The European Investment Bank (EIB) has signed a 50-million Euro loan agreement with ECOBANK, the African bank with the most predominant presence on the continent – present in 30 African countries. US$ 2.9 million of that facility is for ECOBANK Sierra Leone, the bank with the fourth largest investment in the country. The EIB loan to Ecobank Transnational Incorporated is to help Small and Medium term Enterprise (SME) investments with a view to reducing poverty on the continent.
Announcing the agreement, the EIB Regional Representative for West Africa, Christophe Lucet said that since the end of civil war in Sierra Leone the banking sector had developed remarkably with the potential to do even better. He however admitted that credit to the private sector remained low amounting to ten percent of Gross Domestic Project in 2010, which is far below the 57% average for Sub-Saharan Africa.
Christophe said that upon receipt of approval from the Bank of Sierra Leone the funds shall be released for its medium term lending activities. He said sustainable economic growth could only take place when businesses can develop. To this, he companies and entrepreneurs are important to identify new opportunities and create jobs. He stressed the importance for “a firm commitment to ensure that businesses, particularly small and medium ones, are able to make investment in new projects”.
He said banks are essential to finance the real economy because of their knowledge of local market needs and realities as well as their closeness to customers. He however lamented that lending remained “inherently risky”, with banks having to navigate high proportions of non-performing loans. He highlighted some of the challenges leading to this including difficulty to access information to grant and monitor loans effectively, weaknesses in the legal system and the lack of infrastructure which he said that increases the cost of doing business.
Christophe said that Government had taken measures to improve the business environment. It is also implementing a plan to develop the financial sector through the reinforcement of the oversight capacity of the Bank of Sierra Leone, by creating a better legal environment for the financial sector as well as by enhancing the access to financial services through better credit information and improved payment systems. He said the EIB is currently working with the World Bank, the African Development Bank and KfW of Germany on the electricity interconnection between Côte d’Ivoire, Liberia, Sierra Leone and Guinea. This is a project sponsored by the West African Power Pool (WAPP).
He said significant progress had been achieved in the mining industry since 2009 adding that the Agribusiness sector offered many opportunities. He said that with the right type of private funding EIB would look at supporting projects that are financially viable including the tourism and fisheries sectors.
The head of Domestic Banking at ECOBANK Sierra Leone, Mohamed Bah, said the signing of the loan agreement between his bank and the EIB was a “milestone” in banking on the continent. He said the partnership between the two institutions offered an opportunity to partner with international organisations committed to developing the continent. He said Ecobank’s vision is “to build a world class pan African Bank and contribute to the economic development and financial integration of Africa”.
Mr Bah said ECOBANK had been helping with micro-finance, adding that the acquisition of the Procredit Bank in Sierra Leone in 2010 which was renamed Ecobank Microfinance SL (EMSL) was testament to their dedication to the development of the sector as it is the first licensed deposit-taking micro-finance organisation in the country. “It affords us to provide access to basic savings and micro credit facilities to the unbanked population, greatly improving their ability to access financial services and thereby transforming their lives.”
To emphasise why his bank is committed to SMEs, he said small and medium term entrepreneurship remained the main source of employment in developing countries comprising over 90% of African business operations and contributing over 50% of African employment and GDP. They act as an engine of growth in the continent.
The ESL domestic banking head said they were working closely with the International Finance Corporation-accredited trainers to develop the capacity of SME’s across the country to plan, manage and monitor their business performance. He said they had also developed products like Lease and Inventory Finance to support this crucial sector. ECOBANK is also actively involved in the Tourism sector, Transportation Industry and Mining sector, contributing in our own small way to the overall development of the country.
The banking sector in Sierra Leone is the largest and most vibrant sector of the Financial Service industry, Bah went on, adding that in the last few years the sector had witnessed an influx of Commercial banks thereby significantly increasing the competitive landscape and providing employment opportunities in the country. He however said that the sector was in its development stage characterized by lower productivity levels, skill shortages, and very limited outreach accounting for less than one in five people having access to any formal banking services.
He said the industry is also characterized by a relatively small-sized banks with higher administrative costs. “Banks are however profitable” he went on, with efficiency and profitability indicators are also on the increase.
What is the European Investment Bank
The European Investment Bank (EIB) is the long-term lending bank of Europe and it is owned by the 27 member states of the European Union. Its objective is to finance projects in Europe and around the world that are important to the European Union with low-cost and long-term loans, sometimes supported by technical assistance. It is not a not-for profit institution.
In 2010 EIB financed 460 projects for a total of 72 billion EUR of which 9 billion Euros was outside Europe.
In Africa, like the European Commission, EIB operates under the Cotonou Agreement. The Cotonou Agreement is the most comprehensive partnership between developing countries and the European Union. Since 2000, it has been the framework for our relations with 79 countries from Africa, the Caribbean and the Pacific.
The role of EIB is to support the development of the productive sector with financial instruments, with the objective of promoting economic growth and reducing poverty. Its activities are therefore complementary to national and regional programmes undertaken by our colleagues at the European Union Delegation.
In West Africa, EIB has invested 1.3 billion EUR in direct project financing since the entry into force of the Cotonou Agreement in 2003.
Historically, Sierra Leone and EIB had enjoyed a cooperation for more than three decades in the fields of energy, support to SMEs, agriculture and telecommunications.
ECOBANK Sierra Leone
Ecobank Sierra Leone (ESL) started operations in November 2006. Since its brief inception, it has expanded to 7 full branches with 6 additional outlets and with the largest network of ATM’s. Plans are underway to open additional branches in the provinces this year. As at December, 2011, ESL is ranked 4th in terms of combined total assets out of 13 commercial banks.
It is a fully-owned subsidiary of Ecobank Transnational Incorporated (ETI) Incorporated in Lomé, Togo. ETI is the parent company of the Ecobank Group, which is present in more countries in Africa than any other bank in the world. Ecobank currently operates in Benin, Burkina Faso, Burundi, Cameroon, Cape Verde, Central African Republic, Chad, Congo (Brazzaville), Congo (Democratic Republic), Côte d’Ivoire, Gabon, Gambia, Ghana, Guinea, Guinea-Bissau, Kenya, Liberia, Malawi, Mali, Niger, Nigeria, Rwanda, Sao Tome and Principe, Senegal, Sierra Leone, Tanzania, Togo, Uganda, Zambia and Zimbabwe. The Group also has an affiliate in Paris and representative offices in Dubai, Johannesburg, London and Luanda. ETI is listed on the stock exchanges in Lagos, Accra and the West African Economic and Monetary Union (UEMOA) – the BRVM. The Group has over 24,200 employees from 35 different countries in over 1,100 branches. Ecobank is a full service bank providing wholesale, retail, investment and transactional banking services to governments, financial institutions, multinationals, local companies, SMEs and individuals.
Ecobank is well positioned to work closely with the European Investment Bank in our mission to promote growth within the region. For newcomers to Africa and established players alike, Ecobank, given its unrivalled footprint in 35 countries, its considerable finance and investment experience and breath of its service offerings, can be an invaluable corporate advisor and long term business partner. Africa is our Market. Africa is our Strategy.
For more information, please visit: http://www.ecobank.com.
