Angola bankers say sector must fund diversification

LISBON - Angola's banks must use their strong capital and liquidity positions to help fund the diversification of the oil-dependent economy by providing loans for agriculture and industry projects, several of the country's top bankers said on Tuesday.

Tomatoes farming in Ghana. © EnterpriseAfrik

"Angola now has quite a mature banking system, which has already faced the highs and lows of an economy very linked to oil," Emidio Pinheiro, head of Banco Fomento Angola, the country's second largest bank in terms of customer deposits, told a conference in Lisbon.

A unit of Portugal's Banco BPI, BFA is an example of how Angolan growth has benefitted Portuguese banks, helping their bottom lines during the euro zone sovereign debt crisis.

Since the end of a 27-year civil war in 2002, Angolan banks have posted sustained growth, with analysts saying the sector is well capitalised, highly profitable and liquid and boasts resilient asset quality.

Mira Amaral, head of BIC Angola's Portuguese unit -- which recently struck a deal to buy Lisbon's troubled BPN bank -- said that with only around 12 percent of Angolans holding a bank account, there is scope for further growth, including opening branches nationwide.

He added however, that the banking sector's main challenge is to apply its strong capital base to finance the economy.

"BIC in Angola has deposits of around $1 billion, but only has loans of $2.3 billion, which shows room to transform customer funds into significant credit," Amaral said.

Analysts say Angola's level of credit penetration -- with a loans-to-GDP ratio of 19 percent last year -- is low.

"That means Angola's banks, including BIC, are right now powerful instruments to finance the economy, which needs imperatively to diversify from oil," Amaral said.

Oil has helped Angola pick up the pieces of the devastating civil war to become sub-Saharan Africa's third-biggest economy after South Africa and Nigeria.

Despite moves to diversify and invest in sectors such as agriculture, oil still accounts for 90 percent of Angola's export income but employs less than 1 percent of its people.

Jose Reino da Costa, CEO of Bank Millennium Angola, a unit of Portugal's Millennium BCP said the diversification process is taking too long.

"There is the need for investment in exchangeable goods, namely in agriculture and industry, but what we have seen is that the process takes longer than desired".

Da Costa added that Angola's banks prefer to finance projects in those sectors, rather than those in real estate or public works, as they will make the economy more sustainable.

He warned however, that the country's business structure means banks often have difficulty in assessing risk before approving loans.

"(Providing) credit for companies can be one of the biggest challenges. There is still little custom of companies showing organised accounts or sustained and credible business plans, which brings problems for risk analysis," da Costa said.

Source: Reuters