He said this was as a result of the confluence of favorable financial policies, foreign direct investment inflows to the industry and intensified competition due to the number of banks in the country, which increased from only five in 2005 to twelve in 2015.
The CBG Governor made the remarks during the celebration of the first Annual Bankers Day, held at the Kairaba Beach Hotel on Saturday.
According to Governor Colley, the growth had helped deepen the financial intermediation, but not at the expense of safety and soundness.
“The industry is adequately capitalised and liquid,” he said. “The risk weighted capital adequacy ratio was 32.9 per cent in 2015, higher than the minimum requirement of 10 per cent.”
The average liquidity ratio was 93.4 per cent and prudential requirement of 30 per cent, he said, adding that deposit liabilities also increased to D16.5 billion in 2015 from D4.7 billion in 2005, indicating public confidence in the new banks.
He said that despite the financial reforms and the rapid growth of the banking sector, “access to and use of formal financial services is still very low”.
He asserted that the financial sector indicators had attested to the shallowness of The Gambia financial system, and that “less than 20 per cent of the adult population” holds a bank account.
“The level of financial intermediation proxied by loan to deposit ratio at 29.7 per cent in 2015 is low and credit to the private sector at only 11 per cent of GDP in 2015 is insufficient to drive strong and sustained economic growth,” he said.
He added that interest costs and administrative expenses and collateral requirements for loans are significantly higher in The Gambia compared to most sub-Saharan African countries.
In The Gambia, he added, financial sector liberalisation started in1985 under the auspices of the Economic Recovery Programme and its successor, the Programme for Sustained Development.
The programmes aimed inter-alia at promoting the development of a competive banking system and efficient financial markets, he stated.
He also said the reform included the adoption of a prudent credit policy stance aimed at limiting the growth of domestic credit, particularly net credit to government primarily to rein in inflation and crowd in private investment, deregulation of interest rates, abolishment of credit ceilings and credit rationing, as well as the phasing out of preferential lending to agriculture
He said studies had confirmed that countries have achieved high growth rates with deeper financial systems and financial inclusion and provides additional growth boost once depth is accounted for.
“As a key enabler for promoting growth, reducing poverty and boosting shared prosperity, financial inclusion is firmly placed on the agenda of the CBG as a key policy priority,” Mr Colley said.
The CBG had been actively pursuing financial and banking reforms with a view to enhancing the safety and soundness of the financial system, and at the same time promoting financial inclusion, he said.
“Financial inclusion can only be sustained in an environment of financial stability,” he added, stating that it was the determined policy of the CBG to continue implementing prudent policies.
He also stated that the CBG, in collaboration with the commercial banks, established the first Credit Reference Bureau (CRB) in The Gambia by allowing banks to share information on borrowers, and ensure transparency of the borrowers’ capacity to repay loans, thereby benefiting good borrowers while at the same increasing the cost of default.
