Financial sector is thriving as the banks re-open branches
Inflation is low, the exchange rate stable and the growth trend set to continue, says the Governor of the central bank

JAMES KOROMA Governor of the Bank of Sierra Leone

The financial sector in Sierra Leone went through difficult times during the crisis years. Today, however, the banks are making profits and reestablishing their branches, and the sector is not only stable but expanding.
The task of ensuring the health of the sector is undertaken by the Bank of Sierra Leone, the nation’s central bank, which itself was taken close to collapse but has undergone a remarkable revival under its Governor, James Koroma. Reviewing the structure and management of the bank late last year, the IMF found it in “remarkable condition” given the difficult times it had passed through, and concluded that it remained “a quality organization with serious and dedicated management and staff.”
Mr. Koroma says the progress made would not have been possible without the relative independence of operations the bank has enjoyed under President Kabbah’s administration. He looks back on the bank’s stewardship of the financial sector over the last few years with understandable satisfaction.

Demand for business credit indicates renewal of confidence

“Not only have we not witnessed a banking failure—a common feature of previous regimes—but we have seen the entrance of two new commercial banks, the establishment of the first discount house and the growth of other non-bank financial houses, all geared towards the strengthening and deepening of the sector,” he says.
With improved security nationwide, the commercial banks have reestablished their branches in the major towns of Bo and Kenema. “Of the eight rural banks that were closed as a result of the civil war, we hope to re-open two of them as soon as possible, and we shall put on the fast track the process of re-opening the others as circumstances permit.”

Hopefully, Mr. Koroma adds, a stock exchange will soon be opened in readiness for the establishment of the National Commission on Privatization, and will “trigger a regime of private sector development on a transparent, competitive and accountable basis.”
On the broader economic front, he cites the surge in banking sector credit to businesses as clear evidence of a renewal of business confidence.
The national economy grew at a rate of 5.4 percent in 2001, up from 3.8 percent in 2000, and Mr. Koroma expects the trend to continue. “The indications are that 2002 will register an even higher rate of growth, all things being equal.” Currently, Sierra Leone boasts the lowest inflation rate and the most stable exchange rate in the sub-region.

The government’s tightening up on collection of taxes means its revenues are on target. This is thanks largely to a 35 percent increase in returns from imports and excise duties and corporate taxes, and a marked reduction in duty free exemptions and concessions.
Mr. Koroma believes that with stability in the macro-economic fundamentals and in national security, Sierra Leone can provide an attractive environment for investors and development partners. The bank’s recently established Private Sector Development Unit is part of the process of making the country more competitive as an investment destination.

Like Mr. Koroma, Abdulai Kakay, Managing Director of Sierra Leone Commercial Bank, believes that banks have a responsibility which extends beyond just making a profit.
“We are looking at our functions in a broader context,” he says. “We believe that as a key financial institution, we should be part and parcel of government policies in the development of this country.”
While profit should be the primary motive for any institution, he says, at the same time the bank should be associated with other social functions that can develop the community “and thereby create opportunities and wealth.”
Commercial Bank has been examining how to become involved in providing micro-credit finance. “That is one area where we can reach out to the poor people and at the same time try to enhance the capacity of the private sector,” Mr. Kakay says.

With improved national security, commercial banks have reopened branches in major towns

The bank’s reopened branches at Bo and Kenema have been doing increased business and the bank is just waiting for the opportunity to reopen its closed provincial branches. Meanwhile its customer base is expanding rapidly thanks to the bank’s philosophy of keeping up with the times, for example by introducing cash points (ATMs) and online banking.
“You’ve got to move with what is happening in the industry,” says Mr. Kakay. “Good service is the key to everything. We spend a lot of money training our staff to ensure they are competent with modern technologies and up-to-date practices in the industry.”

While banks are thriving, Mr. Kakay points out that a lot of business in Sierra Leone goes on in the informal sector. “People are doing business between themselves and the amount of wealth that is in the informal sector is colossal. It’s very wrong and we must find a way to harness that wealth. We have got to bring them within the mainstream.”
One of the bank’s responsibilities, Mr. Kakay believes, is to educate people—particularly in the rural sector—about the need for financial services.