrears amounting to CFA.F 117 billion as at
30/9/1989 ( i.e. 39% of the banks claims on the State). CFA.F 61 billion of these arrears were for the State
12
and public enterprises and CFA.F 56 billion with respect to the indirect obligations of the CAISSTAB in
the form of seasonal credits to exporters. As at the end of 1990, the amount of public and private arrears
stood at CFA.F 304 billion and in 1991, public sector arrears to commercial banks attained CFA.F 199
billion.
2.1.6
Bank resources, net of refinancing and equity capital, fell by 20% in 1990 compared with
1988 following a fall in public and private deposits and the banks resorted massively to refinancing from
the BCEAO (the refinancing rate was about 43% of all bank resources in 1990). The amount of frozen
private sector debts attained CFA.F 144 billion and 43% of the outstanding debts of the portfolio were
considered doubtful (CFA.F 356.3 billion).
2.1.7
Furthermore, the inflexibility of monetary policy and the weakness of the legal system
lowered the efficiency of the financial system. The Government, in coordination with the BCEAO, took
certain measures intended to wind up the specialized banks with the exception of the BNDA, and audit the
four (4) commercial banks which represented 90% of all claims on the economy and deposits mobilized
by the banking system.
2.1.8
A study on the financial sector, conducted by the World Bank on the basis of the audits on
those four (4) banks was used to define the FISAP and revealed that the recovery of the financial sector
was the precondition for any revival of economic activity in Côte d'Ivoire.
2.2
Background to Policy-based Lending Operations
2.2.1
From 1981, the Ivorian Government, with donor assistance, implemented a series of
structural adjustment programmes from 1981-1983, 1984-1987, and 1988-1993 respectively. However,
the persistence of macroeconomic and structural constraints, characterized by a substantial fall in State
revenues, massive recourse to borrowing, and the worsening of the internal and external imbalances,
prompted the Government to intensify its internal adjustment efforts. In 1988, the Government applied
new measures of a structural nature, particularly with regard to energy (ESAP), which was the subject of a
post-evaluation, and from 1990, embarked upon a medium-term economic programme (MTEP) for the
1991-1995 period. It also implemented a series of reforms in the agricultural sector (ASAP), approved in
1990 and completed in 1994), the financial sector, the human resources sector (HR-SAP) and a
programme for the improvement of competitiveness of and the privatization of the Ivorian economy
(COSAP). These three programmes were approved in 1992 and completed in 1994.
2.2.2
Following the change in the parity of the CFA franc (January 1994), the Government
designed and implemented a macroeconomic and structural adjustment programme (MESAP) for the
1994-1996 period, supported by the traditional donors such as the World Bank and France. Other reform
programmes were initiated by the Ivorian Government with a view to deepening the measures taken: these
were the Economic Management Support Programme (EMSP) backed by France and the Agricultural
Sector Adjustment Programme1 (financed by the World Bank in 1995). In 1996 the Government engaged
in a private sector development programme with the assistance of the World Bank which concurrently
established a technical assistance and institutional support programme.
2.2.3
Overall,the structural or sectoral reform programmes were implemented to the satisfaction
of the donors and reflected the Government's will to deepen these reforms. The stabilization and
1
A second agricultural sector adjustment programme is being approved by
the Bank Group.
13
economic recovery drive underway since 1990 and strengthened by the change in parity of the CFA franc
from January 1994 should enable Côte d'Ivoire to regain an annual GDP growth rate of around 6.5% per
year from 1995 on the basis of an annual investment rate of 18% of GDP.
2.3
Formulation
The FISAP programme was appraised in December 1991, and an ADB loan of UA 50
million (disbursable in two tranches) was granted to Côte d'Ivoire in March 1992. Because of the quality
of the documents submitted by the Government and accompanying its request, the ADB services
considered that the programme could be prepared at the Bank headquarters. The appraisal mission, which
was conducted in December 1991, reviewed the situation of the financial sector, the programme
objectives, its financing plan as well as its modus operandi. The appraisal report did not, however, discuss
the conditions for coordination with the other donors in particular the World Bank, the initiator of the
programme.
2.4.
Justification of the Programme
2.4.1
The financial sector recovery programme was primarily justified by the situation of the
banking system which no longer covered the credit requirements of economic operators, in particular for
investment and by the need to restore the liquidity of the economy.
2.4.2
The design framework of the matrix of measures seems adequate and comprises measures
with a cohesive impact on the financial sector (strengthening and expansion of its institutional and
regulatory framework) as well as the restructuring and reorganization of the banking system and insurance
sector. Recovery action plans were also prepared for the four (4) commercial banks concerned by the
programme (SGBCI, BICICI, SIB, BIAO-CI) as well as their estimated financial statements on
completion of the programme (1994).
2.4.3
The FISAP, which fell within the scope of the 1992-1995 medium-term plan, did not
contain any specific macroeconomic objectives. However, the indicators retained within the framework
of the medium-term plan (until 1995) and appearing in the appraisal report, were the following:
*
Real GDP growth rate of 5% - 6%
*
Investment/GDP : 18%
*
Primary surplus on the State's flow of funds table (CFA.F 28 billion in 1992).
2.4.4
The quantitative sector goals as well as the expected results of the financial sector reforms
following the implementation of the programme were not specified in the appraisal report. Similarly, in
the risk analysis the social impact of the programme was not properly grasped, but was presented in a
qualitative manner (different measures taken in favour of the social reintegration of those made redundant
from restructured financial institutions).
2.5
Objectives and Scope at Appraisal (logical framework)
2.5.1
The goal of this programme, which fell within the scope of the 1992-1995 medium-term
plan, was to support the economic recovery drive through the promotion, in an appropriate environment,
of a solvent and diversified financial system. The specific programme objective was to improve the
internal performance of the financial sector through the restructuring and reorganization of the banking
systems and insurance sector, reform of the legal system and the revitalization of the Stock Exchange.
The loan aimed to support the implementation of the financial sector reforms as set out in the
Government's policy letter, and to cover the country's external financing requirements in 1992 and 1993.
It was, therefore, intended to help to restore the principal macroeconomic balances of Côte d'Ivoire over
that period. The loan represented 4% of the identified requirements of the programme and the counterpart
14
funds were to enable the State to honour its commitments to the BIAO-CI.
2.5.2
The principal results expected of this programme are as follows:
a)
b)
c)
d)
e)
f)
g)
h)
i)
2.6
an improved banking environment;
a strengthened judicial system;
restructured and reorganized commercial banks;
improved rural financial intermediation;
improved operation of the CAA;
reorganization and development of the insurance sector;
the Stock Exchange restructured;
development of the capital market; and
control of the social impact of the programme.
Financial Provisions
The financial provisions under this programme appeared among the loan disbursement
conditions of the Bank and the other donors. These conditions were as follows:
2.7
2.7.1
a)
reorganization, absorption of losses and recapitalization of the BIAO (respectively
CFA.F 11.9 billion, 4.1 billion and 11 billion);
b)
settlement of State and public sector arrears to the banking and insurance sectors;
respective amounts of CFA.F 212.7 billion and 39 billion;
c)
settlement of State and public sector arrears to the CAA (CFA.F 62.767 billion),
recapitalization of the Deposits Management Department of the CAA by CFA.F 5
billion;
d)
liquidation of the BNDA (signing of the consolidation agreement for an amount of
CFA.F 47.8 billion and the establishment of a buyback fund and the compensation
of depositors with a total initial allocation of CFA.F 8 billion).
Evaluation Approach and Methodology
The approach adopted for the evaluation was principally based on:
a)
a survey at the BCEAO on the basis of a prior outline designed to obtain the most
recent information on the financial sector data in Côte d'Ivoire and in the subregion;
b)
a survey of the banks and institutions concerned by the programme;
c)
discussions with the institutions concerned by the programme (Ministry of Finance,
BCEAO, Insurance Directorate, Caisse autonome d'amortissement, Directorate for
Industry, the Abidjan Stock Exchange, etc).
These surveys were conducted in close collaboration with the services of the Ivorian
Ministry of Finance. Discussions were also held with the Bank's programme officers, as well as with the
Caisse française de développement and the World Bank.
2.7.2
As a result of the devaluation of the CFA franc, methodological difficulties appeared
regarding the evaluation of the effects and their attribution to the programme. To do so, the evaluation
15
approach adopted was based on an analysis of trends and a comparison of the "before and after" situation.
The information gathered was, therefore, used to compare the outputs with the forecasts and analyze the
trends of the different performance ratios and indicators.
III.
PROGRAMME OUTPUTS AND RESULTS
3.1
Loan Effectiveness
3.1.1
The Government easily fulfilled the many conditions of effectiveness. This reflects the
level of progress made in the preparation of dossiers and the Government's determination to implement the
programme under optimum conditions.
3.1.2
The loan was declared effective three (3) months after its approval (two (2) months after
the signing of the loan).
3.2
Implementation Schedule
The planned implementation period for the programme was one (1) year. The FISAP was
implemented in conformity with the initial schedule but with an overrun of seven (7) months.
3.3
Programme Costs, Disbursements and the Use of Counterpart Funds
3.3.1
The programme costs were revised downwards from CFA.F 506.2 billion to CFA.F 490.8
billion despite an increase in the cost of bank restructuring (capital increases of the banks and the Caisse
autonome d'amortissement to ensure compliance with the prudential standards issued by the BCEAO).
This fall is primarily due to a reduction in public sector arrears (claims not accepted for settlement by the
State). The principal sources of finance (donors) did not change and the amounts estimated at appraisal
were mobilized without change. The Ivorian State's contribution to the programme financing fell as a
result of the reduction in costs.
3.3.2
The loan was smoothly disbursed in two tranches and a mid-term review mission in
January 1993 reviewed the progress made in implementing the matrix of measures. There was a seven (7)
month overrun in comparison with the estimated disbursement schedule.
3.3.3
The procurement procedures provided for in the loan agreement were complied with (types
of eligible goods, country of origin and method of procurement) and a financial supervision mission was
effected by the Bank's services.
3.3.4
The counterpart funds were primarily used to honour the Government's commitments in
the recapitalization and the settlement of the banks' bad debts (BIAO), as well as of public arrears.
3.4
Logical Framework Approach
3.4.1
The operations guidelines applicable in 1992 had not yet adopted the logical framework
approach within the Bank. However, the appraisal report, which included the programme matrix of
measures, clearly presented the goals and objectives as well as the results expected but did not review all
the consequences of and risks related to the implementation of that programme, particularly with regard
to certain ongoing operations financed by the Bank (liquidation of financing structures such as the
BNDA).
3.4.2
For the evaluation requirements of this programme, a retrospective matrix was therefore
established and performance and impact indicators identified for the assessment of performances with
16
regard to the programme results and the achievement of its objectives (ref. Annex 1).
3.5
Compatibility of Bank Strategies and Policies with those of the Country
3.5.1
The Bank's first Economic Prospects and Country Programming Paper on Côte d'Ivoire,
dated 1994 (ref. ADB/BD/WP/94/138 - ADF/BD/WP/94/115) was the first of its kind since 1988.
However, this programme was a priority for the Ivorian Government which, by establishing an economic
recovery programme for the 1992-1995 period, anticipated the restoration of the viability of the financial
sector with a view to stepping up financial intermediation and diversifying the sources of investment
financing.
3.5.2
Under the macroeconomic justifications of this programme the appraisal report mentions
that the Government was to support and complete the other sectoral restructuring programmes being
implemented during the 1990-1992 period (ASAP, ESAP, and COSAP).
3.6
Compatibility with Regional Economic Integration
3.6.1
The FISAP did not initially integrate the regional dimension owing to the scale of the
economy's specific problems and those of the financial sector, as well as time constraints imposed by the
urgency of the reforms to be implemented. The Financial Sector Development Policy addressed to the
Bank by the Minister of the Economy, Finance and Planning makes passing references to the Banking
Commission, the proposed study of a regional approach to the regulation and control of the insurance
sector and a study on regional capital markets. The Bank's appraisal report also makes fleeting reference
to this aspect.
3.6.2
However, Côte d'Ivoire forms part of an economic grouping, WAEMU, whose principal
objective is to bring about the economic integration of its Member States. The institutional and regulatory
framework of the national financial institutions, monetary and foreign exchange policy, the money market
rate etc., are defined at community level. Furthermore, through the political will of its leaders and its
economic importance in the region, Côte d'Ivoire has always played a key role in the deepening of this
integration policy. In addition, some of the reforms of the programme will fairly rapidly assume a
regional dimension particularly after the change in parity of the CFA franc in January 1994.
3.6.3
The banking sector reforms were all implemented in keeping with the adopted community
regulations, either by the Council of Ministers of WAEMU, or by the BCEAO Board of Directors. The
new prudential ratios were adopted by a WAEMU Council of Ministers, at the proposal of the BCEAO.
The BCEAO participated actively in FISAP within the normal framework of its attributions as defined in
its charter and following the agreement of its Board of Directors comprising the Ministers of Finance of
the Member States. Finally, the subregional Banking Commission, which holds jurisdictional powers, has
carried out audits of the four commercial banks.
3.6.4
While implementing its reorganization programme the insurance sector participated in all
the projects aimed at strengthening regional integration. Côte d'Ivoire was already a member of the Joint
Reinsurance Company of Member States of the Insurance Control Conference (CICARE), but it
considered that greater integration of the sector in the regional economy would encourage its
development. It also signed, on 10 July 1992, following the Inter-African Conference on Insurance
Markets (CIMA) in Yaoundé, the Treaty establishing Joint Regulations and Supervision for the thirteen
(13) Franc Zone States. Côte d'Ivoire ratified it in 1993. The Treaty makes provision for, in particular, the
creation of a team of inspectors and the regulation of the profession of broker. This regional team of
inspectors is operational and has begun its controls in some central African states. The regulation of the
profession of broker should be initiated shortly. Moreover, the proposed texts are based on existing
Ivorian regulations.
17
3.6.5
The restructuring of the stock exchange was designed and implemented with a view to
serving the subregional market. The establishment of a regional capital market in Abidjan, but with
branches in each member state has been approved. It should encourage the mobilization of savings and
meet the requirements of enterprises. Privatization of the public sector enterprises planned in some
subregional member states could fuel this stock market. The quoting on the BVA of two WADB bonds is
a step towards that goal.
3.6.6
The restoration of the principal macroeconomic balances of the Ivorian economy has
regional spinoff since it permits the reallocation of liquid funds to productive investments. The heavy
demand for capital in Côte d'Ivoire to finance its deficit led to a transfer of liquid funds of some member
states of WAEMU to that country and consequently opportunities for productive investment in these states
became rare. Attempts were, however, made to consolidate the monetary and financial integration of
WAEMU and beyond it to the whole franc zone through CIMA in the case of insurance. This regional
economic integration happened naturally, moreover, with the implementation of the measures
accompanying the devaluation of the CFA franc in January 1994.
3.6.7
The integration process is continuing with the establishment of the Organization for the
Harmonization of Business Law in Africa (OHADA), the objective of which is to establish joint
legislation of business law and a single appeals structure for the sixteen (16) signatory Francophone
African countries.
3.7
Reform Measures
3.7.1
Implementation of most of the planned measures has either been completed or started and
been continued or deepened following the FISAP (implementation of the programme for the settlement of
public sector non-bank domestic arrears, a study on a regional approach to the regulation and supervision
of insurance companies, the establishment of a regional stock exchange). Only the measures concerning
the development of capital markets were not implemented at the programme completion date (reform of
security brokerage activities, a study on the taxation of savings and incentives to establish venture capital
companies).
An Improved Banking Environment
3.7.2
The improved banking environment is discernable from indicators such as, compulsory
reserves, the prudential ratios and the trend of the volume of refinancing by the bank of issue. Thus, since
their application in October 1993, the level of compulsory reserves has always been complied with, since
the current account balances of the banks with the BCEAO have always been above the required level.
The prudential standards are increasingly complied with. The Banking Commission report for the 1995
financial year only raises two (2) shortcomings for the debt ratio compared with five (5) in 1994. Bank
refinancing by the BCEAO which represented 57% of their applications in December 1991, only
represented 13% in December 1995 (despite this being a peak period owing to seasonal credits) and was
4% at the end of August 1996.
Table 1
BCEAO Intervention in the Refinancing of the Financial Sector, 1991-1995
(In billions of CFA.F)
1991
1992
1993
1994
1995
18
Applications
938.8
942.3
1016.2
959.0
1141.4
Refinancing
530.8
542.8
517.2
135.1
153,2
57
58
51
14
13
Refinancing
Applications %
Source: Balance Sheets submitted by the banks
Four (4) Commercial Banks Restructured and Reorganized
3.7.3
The four (4) principal commercial banks were restructured and reorganized. One of them,
which had difficulties in complying with the prudential ratios at the end of 1995, reached the required
standards during this financial year. Their situation is described in the following paragraph.
3.7.4
Equity capital, for a long time inflated by provisions which should have been used to settle
bad debts, are falling to a level which will not meet the prudential standards. It became necessary to
recapitalize the banks from 1990. At the end of 1991, SGBCI and in December 1991, SIB carried out the
first recapitalizations following the absorption of previous losses. Other similar operations subsequently
took place at the BIAO-CI, the BICICI and again at the SGBCI. Finally, in early September 1996, SGBCI
increased its equity capital to CFA.F 15.33 billion by the capitalization of reserves. Equity capital rose
from CFA.F 46 billion in 1992 to CFA.F 75 billion in 1995, while commitments stagnated or increased
very little. The banks are moving in the right direction but must keep to their objective and pursue their
efforts. The present level of equity capital does not shield them from any reversal of the economic
situation or a major disaster. They must rapidly attain the prudential ratios required by the international
institutions: the IMF, the BIS, etc. (ref. annexes 8 and 9).
3.7.5
The State is gradually disengaging from the banks' capital. At the time of the
recapitalizations the State, in keeping with its undertaking, wanted to reduce its equity participation in the
four (4) principal commercial banks to a ceiling of 20%. This undertaking was complied with in the case
of the SGBCI and BICICI. Its participation in the capital of the SIB remains 49% and in the BIAO-CI,
100%. Concerning the latter, a memorandum of understanding was signed in March 1996 with a group of
investors, but, the consortium still leaves the State with 30% in the absence of other candidates. With
SIB's return to profitability, the State is hoping to withdraw and reduce its participation to 20% on the
basis of subscribed commitments.
3.7.6 Regarding compliance with the prudential ratios, the measures recommended by the FISAP enable
the banks to comply with or approach the requirements of the new prudential rules. The restoration of
profits following the reorganization of the portfolio should facilitate compliance with these rules. The
debt ratio - risk cover - which ought to be above 4% was complied with in 1995, as well as the fixed assets
and participation ratio which may not exceed 100% of actual equity capital. With regard to risk spreading,
the total amount of risks taken on one signature is limited to 100% of the actual equity capital and the total
volume of risks individually attaining 25% of the actual equity capital may not exceed ten (10) times the
value of such equity capital. BIAO-CI and SIB are experiencing difficulty in complying with this ratio,
since the former has considerable commitments on EECI and the latter a volume of individual
commitments in excess of 25% of the actual equity capital. On the other hand, the liquidity ratio, the
objective of which is to control the risk of illiquidity, i.e. to limit the use of very short-term resources
through short, medium and long-term lending, is rarely complied with. It must not fall below 60%. Only
SIB has met this criterion for four (4) years, while the other institutions only occasionally comply with it
(ref. Annex 9).
3.7.7
The Banks' portfolio has been reorganized. As from 1992, public arrears to the banking
19
sector have either been settled or consolidated by securitization and taken over by the State. In particular,
its securitized debts may be refinanced to the tune of 90% and at a rate of 3% by the BCEAO. This
settlement, the securitization of State arrears, the collection and/or settlement of debts have modified the
structure of the banks' balance sheets (conversion of short-term credits into medium-term credits, an
increase in the volume of claims on the state, increased provisions, etc.) and their financial situation (the
possibility of mobilizing State-issued securities at a rate of 3% instead of the previously applicable 11%).
These securities which are representative of the state's arrears to the banking sector are being amortized
normally. As at September 1996, the schedule for the settlement of interest payments had been complied
with and the first four (4) amortization due dates respected by the CAA. The State is up to date with these
repayments.
3.7.8
The reorganization is continuing at the instigation of the Banking Commission, through the
analysis of outstanding private sector credits, which ,in 1991, represented CFA.F 148.3 billion, i.e. 14% of
all banking credit to the economy. This amount fell to CFA.F 73.2 billion in 1994 (9% of credits)
following in or out of court collection and consolidation measures for about CFA.F 40 billion. The
balance was posted as bad debts and settled. The quality of these outstanding credits improved in 1995
since they included only 40% of doubtful and disputed debts compared with 60% previously in all the
commercial banks (Annex 8, table 3).
3.7.9
The results. From 1993, the banks began to post profits. This situation was confirmed in
the following year, with the exception of SIB (exchange rate losses following the devaluation), and
especially in 1995, when the four principal commercial banks made substantial profits more in keeping
with the level of their activities.
3.7.10 All banks in Côte d'Ivoire gradually began to make returns on equity capital in 1994 with an
average rate of 7% compared with a little over 1% in previous years. This progress was not general, for
some institutions (SGBCI and SIB), affected by the change in parity in January 1994, suffered serious
exchange rate losses, but from 1995, the rate of return moved back to two figures.
3.7.11 The management ratios appearing in Annex 8 are also good indicators of the banks' financial
situation. BICICI effectively controlled its overheads since the overheads/NBI ratio of 40.6% in 1995 and
which had been falling steadily since 1992, easily stands up to comparison with that of the best
international banks. The other banks, despite noteworthy improvements, should pursue their efforts, but
because of the staff age pyramid (high average age), personnel expenditure is difficult to reduce in the
short and medium terms. The NBI/staffing ratio over four (4) financial years shows the productivity gains
made and, a posteriori, the economic need for retrenchment in the banking sector.
Caisse autonome d'amortissement - Deposits Management Department
3.7.12 As in the case of the commercial banks, the reorganization of the Deposits Management
Department involved the settlement of public sector unpaid debts which had amounted to CFA.F at the
end of 1991. They were securitized to a level of CFA.F 30.5 billion over 15 years, with a 2 year grace
period and the securities issued on 30 June 1994. The rate was set at 0.75% during the grace period and at
0.50% over the repayment period The balance was settled by the allocation of reserves built up and the
consolidation of recoverable debts.
3.7.13 At the institutional level, CAA recapitalized its Deposits Management Department slightly behind
the FISAP schedule. In fact the initial capital fund was established in June 1994 with an amount of CFA.F
5 billion. In November 1994, a law modified the rules governing the structures of the CAA, henceforth
managed by a Board of Directors.
3.7.14 With operating costs rising by 10.3% over the previous period, the deteriorating financial structure
20
of the Deposits Management Department ended in the 1994 financial year, and the 1995 financial year
which produced outstanding results, made it possible to achieve the targets set by the FISAP. Operations
over the fifteen months of the period show profits of CFA.F 2,788.9 million. Even with a normal period
of twelve months, the result remains excellent at CFA.F 2,232 million, i.e. an increase of 131.8%. These
results were due to improved banking products and tight management of operating and investment
expenditure recommended by the FISAP. Despite the devaluation which resulted in a readjustment of
salaries, operating expenditure in 1994 only increased by 14.7% over the previous period which was
marked by a sharp reduction in staff. The 1995 operating expenditure, with a constant perimeter of 12
months, increased by 20%. But as a result of this sharp increase in activities, the Deposits Management
Department had to recruit. There are now 44 staff compared with 35 as at 21/12/1994 and 66 prior to the
retrenchment.
3.7.15 Total assets which were CFA.F 118.57 billion in 1993 rose to CFA.F 225.55 billion in 1995. This
progress was essentially due to resources which attained CFA.F 170 billion in 1995. These represented
75.4% of the assets compared with 47.5% in 1993. Applications did not rise at the same rate as resources.
It is significant that, in 1993, applications represented 132.4% of deposits. They represented 90% in 1994
and 72.7% in 1995. Nor did the Deposits Management Department have recourse to BCEAO financing.
On the contrary, it intervenes as a lender on the monetary market. Like the four major commercial banks,
it has a satisfactory liquidity margin.
3.7.16 Since its recapitalization, CAA's Deposits Management Department has complied with the
prudential ratios set by the Banking Commission, with the exception of the medium and long-term lending
ratio, which cannot be attained because of the low level of stable resources. The following management
ratios are representative of the performance achieved:
Table 2
Management Ratios of the CAA's Deposits Management Department, 1993-1995
1993
1994
1995 *
Income/Equity Capital
2.8 %
12 %
22.7 %
Operating Expenditure/NBI
41.1 %
41.6 % **
21.5 %
NBI/Staffing
30.5
65.2
(millions of CFA.F)
* reduced to a twelve month financial year.
** The purchase of premises for the Abidjan branch resulted in extra costs.
144.8
Source : Caisse autonome d'amortissement
3.7.17 The CAA's Public Debt Department, operating on behalf of the State, issued the securities for the
settlement of unpaid public sector debts to commercial banks. These securities, for an amount of CFA.F
165.1 billion at a rate of 3%, are amortizable annually over 15 years after a two year grace period.
Furthermore, unpaid public sector debts to the Deposits Management Department (CFA.F 30.5 billion)
have followed the same procedure. As at 30 September 1996, the schedule for settling interest had been
complied with, as well as the amortization schedule. There was no delay.
The Abidjan Stock Exchange
21
3.7.18 The Stock Exchange reform programme was intended to reduce its operating costs, improve its
method of operation and expand its area of activity. In fact, following a satisfactory start in the late 1970s
and the early 1980s, there was a lull in the activities of the Abidjan Stock Exchange. No new companies
were registered from 1983 to 1991. Its revitalization was, therefore, included in the FISAP.
3.7.19 With regard to structures, the reform concerned a reduction in staff from 47 to 13 employees in
January 1992, the reorganization of services and procedures as well as the computerization of operations.
3.7.20 At the institutional level, a 1989 law and July 1992 decree established the Stock Exchange
Commission, a management body with authority and control over the activity and organs of the BVA.
This commission comprises a representative of the Ministry of the Economy and Finance,the BCEAO and
representatives of the principal operators (issuers of shares and bonds, the privatization committee and
professionals). The aim is to rapidly develop the BVA into a private autonomous structure which will
extend its area of activity to the WAEMU member states. Furthermore, a December 1992 law and an
August 1993 decree authorized the establishment of UCITS. Finally, BVA reduced or cancelled its
service charges (abolition of admission fees to the official list and a reduction in admission fees to the
unlisted securities market). The means of access to the stock market were expanded with the
establishment of the unlisted securities market (only one admission) and the curb market (a very
secondary market).
3.7.21 The taxation of financial operations remains a problem in abeyance. A reduction in taxation on
income from household savings had been recommended for many years. An initial but modest start was
made: the tax on income from securities (IRVM) was reduced from 12% to 6% for State borrowings, and
more significantly, the appreciated surpluses on securities became exempt from tax.
3.7.22 Two years after this Abidjan Stock Exchange reform programme, a revitalized financial market is
emerging, buoyed by privatization, the devaluation and an improved macroeconomic framework as a
result of the FISAP. As at 30 June the situation of the BVA was as follows:
-
31 companies were listed;
-
market capitalization had reached a record level of CFA.F 462.4 billion compared
with CFA.F 122.4 billion at the end of 1993, i.e. a 278% increase, primarily due to
shares for , over the same period the market capitalization of bonds remained fairly
low: CFA.F 24.2 billion as at 31 December 1993 and CFA.F 52 billion as at 30
June 1996. The State did not intervene on the market;
-
An increase in securities and capital exchanged on the unlisted securities market
accompanied the market capitalization. While, on average, 1,500 securities
changed hands at each sitting in 1991, for an amount of CFA.F 18.2 million, 3,072
securities were exchange in 1995 for an amount of CFA.F 36.4 million in 1995.
3.7.23 The creation of a favourable financial, legal and fiscal environment and some sensitization of the
population to the problems of the enterprise, were two key factors in the success of the programme.
Indeed, the privatizations and the rehabilitation of the Stock Exchange attracted an Ivorian people's
shareholding. An analysis of the origin of the subscribers to the recent issuing of shares by privatized
companies shows the enthusiasm of Ivorians since over 70% of the capital is in their hands and, what is
more interesting, small holders of 1 to 10 shares represent 17.5% to 67.2% of the capital of listed
companies. However, the absence of an independent body to control operators, with jurisdictional
22
powers, should be rectified. The Stock Exchange Commission, actively involved in the management of
the BVA, cannot efficiently and equitably fulfill that role.
3.7.24 The proposed regional stock exchange is at a fairly advanced stage. It provides for the
establishment of a regional stock exchange and a central depository/bank for settlements. These two
institutions, with majority regional private capital shareholdings, will be located in Abidjan, but local
branches of the Stock Exchange will be established in each of the WAEMU States. At present intentions
to subscribe to the capital of these two key market structures concern an amount of CFA.F 4,149.5
million, CFA.F 2,829.5 million of which is from the private sector. These intentions concern 67
shareholders, including 17 management and intermediation companies (SGIs). Only these SGIs will be
authorized to intervene. The Ivorian banks will only, therefore, be able to maintain their security related
activities through these SGIs in whose capital they participate.
A Reorganized and Developed Insurance Sector
3.7.25 The bulk of the insurance sector reforms recommended by the FISAP were implemented. The
financial reorganization of the insurance companies is continuing and the structures to control operations
in the sector are gradually being established.
3.7.26 The principal features of the financial reorganization are:
-
the settlement of public arrears by cash payments (CFA.F 7.6 billion), by offsetting debts
(CFA.F 3.6 billion) and by a loan from the CAA (CFA.F 7 billion). The last operations
were completed in July 1994. There are now no new arrears and the first due-dates were
respected;
-
portfolio consolidation; the number of insurance companies has fallen from 40 in 1990 to
29 at present, through the closure and transfer of the portfolios of small companies to those
with a strong enough local base;
-
recapitalization, risk cover, and management measures to strengthen the companies
balance sheets and income statements were recommended by the general audit of the
profession which began before the implementation of the FISAP.
Fire, Accident and Risk Subsector
-
the equity capital requirements of companies in this subsector which were CFA.F 7.86
billion in 1992 gradually declined to CFA.F 2.73 billion in late 1995. There remained the
problem of the recapitalization of mutual insurance companies in need of CFA.F 1.46
billion of equity capital to comply with the regulations;
-
the management costs of this subsector, which increased from CFA.F 17.85 billion for a
turnover of CFA.F 40.95 billion in 1992, to CFA.F 20.99 billion for a turnover of CFA.F
63.15 billion in 1995 give a positive net operating income of CFA.F 1.91 billion after two
loss-making years. The management costs to turnover ratio of 35.48%, although steadily
improving since 1992, still remains above the international standards (30%). This
improvement is primarily due to the automobile sector, which is now profit-making after
23
the introduction of a new accident compensation schedule.
The Life Insurance Subsector
-
the equity capital requirements of the Life Insurance companies, with the exception of
those of one company in serious difficulties and which was unable to provide the
supervising authority with any result, were fully covered in 1995;
-
management costs, which are steadily rising, remain high (28.3% of turnover). The
turnover of this sector, which is only one third of the fire, accident and risk sector can
progress within the existing structures.
Table 3
Performances of All Subsectors of the Insurance Sector from 1992-1995
(in billions of CFA.F)
1992
1993
1994
1995
Turnover
50.013
52.949
65.197
81,450
Management Costs as a %
of turnover
Operating Income
43.56
42.13
38.11
33.87
2.452
0.266
- 1.428
2.544
Source : Insurance Directorate
3.7.27 In 1995, personnel costs represented 29.49% of management costs and 10% of turnover, i.e. a ratio
approaching international standards. Following a deficit in 1994, the insurance companies once again
made profits and reached the level of 1992, which had been the first profitable financial year since 1987.
3.7.28 This reorganization was accompanied by reforms of an institutional nature. An insurance code
was enacted at the level of CIMA in July 1995. Heavily based on the 1991 Ivorian law governing the
profession, it established a Control Commission and a team of inspectors already operational and based in
Libreville, and defined the new rules for the allocation of the investing of resources: technical reserves,
etc. It also determined the status of brokers and general agents. Furthermore, the insurance companies are
actively participating in the establishment of the Regional Stock Exchange as well as of management and
intermediation companies (SGIs). These SGIs enable them to intervene on the market like brokers. The
establishment of UTICs within the framework of the Stock Exchange will encourage the development of
the new financial products on offer for some years (capitalization, retirement, Education Plus etc.)
3.7.29 The introduction of efficient computer hardware and software will make it possible to process
contracts and claims more quickly. Owing to those computer tools the supervising body is in a better
position to regularly receive the financial statements within a reasonable time. It can thus monitor the
development of the sector and intervene, if necessary, when appropriate. In addition to the CIMA
controls, the Insurance Directorate at the Ministry of Finance and Planning has its own team of inspectors:
two are operational and three are completing their training.
Strengthened Judicial System
3.7.30 The improvement in the Ivorian judicial environment through the reform of the office of the Clerk
of the Court, wider prerogatives for courts of first instance and the extension of the "provisional
executions" regime and emergency procedures formed one of the conditions of the loan agreement. The
24
legal measures recommended have been implemented. Different laws have been adopted and
implementing texts signed. They are effectively applied, but do not appear to have any significant impact
on the speed or the cost of the legal process. The improvements noted are due much more to the general
economic situation since the devaluation than the laws themselves. For example, the collections made by
the claims department of one of the four banks have risen by 44% since 1993 and the volume of
collections has been sustained in 1996. But its importance is relative for the collection of bad debts only
represents 4% of the stock managed by that department. Furthermore, the measures aimed at reorganizing
and modernizing the judicial system are not maintaining the desired pace owing to a shortage of financial
(a budget in the region of CFA.F 5 billion) and human resources. The planned creation of three courts on
the outskirts of Abidjan to ease the congestion of the Abidjan Court of First Instance has not been
achieved. Only in Yopougon is one being built. It also appears vital to conduct a campaign to sensitize
the citizen to judiciary problems.
3.7.31 The FISAP was the first programme to take into consideration the problems related to the failure
of the legal system in its relations with the economic operators. It made it possible to sensitize the
authorities to the requirements of a legal environment (judicial system and legislation), which was
conducive to development. Since then, the adjustment programmes implemented have comprised either a
specific component concerning these problems or a component encompassing the judicial system itself, as
in the case of the Economic Management Support Project (EMSP), financed by the Ivorian Government,
French Technical Assistance (FAC) and the World Bank.
3.7.32 At the same time, the Francophone States signed on 17 October 1993, in Port-Louis (Mauritius), a
Treaty concerning the Harmonization of Business Law in Africa (OHADA). Ratified by Côte d'Ivoire on
6 September 1995, it became effective on 18 September 1995. Only the problem of financing the
institutions it provided for is still delaying the effective implementation of the Treaty. Its implementation
will lead to the adoption of this law and the disappearance of the related national laws.
Rural and Agricultural Financial Intermediation
3.7.33 The liquidation of the BNDA in 1990 saw the disappearance of the agriculture and livestock
financing institution. The liquidation operations were mindful of the interests of the small depositors who
were all reimbursed. By the end of 1996, the totality of the assets of natural persons will have been
restored. The full repayment of deposits was an imperative for the public authorities. Indeed, in order to
create a future institution which would be involved in financial intermediation in this sector, the trust of
the farming community had to be maintained at all costs.
3.7.34 Since the liquidation, the absence of financial intermediation has remained prejudicial to the
activities of the sector. Despite the favourable impact of the devaluation on farmers and stockbreeders
incomes and the availability of financing from the organized product sectors: oilpalms, rubber trees,
bananas, etc., this sector cannot mobilize the necessary resources. There is a vacuum which the interim
solutions put forward through the utilization of the network of the Rural Savings and Lending Fund
(CREP) cannot fill. In fact the resources gathered by the CREPs are about CFA.F 5 billion in relation to
loans of CFA.F 700 million. These figures are derisory in relation to the credit requirements of the
primary sector which represent about 33% of GDP.
3.7.35 The public authorities have outlined solutions to the problem of agricultural credit in Côte d'Ivoire.
These are under consideration by some donors, and a study is about to be conducted to find the most
appropriate solutions. At any rate, the participation of the State and/or state-owned companies in the
initial capital may not exceed 20%.
The Development of the Capital Market
3.7.36 The present supply and demand conditions for capital are not conducive to the development of that
25
market for several reasons, among which:
-
Surplus liquidity in the banking system at the WAEMU level. Funds are not lent. In Côte
d'Ivoire, despite refinancing facilities through the mobilization of securities issued in
recognition of State bank arrears, the banks make little use of them. All the enterprises
have considerable ready money and do not, therefore, find counterparties: treasury bills are
not much used now.
-
The lack of tax incentives to stimulate this market. The rates of tax on financial
transactions and investment interest (IRVM at 12%) are high, although they were slightly
alleviated with the TPS on bank charges falling from 25% to 10% and the tax on the profits
of financial institutions falling from 50% to 35%, as in the whole industrial and
commercial sector.
-
insufficient long-term resources.
Recovery of SONARECI Debts
3.7.37 Of an initial amount outstanding of CFA.F 184 billion, the net portfolio was reduced to CFA.F 96
billion after an analysis of the files (cancellation of charges, settlement of bad debts, assessment at their
market value of recoverable debts, etc). Of that amount, SONARECI was able to recover between
2/06/1993 au 31/08/1996, the sum of CFA.F 18.3 billion, CFA.F 415 million of which came from the
liquidation of BCCI which it had taken over since early July 1995. Thus in its first 39 months of
existence, SONARECI was only able to recover 18.6% of a portfolio already well cleared of these
irrecoverable dossiers.
3.8
Institutional Performance and Monitoring
A - Performance of the Borrower and Executing Agency
3.8.1
Both in the preparatory and implementation phases of the FISAP, the Government
cooperated closely with the donors. A FISAP Monitoring Committee was established at the Ministry of
the Economy and Finance. It grouped together the government services directly involved in the reforms,
and the BCEAO. The objectives had been clearly defined and the measures to be taken clearly set out and
adapted to requirements. Furthermore, the need for the reforms was imposed on all the beneficiary players
who cooperated in their implementation.
3.8.2
The schedule was strictly adhered to and virtually all the measures implemented during
1992 and 1993. However, it was unfortunate that the borrower never submitted to the Bank the
completion report provided for in the loan agreement, despite several reminders and although it had
submitted one to the World Bank on 18 November 1994.
3.8.3
A comparison of the results of the four banks with the forecasts made in their plan of
action for the 1992-1994 period, leads to the following conclusions:
-
Deposits and credits. Not all the banks reached their objectives in 1992 and 1993,
since the performance was below expectations. In 1994 deposits surged as a result
of the devaluation producing a 28% increase on forecasts. On the other hand, the
volume of credit is still below forecast.
-
Overheads. The actual figures are very close to the estimates. The slippage
observed in 1994 (an average of over 23%) was the result of readjustments
following the change in parity of the CFA franc.
26
-
The net banking income forecasts were too low in relation to performance over the
three financial years. Despite the accuracy of the overheads forecasts and aboveforecast NBI, the results do not confirm the forecasts. In fact, the banks concerned
underestimated provisions and the settlement of bad debts, as well as exchange rate
losses following the devaluation.
-
Overall, the BICICI is the most efficient for it virtually always achieved the
forecasts of its 1992-1994 plan of action. In fact, it had taken recovery measures
prior to the FISAP.
B - Bank Performance
3.8.4
The FISAP was prepared by the World Bank and the executing agency. It was only at the
end of that phase that the Bank was contacted by the Ivorian Government with a view to obtaining a UA
50 million loan to support the financial sector reforms. The preparation of its intervention as well as the
appraisal of the programme were carried out locally on the basis of the documents accompanying the
request. Its participation was aimed at enabling the State to release the necessary resources for the
restructuring and recapitalization of the BIAO-CI which was in a desperate financial situation, since it had
been considered liquidating it.
3.8.5
There was no real cooperation and coordination between donors since each one was
operating in specific areas defined when the FISAP was prepared by the World Bank and the Ivorian
Authorities. There should, however, have been a minimum of coordination.
C - Monitoring
3.8.6
Implementation of the reform programme was monitored by the competent services of the
Bank, in relation with the borrower. The Bank devoted 125 staff/days to it, mainly during the mid-term
review and the preparation of the completion report. The mid-term review revealed that the conditions
precedent to the disbursement of the second tranche of the loan were fulfilled with the exception of the
payment of CFA.F 1 billion constituting the State's share in the capitalization of BIAO-CI. Following the
completion of that transaction, UA 20 million was released and the programme was implemented
according to the initial estimates. Furthermore, informal meetings were held between the Ivorian
Authorities and the ADB to review the achievements of the programme.
3.8.7
The Borrower established a monitoring committee which played an active role in the
success of the programme. Comprising representatives of the financial sector, it obtained a consensus in
Parliament and of the other administrations concerned, thus encouraging the achievement of the
programme objectives.
3.9
Compliance with the Conditions and Provisions of the Loan Agreement
3.9.1
In the form of undertakings, the conditions for the implementation and disbursement of the
first tranche of the loan were fulfilled without difficulty by the Ivorian Government. Prior to the
disbursement of the second tranche, a mid-term review mission enabled the Bank to confirm the
fulfillment of the related conditions. A memorandum and a review mission report were prepared and
served as a basis for the disbursement of the second tranche.
3.9.2
The Ivorian Government did not submit to the Bank the activity reports and its completion
report and did not carry out the audit of the account used with respect to this loan. However, the
authorities contributed to the preparation of the Bank's completion report by providing statistical data.
27
IV.
PROGRAMME EVALUATION AND IMPACT
4.1
Impact of the Reforms
4.1.1
The implementation of the FISAP coincided with a difficult economic climate. In 19921993, all the economic and financial indicators continued to deteriorate, especially in the second year.
This situation was not specific to the Ivorian economy. In fact the economic crisis also affected many
industrialized countries. 1993 was a year of negative growth in the European countries, the principal
commercial partners of Côte d'Ivoire. The 0.4% fall in 1993 was comparable to that in many other
countries and could have been accepted if it had been an isolated setback. But it reflected an economic
framework which had been steadily deteriorating for several years and which required the initiation of a
series of programmes including the FISAP.
4.1.2
Most of the reforms planned to support the efforts to revive economic activity and promote
a solvent, diversified and efficient financial system were completed at the end of 1993. The performance
of that programme can be evaluated in the following years. The impact of the devaluation of January
1994 partially camouflaged their real impact. Only when the effects have stabilized can the specific
impacts of the FISAP be accurately assessed, although some are already visible.
Support the Efforts to Revive Economic Activities
4.1.3
Gross Domestic Product. During the 1990-1993 period, GDP fell by 1.5% reflecting the
shrinking of domestic demand, especially of investment, which fell from 8.5% of GDP in 1990 to 7.8% in
1993. Apart from the primary sector, which maintained an annual growth rate of 1.7% per year, the other
sectors declined. Exports and imports of goods and services, in terms of value, declined every year from
1990-1993.
4.1.4
The trends reversed from the January 1994 devaluation and the completion of the FISAP.
GDP in real terms rose by 1.5% in 1994 and by 6.5% in 1995. It should remain at that level in 1996. All
the sectors are contributing to that growth, especially the secondary sector, which in 1994 was boosted by
a sharp decline in imports (-10%) offset by local production. The growth in volume of the secondary
sector was 3.7% and 8.3% in 1994 and 1995. It should be 11.9% in 1996. 4.1.5
Investment,
two thirds of which was from the private sector, is taking off again and in 1994 and 1995 represented
10.8% and 12.3% of GDP. However, the targets set have not been achieved. Its growth rate is 5.7%
below that forecast at the time of appraisal, but it is expected to increase in the next few years without,
however, attaining the 18% forecast. However, the fall in the base debit rate from 13% (17% after the
devaluation) to 7% at present encourages lending. Several causes of the implementation delays have been
suggested:
-
a wait and see attitude of economic operators following several very difficult years
for their cash flow and operations;
-
hitherto unutilized production capacity requiring only minor investment to start up
again. These minor investments are selffinanced from the gains made by exporting
companies following the devaluation.
4.1.6
The low demand for financing from the banking sector in 1994 has corroborated these
assumptions. The devaluation improved the cash flows of exporting companies which can selffinance
virtually all their investment programme. At the same time, the settlement of part of the State's debt
arrears is enabling enterprises to strengthen their financial structure and envisage further investments,
often selffinanced. In 1995, under the old investment code, the Ministry of Planning and Industrial
28
Development had granted 122 priority authorizations for an estimated volume of investment of CFA.F
219.7 billion. CFA.F 61 billion of this amount has not yet been committed. From February 1996, the
effective date of application of a new code, until 30 August 1996, the ministry had approved 38 dossiers
for planned investments of CFA.F 101.3 billion and received ten statements of intent for an amount of
CFA.F 1.2 billion. The planned volume of investments in 1996 is slightly below that of 1995, but the
surveys conducted by the Ivorian employers' association among its members reveal on the contrary,
substantial progress.
4.1.7
Public Finance. The reorganization of public finance continued in 1994 and 1995. The
primary balance, which had posted deficits for several years, posted a surplus of CFA.F 34 billion in 1994
and CFA.F 150 billion in 1995, despite the scale of the settlement of domestic arrears (CFA.F 175 billion
in 2 years) and tax incentives for enterprises (CFA.F 25 billion in 1995 for the private sector). The FISAP
appraisal estimates counted on a surplus of CFA.F 153.6 billion in 1995. The results achieved are
therefore close to the forecasts.
4.1.8
Public domestic debt. The financing of the public finance deficit was partially achieved
through the accumulation of domestic and foreign debt. Domestic public debt increased throughout the
implementation of the FISAP from CFA.F 973.5 billion at the end of 1981 to CFA.F 1130.80 billion at the
end of 1983, i.e. almost 40% of GDP. It only reached CFA.F 634.7 billion in 1990 (24% of GDP). But
the positive element is that public arrears to the banking system and insurance sector were settled or
securitized during the period.
4.1.9
The balance of payments. After a long period of deterioration, the balance of payments
recovered considerably due to the improved external competitiveness of the Ivorian economy. The
change in the parity of the CFA franc permitted increases in the volume of exports of goods and services
of 4.7% and 4.9% respectively, while they had fallen by -0.2% and - 10.6% in the previous two years.
While imports reacted to the devaluation with a 9.5% fall in volume in 1994, they grew at a rate of 28%
from 1995. There were primary surpluses in 1994 and 1995 of 5.3% and 1.0% of GDP respectively. The
current deficit fell from 12.5% of GDP in 1993 to 1.9% and 4.9% in 1994 and 1995. Foreign currency
reserves are CFA.F 700 billion.
4.1.10 The January 1994 devaluation of the CFA.F was to encourage a partial reduction in the State's
domestic debt. Outstanding domestic public debt was CFA.F 770.4 billion as at the end of 1994 and
CFA.F 931.7 billion as at the end of 1995, i.e. respectively 18.2% and 19.3% of GDP. This stock
comprises arrears of CFA.F 148.5 billion (16% of the debt outstanding), CFA.F 135.3 billion of which
was owed to the CNPS. Debt owed to banks is CFA.F 626.3 billion, CFA.F 334.7 billion of which is
owed to the BCEAO, but there are no more arrears. Thus, in 1994 and 1995, the State was able to reduce
its domestic arrears by CFA.F 175 billion of an initial stock of CFA.F 288 billion, but it accumulated
further delays on the last due dates of the CNPS and the FNI, in the region of CFA.F 135 billion.
4.1.11 Money supply. During the two year implementation of the FISAP, money supply contracted
slightly from CFA.F 846.4 billion in 1991 to CFA.F 836.3 billion in 1992 and CFA.F 824.9 billion in
1993, i.e. an annual fall in the region of 1.2%. This contraction was to be found at counterparty level, in
particular domestic credit fell from CFA.F 1303.2 billion to CFA.F 1288.2 billion. The impact of the
FISAP has not yet been felt. But after two years of reorganization, the banking system resumed normal
operations in 1994 and 1995, boosted, it is true, by the change in parity. Money supply rose by 46.8% in
1994 and 16.6% in 1995 reaching CFA.F 1206.6% and CFA.F 1406.8 billion respectively. This increase
in the money supply, especially pronounced in the case of fiduciary circulation and sight deposits in
banks, is directly related to the return of capital from outside the CFA.F States.
29
4.1.12 The inflation rate. Prior to 1994, the Ivorian economy experienced a period of recession due to its
vulnerability to external shocks and the inadequacy of its macroeconomic policy. The inflation rate, like
the other economic indicators, reflected the state of an economy in recession. The devaluation of the CFA
franc in early January 1994, provoked an inflationary surge. But the policy of budgetary and monetary
rigour, the implementation of which was facilitated by improvements to the financial system by the
FISAP, made it possible to contain inflation at 32% in 1994 and 7.7% in 1995. It is estimated at 5% in
1996 and the forecasts anticipate an identical rate in 1997 1998.
4.1.13 Domestic savings, which represented 11.3% of GDP in 1990 and 9.4% at the end of 1994, surged
to 21.8% in 1994 and 20.7% in 1995. According to the Ministry of the Economy and Finance, this rate
should be maintained in 1996 and 1997. With the inflow of external private financing a higher than
estimated investment rate should be possible.
The Promotion of a Solvent, Diversified and Efficient Financial System
4.1 14 The FISAP's objective of promoting a solvent, diversified and efficient financial system was
partially achieved between 1992 and 1995. The financial system is now solvent: both the banks and
insurance companies have been reorganized and the banks now have substantial liquidity and are not
chronic borrowers from the issuing house or the money market. However, it is not very diversified: the
structure of deposits and credits is fairly rigid, agricultural sector financing was suspended with the
disappearance of the BNDA and only the Stock Exchange attempted to diversify. Also, although the
performance achieved is undeniable, it has to be confirmed over the next few years after the disappearance
of the remaining effects of the devaluation.
The Financial System is Once Again Solvent
4.1.15 In view of the importance of the four principal commercial banks, their performance levels with
respect to their profitability, improved balance sheet and financial structure have had an automatic impact
on the entire Ivorian banking system. The banks' portfolio has been reorganized, their equity capital is in
keeping with the risks borne by them. The profits of the insurance companies have been restored and their
capital is once again boosting the liquidity of the economy.
4.1.16 Bank liquidity. Bank resources which had fallen steadily from 1988 to 1993 increased sharply by
53% in 1994. This trend continued in 1995 at the rate of 25%. In two years, the increase in deposits was
CFA.F 578 billion. This abundance of resources was not accompanied by an equivalent demand for loans
which only increased by CFA.F 227 billion during the same period. Also, since the banking system was
virtually insolvent, refinancing by the BCEAO, which represented over 50% of reinvestment in 1993,
gradually declined to 4%. The Ivorian banking system is now very liquid.
The Diversification of the Financial System is Slower
4.1.17 The structure of deposits and credits remains rigid. The banks do not have long-term resources. In
1994 and 1995, 49% and 46% of households' and enterprises' bank deposits were sight deposits. Time
deposits were in fact very short term (1, 2 or 3 months) and very often renewable. They are not, therefore,
real long-term resources on which the banks can count for the financing of medium and long-term credits.
4.1.18 Consequently, it is difficult for small and medium-size enterprises to obtain medium and long-term
credits to finance their investments. Throughout the FISAP, and the following two financial years,
outstanding credits in the banks varied. There were limited operations to transform short-term savings
into medium-term savings, since the banks could quickly find themselves in a situation of illiquidity.
Therefore short-term credits remained the preferred products of the banks and represented two thirds of
bank credit over the same period.
4.1.19 Agricultural financing. With the liquidation of the BNDA, the farming community had no specific
30
financing institution. The financial system could not diversify either by intervening directly, with the
appropriate products, in the financing of this basic sector of the Ivorian economy, or by encouraging the
establishment of institutions to finance that sector.
4.1.20 Credit and debit interest rates are similar from one institution to another. There is no real effective
competition despite the existence of unutilized resources which should encourage banks to propose
attractive financing to economic operators. Although liberalized credit rates remain low and do not offset
inflation, especially as the surplus liquidity in the economy is pushing those rates down. Similarly, the
cost of bank transactions (account charges, transactions charge and related taxes) remain high and
standard whatever the bank and the client. The interest margins obtained are high and should permit a
further fall in the base debit interest rate, when they have replenished their equity capital.
4.1.21 Diversification came from the Abidjan Stock Exchange, revived by the programme for the
privatization of State enterprises. The BVA took part of the enterprise financing market. The
capitalization/GDP ratio, which stood at 4.3% in 1991, had fallen to 3.7% in 1993 but rose to 6.8% in
1994 and attained 12% in 1995.
Financial Sector Performance
4.1.22 The financial sector's greatest achievement was to have been able to absorb and integrate a large
part of the reforms recommended by the FISAP, in particular the reorganization of public arrears and the
settlement of the large stock of outstanding private sector debts. The banks and insurance companies have
had to establish restructuring programmes affecting their equity capital, their personnel and their internal
organization. More concretely, performance can be judged from the financial results obtained.
4.1.23 The banks' results are satisfactory. All the banking institutions posted profits in 1995. They are
quite substantial for the four principal commercial banks and the Deposits Management Department of the
CAA since they amounted to CFA.F 19.82 billion while profits for the banking sector were CFA.F 7.88
billion in 1994 and CFA.F 3.82 billion in 1993. The same is applicable to the insurance sector which
produced significant positive results (CFA.F 2.54 billion) in 1995. This was the first profit-making
financial year since 1987, with the exception of 1992. The ratio of management costs as a percentage of
turnover was 33.87% in 1995, compared with 43.56% in 1992. It is close to the generally accepted
international standard of 30%.
4.1.24 The banks' equity capital, for a long time boosted by reserves which should have been used to
settle bad debts, fell to CFA.F 123.9 billion in 1993 compared with CFA.F 176.7 billion in 1991. After
further finetuning of the reserves (concertina effect), effective equity capital reached CFA.F 176.7 billion
in 1994. This position should be significantly consolidated in the 1995 financial year, in the light of the
results of the four principal commercial banks and the Deposits Management Department of the CAA, and
because some of the banks have preferred to reduce distributable profits and convert them into reserves.
Efforts should be continued to fully comply with the prudential standards, established in the context of
WAEMU and to be able, at a later stage, to adopt those enacted by the 1988 Basel Agreements (ref.
Annex 9). In the insurance sector, with the exception of some mutual funds, equity capital requirements
have been met. From CFA.F 8.7 billion in 1992, they remained at CFA.F 2.7 billion in 1995.
4.1.25 There was a positive return on equity capital in the 1995 financial year. In the case of the principal
banks and the CAA the return was high, over 21%. In relation to the yields of previous years, which did
not exceed 7% in the best of cases, and were negative for many institutions, the performance was
appreciable.
4.1.26 Such yields are recent and must be confirmed during the 1996-1997 financial year.
The
31
information available as of September 1996 is sufficient to confirm them for the present financial year. In
future, yields will depend on the macroeconomic framework and the world economic situation. The trend
of world commodity rates, in particular of coffee and cocoa, will be determining for their sustainability.
4.2
Social and Economic Impact
4.2.1
The financial sector adjustment programme resulted in considerable downsizing of the four
(4) principal commercial banks, the Caisse autonome d'amortissement, the insurance sector and the Stock
Exchange. Some institutions had already begun the adjustment prior to the establishment of the FISAP.
Between 1990 and 1995, 570 jobs were lost in these different sectors, 163 of which in 1992 and 1993.
Women represented around one third of these departures.
4.2.2
Social reintegration plans were introduced in some institutions with the financial assistance
of the CFD. The most important was that of the BIAO-CI, in 1990, which accompanied its downsizing
plan. The 166 departures (140 of whom were voluntary) were facilitated by attractive financial packages.
But the known results of this reintegration policy are not very encouraging. Most of the credits granted
have not been repaid. It is true that these departures occurred in 1991 and 1992 against a difficult
background. The results would certainly have been different after devaluation.
4.2.3
In the case of the other institutions, the downsizing was achieved through natural
departures without economic redundancies: retirement, deaths, resignations, serious misconduct.
4.2.4
Following these adjustments, the staffing structure of the banks was imbalanced. In fact,
the reduction in staff particularly affected two categories, those near retiral age and young people attracted
by the financial conditions of some of the reintegration plans. Also, the age pyramid no longer has a base
and is top heavy at the 30-50 year level. Within five years, a major part of the bank senior staff and
officers will be approaching retirement. Since it takes 4 to 5 years to train a bank officer, the banks must
immediately start recruiting young graduates over the next ten years, and train them so that they can take
over.
4.3
Institutional Impact
4.3.1
The restoration of the financial balances of the banking sector was achieved through
austerity measures which resulted in major changes in the organizational structures. They affected several
sectors within the banks. The legal and claims departments were revitalized and made more efficient
regarding the recovery of disputed claims. The reinforcement of computer resources and the introduction
of an internal audit have improved risk assessment and encouraged more training and the enhancement
and enriching of tasks. The social plans and retrenchment prompted the human resource directorates to
call into question their personnel management methods and prepare a new recruitment policy which
would take into consideration the long-term effects of decisions.
4.3.2
The BCEAO itself, through its participation in the design and implementation of the
FISAP, has acquired new experience which will enable it to avoid past mistakes. The measures taken by
the Regional Banking Commission, established in 1990, should ensure the timely prevention of the
difficulties of the banking sector. Its regular, rigorous controls are improving the quality of the banks'
portfolio. Through its comments and its judgements, it sensitizes the general directorates and senior staff
to the need for indepth analyses of banking risk and the constitution of appropriate equity capital.
4.3.3
The institutional reforms concern the establishment of a Stock Exchange Commission, the
management organ which exercises authority and control over the activities and organs of the BVA. But
32
the existence of the present BVA is called into question with the proposed Regional Stock Exchange to be
established in Abidjan which will expand its area of activity to the WAEMU states. With a private
autonomous structure, it will be represented in these States by a national branch of the Stock Exchange
(ANB). Regarding the existing BVA, a law of December 1992 and a decree of August 1993 authorize the
establishment of UCITS.
4.3.4
The principal features of the institutional impact in the insurance sector were the
disappearance of twelve (12) insurance companies, the recapitalization of other companies, strengthened
controls and the gradual adoption of a joint regulatory framework for CIMA member countries. The
establishment of a regional stock exchange and the development of the professions of this sector are
conducive to the establishment of joint subsidiary stock exchanges of insurance companies and banks.
4.3.5
The measures taken to improve the judicial environment have not for the moment
produced the desired results. The reorganization of the Office of the Clerk of the Court and the
establishment of new courts in the suburbs of Abidjan are slow in being implemented. The Court of
Arbitration has been set up. Its Chair and Secretary-General have recently been appointed and the
premises allocated. Its operation is now dependent on the installation of the arbitrators who are
undergoing training.
4.3.6
Finally, in the agricultural sector, the disappearance of the BNDA has not been
compensated for by the already existing structures such as the CREP and COOPEC or the provisional
structures established such as the social funds.
4.4
Impact on the Female Population
4.4.1
Neither at the design nor implementation stages of the programme were specific measures
made for the retrenched female employees. They were treated in the same way as the rest of the staff
although the opportunities for reconversion are more difficult. Women are more affected by the increase
in poverty than men, for their jobs are in low productivity sectors such as the informal sector, domestic
activities and the food processing and production sectors.
4.4.2
Regarding those sectors directly targeted by the FISAP, female staff losses accounted for
180 out of a total of 570 jobs.
V.
PROGRAMME SUSTAINABILITY
5.1
Sustainability of Results and Impacts
5.1.1
Any comparison between the existing situation of the financial sector and that prevailing
when the FISAP was implemented is clearly in favour of the former. All the banks established in Côte
d'Ivoire have fairly stable balance sheet structures and the income statements for the last two years, and
more particularly those of the 1995 financial year, are highly satisfactory. The same observation is also
applicable to the insurance sector and the stock exchange. There is once again a positive yield on equity
capital. However, the results are not irreversible. On the whole, the banking and financial sector is
dependent on phenomena which are external to the sectors themselves and also to the Ivorian economy.
The macroeconomic framework is the determining factor in any assessment of the sustainability of the
results obtained. The overdependence of the Ivorian economy on two or three export products remains a
concern. Furthermore, the external debt burden remains a brake on any development.
5.1.2
On the other hand, the results are sustainable at the institutional level. The introduction of
prudential rules which are close to those recommended by the Bretton Woods institutions, the
establishment of compulsory reserves and the establishment of the Regional Banking Commission to
33
ensure compliance with those standards, will avoid any repetition of the past mistakes which threatened
the Ivorian banking system.
5.1.3
The restructured banks have equity capital in keeping with the prudential rules. Internally,
they have established appropriate management tools with the reinforcement of computer resources and the
creation of an internal audit. CAA is now managed by a board of directors. To harmonize the structures
of its Deposits Management Department with those of the banks, it has created an initial capital fund and
is required to comply with the prudential rules.
5.1.4
The bulk of the structures and regulations concerning the Stock Exchange will be sustained
with the forthcoming establishment of the Abidjan Regional Stock Exchange.
5.1.5
The restructuring of the insurance sector (29 companies in 1996 compared with 41 in
1990) and the strengthening of the insurance directorate at the Ministry of the Economy and Finance
supervised by legislation and controls which have become increasingly community-oriented within the
context of CIMA, is evidence of the sustainability of the reforms.
5.1.6
The improved judicial and economic framework sought under the FISAP was achieved in
1992 and 1993 from the standpoint of legislation but has not been reflected in the decisions of the courts.
Virtually all the economic operators encountered consider it to have been a total failure. The problem to
be resolved is vast and the judicial system must be reorganized at the structural, financial and human
resource levels. But part of the legislative work has inspired the authors of the project for the
harmonization of business law in Africa (OHADA) which is shortly to be applied in 16 Francophone
countries. While the sustainability of some national laws is called into question, the legislation will, on
the other hand, be found in the OHADA code.
5.1.7
The fact that most of the legislation and controls are of community origin increases their
sustainability for they cannot easily be called into question by national legislation or regulations.
Furthermore, they have had a profound impact on the perception of independent supranational institutions.
5.2
Programme Development
5.2.1
A growth-bearing macroeconomic framework is vital for the maintenance and
strengthening of the results obtained. The rigorous management of public finance, the currency and the
external debt should be continued. Special efforts should be made in favour of national and foreign
private investment. The 1995 investment code constitutes one element of this policy although it is
somewhat elitist, and far more oriented towards major capital investment than investment in small and
medium-size enterprises which is productivity generating and job creating. But the core problem of
investment concerns its financing provided by the conversion of the liquid savings of the banking sector
into medium and long-term applications. Support for foreign and Ivorian private sector investment is one
of the conditions for the sustainability of the success of the FISAP.
5.2.2
Only with the establishment of efficient financial structures, can the role of the agricultural
sector in the Ivorian economy be further enhanced. The lack of financial institutions is slowing down
agricultural investment particularly the renewal of old coffee and cocoa plants. The intermediate
measures used (CREP, public resources on projects managed by the institutions responsible for
administering those projects) or those which are envisaged under the ASAP 2 in which the Bank
participates, cannot meet all the requirements.
VI.
PERFORMANCE RATING
34
The performance rating tables are set out in Annex 10.
6.1
Implementation Performance
The programme was implemented satisfactorily. The four indicators retained each
received a score of 3. However, attention was drawn to the fact that some of the provisions of the loan
agreement were not fully complied with.
6.2
Bank Performance
The Bank's performance rating was "U", unsatisfactory, with an average score of 1.75. In
fact, the Bank did not take part in the identification of the programme which was prepared at the
Headquarters, on the basis of the documents provided but without any real contribution from it and at the
supervision level, there was no mid-term review mission. Only the appraisal was satisfactory.
6.3
Assessment of Project Outcome
On the whole, the outcome is considered satisfactory but the individual scores vary
considerably from one indicator to another. The institutional development objectives were attained
satisfactorily since the three individual indicators each obtained a score of three. The sustainability
indicators also received an average score of three with some very strong performances, such as the
continuing commitment of the borrower and the political environment which obtained the maximum
score. The two indicators which only obtained 2 are in fact subject to exogenous factors. On the other
hand, the indicator of the relevance and achievement of objectives only received an average of 2.6. It was
noted that the objectives of promoting a solvent, diversified and efficient financial system had only been
partially attained, but that in particular, the development of the private sector and not received any
significant boost and that the different administrative, tax or credit distribution related constraints had not
been removed.
6.4
Overall Assessment
On the basis of the scores of all the individual indicators, the FISAP receives an average
rating of 2.67 which classifies it in the "S" or satisfactory category.
VII.
CONCLUSIONS, LESSONS AND RECOMMENDATIONS
7.1
Conclusions
7.1.1
The financial sector was profoundly changed during the implementation of the FISAP and
in the following two years. Improvements, especially of an institutional nature were observed at the end
of 1993 and are attributable to the FISAP. The financial performance subsequently achieved cannot easily
be attributed to the FISAP or the devaluation alone. It is clear that the two are interlinked and it may be
suggested that the achievements of the FISAP have been strengthened by the effects of the devaluation
just as the results of the devaluation have been enhanced by the existence of an improving financial
environment. It is, therefore, too early to determine the real impact of the FISAP. Indeed, the actual
impact of the programme and the attribution of the impacts noted cannot be accurately assessed until the
effect of the change in parity has declined.
7.1.2
The success of this major programme is due to the unanimous support of the international
financial community: ADB, IMF, the World Bank, France, the European Union and the BCEAO. There
was also a consensus of the economic operators established in Côte d'Ivoire and the Ivorian political
authorities: the Government and parliament. There was an awareness of the seriousness of the situation of
35
the banking and financial sector and the prior need for a rigorous budgetary policy.
7.1.3
The law of 11 September in favour of SONARECI speeded up and facilitated the
procedure of taking collateral on debts being recovered but did not speed up judgements, which, whenever
appealed, fall within the common law procedure.
7.1.4
The banking system is now very liquid, and the economic operators who are now solvent
and have considerable liquid assets, do not require credits. Also, the function of intermediation in the
banking sector is losing ground since the credits to the economy/GDP ratio, which was 36.7% in 1991,
was only 16.6% in 1995. The banks participate less in the financing of the productive sector and more in
the financing of the State. This disintermediation appears in the analysis of the trend of medium and longterm portfolios which rose from 31% of total credits in 1991 to 39.5% in 1995 with however, outstanding
debts lower than in 1991.
7.1.5
In the light of the results of the last financial year, it has been noted that the FISAP has
only strengthened the position of the four principal commercial banks in the financial system of the Côte
d'Ivoire. After the liquidation of the specialized development banks and the restructuring of the portfolio
of the remaining banks, the creation of healthy competition might have been expected. This was not the
case. On the contrary, the same banks dictate their will to the profession. Their previous market share has
been restored. Their clientele remains large industries and businesses. The SME is not their business.
Their policy is much more orientated towards short-term operations, with regard to resources and lending.
7.2
Lessons
7.2.1
Any reform programme should follow a logical and sequential framework. This was the
case with the FISAP which was implemented following preliminary macroeconomic measures: the
reorganization of public finance and the removal of the structural rigidities of the economy. The change in
parity which occurred after the implementation of the FISAP, but which was an underlying possibility at
the time of its preparation, strengthened the results.
7.2.2
But the success of the programme is largely due to the project executing agency which was
able to determine the actions which would condition its success, in particular the settlement of the State's
arrears. The active participation of the institutions and organizations directly involved consolidated it. It
was thus demonstrated that, to ensure the success of a particular programme, it had to have a competent
structure to manage it throughout the programme cycle: identification, appraisal, implementation and
supervision.
7.2.3
The restoration of bank liquidity is a necessary but not sufficient condition to revive
investment financing. The devaluation should have automatically resulted in a sharp growth of investment
credits except in the case of unutilized production capacity. But the decision to invest is also governed by
other parameters, in particular the removal of administrative obstacles which hold up decision-making, by
a legal environment which guarantees that the lender will be able to recover his debt or be able to bring
into play the guarantees held by him and that the investor will benefit from a competitive framework.
7.3
Recommendations
A)
To the Government
7.3.1
To consolidate the results of the FISAP, it is recommended that the Government, and
through it the financial institutions, pursue the reforms initiated, namely:
a)
The restructuring of the Stock Exchange through the privatization of its management and
the establishment of SGIs, separate from the banks. Despite the progress made, it is still
too small to attract foreign investors or savers. Its inadequate share of supply and demand
36
could not only be offset by the extension of its regional cover which will provide greater
opportunities for potential investors regarding liquidity and risk management.
Furthermore, it is necessary to create a jurisdictional body independent of the economic
operators;
b)
In the judicial sector, it should implement its programme to establish and build new courts
in the Abidjan suburbs in order to ease the pressure on the existing Abidjan court. The
modernization of the office of the Clerk of the Court should be continued. More
magistrates should be recruited and trained in economic, financial and commercial
problems. The justice system should be thoroughly reformed to be able to accompany and
not hold up the country's social and economic development. The justice system adjustment
plan is one of the major undertakings called for by local economic operators and foreign
investors who might intervene in Côte d'Ivoire. Foreign investment will only be attracted
if the business community is subject to the rule of law. This sometimes appears to be
lacking. The recovery of debts managed by SONARECI, belonging to the State, should be
governed by the same procedures as those related to the recovery of taxes and duties. In
the absence of such measures, more radical solutions should be envisaged regarding the
continuity of SONARECI's activities.
c)
The development of a capital market which was outlined at the time of appraisal and which
was not implemented during the FISAP, is to be revived. The insurance companies should
be major players in this market and no longer confine themselves to short-term investment
operations with the banking sector;
d)
To promote the emergence of long-term resources, the banks should propose medium and
long-term savings products with a yield above the inflation rate, and the State should
intervene by creating a favourable tax environment. The taxation component of the FISAP
has only been outlined. It has to be deepened with a view to creating a suitable
environment for the long-term savings required to finance productive investments. The
taxing of stock exchange operations is to be reviewed, private sector transactions should
benefit from the same advantages as State borrowings. The fiscal status of leasing is to be
defined to provide an opportunity for this modern type of financing which is appropriate
for SMEs/SMIs. The ongoing private sector adjustment programme will also provide a
solution to some of these problems.
e)
To encourage the banks to increase their equity capital by gradually raising the prudential
ratio to the level of international standards, in particular the debt ratio;
f)
The establishment of social funds as agricultural sector financing instruments can only be
an interim situation and should not slow down the establishment of appropriate financing
institutions. In fact, the poor performance of similar mechanisms in other regions of the
world calls for great prudence. The importance of the primary sector in the Ivorian
economy justifies the existence of special financing institutions or the establishment of
appropriate financial instruments.
g)
At the political level, to extend and deepen the economic cooperation, social, legal and
financial agreements, which will permit greater integration of the Ivorian economy in the
subregion and extend its area of activity and its opportunities for action. In the era of
globalization of the economy, Côte d'Ivoire cannot ignore its immediate environment.
B)
To the Bank
37
7.3.2
7.4
It is principally recommended that the Bank:
a)
Support the Government's efforts to find solutions to the problems of establishing
agricultural sector financing institutions and the implementation of the recommendations
of the ongoing studies;
b)
Remind the Borrower to comply with the provisions of the loan agreement. The
Government's attention should be drawn by the Bank to the obligation to regularly provide
activity, audit and completion reports;
c)
Pursue the policy dialogue with the country with a view to deepening the financial sector
reforms and consider the opportunities for opening lines of credit which would be totally
managed by the commercial banks; and
d)
Encourage exchanges of information with the other donors in order to improve the
coordination of operations at the identification, preparation and other stages of the
programme cycle. On a trial basis, it should be possible to propose that other donors
involved in the same programme carry out a joint completion mission while preparing
separate reports. The work of the executing agencies would then be considerably
lightened.
Follow-up Measures
A)
At Government level
a)
As part of the continuing reforms of the legal system, the Government is required to
strengthen the financial and human resources of the Ministry of Justice and conduct studies
with a view to establishing the legal structures provided for by WAEMU and OHADA.
b)
Deepening of the FISAP reforms and establishment of an action plan as well as a realistic
schedule for the adoption of the international standards recommended by the 1988 Basel
agreements.
c)
In view of the many ongoing adjustment programmes being implemented by the
Government, the establishment of a structure to monitor and evaluate these programmes
will be necessary to strengthen the dialogue between the Government and the local
structures and the donors.
B)
At Bank Group level
a)
It will, in the context of improving the quality of Bank Group operations, be necessary to
strengthen the operational guidelines through:
-
the preparation of verifiable sectoral indicators of economic and social performance with a
view to using them in project and programme logical framework matrices;
-
the definition of conditions for coordination with the other donors and cofinanciers in order
to permit joint appraisal and completion missions; and
-
the establishment of specific guidelines for the conduct of mid-term review missions which
would further involve the Government and its executing agencies;
38
b)
The Bank's services shall be required to strengthen policy dialogue with the country in the
following areas:
-
Financial intermediation in the rural sector and the establishment of appropriate financing
structures for the sector;
-
Development of the financial sector (deepening of the reforms undertaken within the
framework of private sector adjustment, a reduction in the costs of financial intermediation,
the promotion of small and medium-size enterprises and the development of the capital
market); and
-
Strengthening of the legal and judicial environment (deepening of the reform of the judicial
system and the establishment of appropriate judicial structures).
c)
The Bank shall keep informed of the results of adjustment programmes being implemented
and support the efforts of the Ivorian Government with a view to reducing its external debt.
DISET-ikg-FISAP
ANNEXES
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Retrospective Programme Matrix
Economic and Financial Indicators from 1990 to 1998
Sources and Applications of Banks' Funds from 1990 to 1995
Summary Financial Situation of the Four (4) Principal Commercial Banks from 1990
to 1995
Insurance Directorate Tables on the Equity Capital of the Insurance Companies and their
Consolidated Situation (1992-1995)
SONARECI -Collection of Debts and Transfer of Assets from 1993-1996
BVA Statistics
Some Performance Indicators of the Four (4) Principal Commercial Banks
Prudential Ratios of the Four (4) Principal Commercial Banks
Performance Ratings for the Implementation, the Bank, and the Project Results
10.1
10.2
10.3
Implementation Performance
Bank Performance
Project Results
ANNEX 8
Page 1 of 3
COTE D'IVOIRE : PERFORMANCE AUDIT REPORT OF THE FINANCIAL SECTOR
ADJUSTMENT PROGRAMME (FISAP)
SOME PERFORMANCE INDICATORS OF THE FOUR (4) PRINCIPAL BANKS
Table 1
Trend of Equity Capital of the Four Principal Commercial Banks
(in billions of CFA.F)
1991
1992
1993
1994
1995
SGBCI
8
(September)
10.8
(February)
11.5
(September)
11.5
11.5
BICICI
7.5
7.5
7.5
7.5
10
(March)
5
(February)
5
5
4
4
4
BIAO
SIB
4
(December)
4
Table 2
Trend of Equity Capital after Distribution of the Four (4) Principal Commercial Banks
(in billions of CFA.F)
SGBCI
1991
68.50
1992
17.95
1993
18.60
1994
22.47
1995
27.69
BICICI
14.92
15.63
17.19
21.16
26.27
BIAO
9.81
8.81
8.07
9.09
11.13
ANNEX 8
Page 2 of 3
COTE D'IVOIRE : PERFORMANCE AUDIT REPORT OF THE FINANCIAL SECTOR
ADJUSTMENT PROGRAMME (FISAP)
SOME PERFORMANCE INDICATORS OF THE FOUR BANKS
Table 3
Reserves and Collections of the Four (4) Principal Commercial Banks from 1991-1995
(in billions of CFA.F)
SGBCI
BICICI
BIAO
SIB
1991
1992
1993
1994
Reserves
3.29
7.69
8.00
4.68
1995
*
10.20
Collection
0.3
2.60
3.43
3.50
8.30
Reserves
10.99
5.55
3.75
4.74
15.32
Collection
3.10
4.67
3.41
5.10
6.70
Reserves
3.92
4.48
10.96
7.04
4.40
Collection
0.54
14.80
11.27
3.50
8.30
Reserves
NA
3.45
2.15
2.53
NA
Collection
NA
3.95
2.51
1.82
NA
* 15 Month Financial Year
Table 4
Trend of the Results of the Four (4) Principal Commercial Banks
(in millions of CFA.F)
1991
1992
1993
1994
1995
(15 months)
SGBCI
- 10340
991
405
778
BICICI
1879
1168
1205
3812
BIAO
- 7607
65
100
261
SIB
- 7269
- 138
426
- 317
7204
(5760)
7495
(5996)
1911
(1729)
6447
(5157)
( ) brought down to 12 months
ANNEX 8
Page 3 of 3
COTE D'IVOIRE : PERFORMANCE AUDIT REPORT OF THE FINANCIAL
SECTOR ADJUSTMENT PROGRAMME (FISAP)
SOME PERFORMANCE INDICATORS OF THE FOUR (4) PRINCIPAL
COMMERCIAL BANKS
Table 5
Return on the Equity Capital of All the Banks and the Four (4) Principal Commercial
Banks from 1992-1995
CI Banks
SGBCI
BICICI
SIB
BIAO
1992
1.4 %
1.4 %
7.8 %
negative
0.6 %
1993
1.3 %
2.2 %
7.7 %
10.2 %
1.1 %
1994
7.0 %
4.2 %
negative
3.2 %
1995
*
NA
25.6 %
52.5 %
21.0 %
*
22.1 %
28.3 %
15 month financial year, brought down to 12 months
Source: BCEAO
Table 6
Trend of Overheads/NBI ratio
1992
1993
1994
1995 *
SGBCI
57.7 %
62.4 %
59.1 %
60.5 %
BICICI
74 %
69.8 %
62.8 %
40.6 %
-
-
-
55.4 %
87.2 %
74.4 %
66.4 %
61.9 %
SIB
BIAO
Table 7
NBI/Staffing (NBI per employee in millions of CFA.F)
1992
1993
1994
1995 *
SGBCI
19.2
18.2
21.8
38.5
BICICI
14.9
17.2
21.3
36.7
BIAO
9
14.3
18.7
29
SIB
-
-
-
23
* Brought down to a 12 month financial year. Source : Balance Sheets of the Commercial Banks and
the BCEAO
ANNEX 9
COTE D'IVOIRE : PERFORMANCE AUDIT REPORT OF THE FINANCIAL SECTOR
ADJUSTMENT PROGRAMME (FISAP)
Prudential Ratios of the Four (4) Principal Commercial Banks from 1991 to 1995
(Source: The Banking Commission)
SGBCI
1991
1992
1993
1994
1995
Creditworthiness
- risk cover
-
4.4 %
-
-
4.8 %
- fixed assets and part. cover
-
68.8 %
-
-
47.0 %
- risk sharing
-
yes
-
-
yes
28.4 %
63.5 %
42.2 %
45.9 %
42.5 %
8.7 %
7.5 %
7.1 %
9.6 %
5.8 %
210.9 %
60.5 %
56.1 %
53.5 %
53.8 %
yes
yes
yes
yes
yes
58.6 %
76.7 %
44.0 %
69.9 %
52.4 %
-
3.0 %
3.2 %
6.1 %
5.1 %
-
147.7 %
159.1 %
95.0 %
100 %
66.3 %
yes
64.0 %
42.2 %
1 infract.
34.4 %
1 infract.
42.9 %
-
4.5 %
5.1 %
4.9 %
5.0 %
-
91.6 %
78.3 %
71.6 %
54.4 %
-
1 infract.
2 infract.
1 infract.
3 infract.
23.0 %
71.3 %
72.0 %
71.4 %
67.5 %
Liquidity
BICICI Creditworthiness
- risk cover
- fixed assets and part. cover
- risk sharing
Liquidity
BIAO
Creditworthiness
- risk cover
- fixed assets and part. cover
- risk sharing
Liquidity
SIB
Creditworthiness
- risk cover
- fixed assets and part.
cover
- risk sharing
Liquidity
The percentages of these ratios are specific to the banking and financial institutions of WAEMU. In fact, the
debt ratio established by the Basel Bank for International Settlements, in 1988, stipulates that international banks
should, as from the end of 1992, have an amount of equity capital equal to at least 8% of their weighted assets
(COOKE ratio). Furthermore their liquidity must exceed 100%.
ANNEX 10
Page 1 of 4
COTE D'IVOIRE : PERFORMANCE AUDIT REPORT OF THE FINANCIAL SECTOR
ADJUSTMENT PROGRAMME (FISAP)
FORM PR 1
IMPLEMENTATION PERFORMANCE
Indicators
Rating
(1 to 4)
Observations
1. Compliance with implementation schedule
3
Some measures were
implemented beyond the planned
schedule. A 7 month delay was
observed with respect to
disbursements.
2. Compliance with costs.
3
A gap was noticed for the public
debt had been overestimated.
3. Compliance with the conditions of the loan
agreement.
3
The Borrower did not comply with
some of the provisions of the Loan
Agreement (audit of the loan
account and submission of the
PCR)
4. Adequacy of monitoring and evaluation and the
quarterly status reports
3
An Interministerial Monitoring
Committee was established but
the Borrower did not submit the
quarterly status reports.
5. Satisfactory Operation (where necessary)
Overall Performance Assessment
N.A.
3
Satisfactory but the Bank should
take steps to ensure compliance
with all the general loan
conditions.
ANNEX 10
Page 2 of 4
COTE D'IVOIRE : PERFORMANCE AUDIT REPORT OF THE FINANCIAL SECTOR
ADJUSTMENT PROGRAMME (FISAP)
FORMULA PB 1
BANK PERFORMANCE
Indicators
Rating
(1 to 4)
Observations
1. At identification
0
The Bank did not take part in the identification of the
programme.
2. At the preparation of the project
2
The preparation was carried out at the Headquarters
without any real Bank contribution.
3. At appraisal
3
The quality of the appraisal report was satisfactory
but did not contain any method of coordination with
the other donors.
4. At supervision
2
Only a programme mid-term review was carried out.
1.75
Overall Assessment of the Bank's
Performance
Unsatisfactory. The Bank did not participate in the
identification and the mid-term review was the only
supervision mission carried out.
ANNEX 10
Page 3 of 4
COTE D'IVOIRE : PERFORMANCE AUDIT REPORT OF THE FINANCIAL SECTOR
ADJUSTMENT PROGRAMME (FISAP)
FORM RP 1
PROJECT OUTCOME
No.
INDICATORS
1
Relevance and achievement of
objectives
RATING
(1-4)
OBSERVATIONS
Partially achieved its objectives of
promoting a solvent, diversified and
efficient financial system. A lack of
competitiveness
and
considerable
disintermediation were noted.
2.6
i)
Macroeconomic policy
3
Is very compatible with the Medium-term
Economic Programme (MTEP).
The
reforms must, however be deepened.
ii)
Sectoral Policy
4
Well designed matrix.
iii)
Physical outputs (including
production)
iv)
Financial results
3
The banks are approaching the prudential
ratios and are once again profitable.
v)
Poverty alleviation, social aspects
and women in development
2
The social aspects were not fully covered,
particularly for women.
vi)
Environment
vii)
Private sector development
1
viii)
Others (to be specified)
-
Institutional Development
3
Institutional framework, including
restructuring
3
2
i)
ii)
Financial and management
information systems including
audit systems
N.A.
N.A.
3
No tangible effect on the development of
the private sector. The distribution of
credit and the administrative, tax and
other constraints have not permitted its
development. Banking intermediation
costs remain high.
The objectives
achieved.
were
satisfactorily
Satisfactorily met the restructuring and
reform requirements of the banking
system insurance sector and the Stock
Exchange. Other reform measures are
necessary.
Satisfactory response to the objectives of
improving the different management
tools. Further efforts must be made to
approach the international standards.
iii)
Transfer of technology
iv)
Acquisition of skilled staff
(including turnover), training and
provision of counterpart staff
3
The institutions concerned by these
problems have set up training programmes
but have not yet solved the problem of
taking over the supervision.
Sustainability ***
3
Satisfactory
i)
Continuing commitment of the
Borrower
4
Joint determination of all the players to
succeed the FISAP.
ii)
Political environment
4
Joint determination of all the players to
succeed the FISAP.
iii)
Institutional framework
3
Strengthening within the framework of
regionalization. It is necessary to deepen
the reforms in the legal, fiscal and capital
market areas.
iv)
Technical viability and staff
retraining
3
The training of magistrates should be
stepped up.
v)
Financial viability including cost
recovery systems
vi)
Economic viability
vii)
Environmental viability
N.A.
viii)
Operating and maintenance
mechanisms (availability of
recurrent funds, foreign currency,
spare parts, maintenance
workshop)
N.A.
Internal rate of return ****
N.A.
Overall assessment of results
2.86
3
4
N.A.
Dependent on macroeconomic conditions
and external factors.
2
Dependent on macroeconomic conditions
and external factors.
Satisfactory.