May 27, 2015, 12:17 PM
The annual report of the Central Bank of The Gambia to the people’s representatives was Monday adopted by the PAC/PEC committees of the National Assembly, after Bank Governor Amadou Colley had made thorough presentation of it over the week. In it there is a lot to be learnt, and the following is an excerpt of what transpired in the country’s financial sector in the course of 2013.
Financial Sector Developments
The Central Bank of the Gambia recognizes that a stable financial system is a prerequisite for sustainable economic growth. This underscores the need for sound policy framework and reforms to preserve financial stability. The Bank continues to work towards achieving a more stable and dynamic financial system that is able to deliver essential services to both savers and borrowers. In this regard, the Bank is continuously reviewing and reforming the way we supervise and regulate the financial system.
The Banking Sector
The banking sector in The Gambia continues to be stable and safe with sufficient capital and liquidity to meet their commitments. The industry consists of twelve banks including one Islamic bank. The industry’s capital adequacy ratio dropped by 2 percentage points from December 2013. However, all banks met the statutory minimum capital adequacy ratio of 10 percent during the period under review.
The asset base of commercial banks increased by 12.9 percent to D20.74 billion in 2013, funded by increases in deposits. Gross loans and advances accounted for 25.36 percent of the industry’s total assets. The deposits of the banking industry rose by 15.19 per cent to D15.2 billion as at end-December 2013. This was mainly due to the increase in both demand and savings deposit. However, time deposit dropped in the year under review from the prior year.
As at December 2013, The Gambia’s industry comprises 13 insurers, 9 brokers and about 50 agents. Ten of the insurance companies including a Takaful/Islamic operator underwrite general business (non-life businesses) only, one is a composite insurer (i.e. underwriting both life and non-life businesses) and two are wholly life insurers.
Total assets of the industry grew by 2.8 percent to stand at D528.13 million from D513.74 million in 2012. Current assets stood at D270.31 million which indicated an increase of 24.84 percent to stand at D219.17 million from D190.86 million in 2012. Gross premium income rose by 10.21 percent to D227.16 million from D206.12 million in 2012. A lot of reform in the industry is required and CBG will work with stakeholders to implement the agreed agenda of reforms aimed at achieving an effective industry.
Microfinance Institutions (MFIs)
Financial inclusion that ensures delivery of financial services at affordable costs to the low-income of the segment of the population is at epic centre of the Bank’s policy priorities. As a result, the Bank and other stakeholders continue to support MFIs to improve on management and performance. In 2013, Village Savings and Credit Associations (VISACAs) registered significant growth in membership and deposits. Membership rose from 38,389 in 2012 to 42,104 by end December 2013, an annual increase of 9.68 percent. Total deposit liabilities increased to D18.5 million in 2013 from D15.2 million in 2012 or 21.71 per cent. Managerial quality has generally improved in many VISACAS as a result of continuing support from stakeholders, and several dormant VISACAs were revived.
The overall budget deficit (including grants) was D2.7 billion (8.0 per cent of GDP) in 2013, higher than the deficit of D1.3 billion (5.9 per cent of GDP) in 2012. The deficit was finance
d mainly from domestic sources in the amount of D2.2 (6.0 percent of GDP). External financing amounted to D578.8 million and repayments (D172.7 million).
Bank financing constituted 71.1 percent of total financing at D2.5 billion while a repayment of D172.7 million or 7.0 per cent, was made to the non-bank sector.
Central Bank financing of government deficit (monetization) constituted 91.4 percent of total domestic financing in 2013.
The consequence of financing the fiscal deficit through advances by Central Bank limits the ability of monetary policy to have the desired impact.
In so doing, it contributes to macroeconomic instability by increasing depreciation and inflationary pressures and thus stifling growth.