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Cablegate: Senegal: Financial Services for Usitc Study On

VZCZCXRO1310
PP RUEHMA RUEHPA
DE RUEHDK #2503/01 2900945
ZNR UUUUU ZZH
P 170945Z OCT 06
FM AMEMBASSY DAKAR
TO RUEHC/SECSTATE WASHDC PRIORITY 6596
INFO RUCPDOC/USDOC WASHDC PRIORITY
RUEHLMC/MCC WASHDC
RUEHZK/ECOWAS COLLECTIVE

UNCLAS SECTION 01 OF 04 DAKAR 002503

SIPDIS

SIPDIS

STATE FOR EB/TPP/BTA, AF/EPS AND AF/W
STATE PLEASE PASS USTR
USDOC PLEASE PASS USITC ATTN: L. SCHLITT

E.O. 12958: N/A
TAGS: ETRD EFIN EINV SG
SUBJECT: SENEGAL: FINANCIAL SERVICES FOR USITC STUDY ON
U.S-SUB-SAHARAN AFRICA TRADE AND INVESTMENT

REF: STATE 146622

DAKAR 00002503 001.2 OF 004


1. SUMMARY: Senegal's financial sector is anchored by the Central
Bank of West African States (BCEAO), based in Dakar. The commercial
banking sector is active, and relatively efficient, with a number of
international banks using Dakar as their regional headquarters.
Senegal has one of Africa's most effective and highly capitalized
network of microfinance institutions. These institutions have
spawned the creation of profitable local businesses providing
financial services, including software systems, which are pursuing
markets in other African countries. Senegal also benefits from
growth in other service-related sectors, including call centers. END
SUMMARY.

FINANCIAL SERVICES
------------------
2. While the banking sector is over-liquid and stable, it is
conservative in issuing medium and long term loans. Mortgage
markets are underdeveloped and expensive, generally offering only
short-term funds. Most banks active in real estate lending express
the need for additional tools to refinance mortgage loans.
Senegal's commercial banks have a mixed record on offering
affordable credit to small and medium-sized enterprises (SMEs) and
business start-ups. Many commercial banks maintain their regional
headquarters in Dakar. The largest commercial banks, including
"Societe Generale de Banques au Senegal" (SGBS) and "Banque
Internationale pour le Commerce et l'Industrie du Senegal" (BICIS)
are predominantly French. Citibank, the only U.S. bank present in
Senegal, is active but only provides corporate and investment
banking services.

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3. There are 800 microfinance institutions (MFIs) in Senegal with a
total deposit of CFA 60 billion (USD 117.6 million). Senegal's
microfinance sector, one of the most dynamic in the West African
Economic and Monetary Union (WAEMU) is made up of a solid core of
profitable instittions that compete with banks to finance SMEs.
(OTE: WAEMU members countries -- Benin, Burkina Fao, Cote
d'Ivoire, Guinea-Bissau, Mali, Niger, Too and Senegal -- share a
common currency, the "Comunaute Financiere d'Afrique Franc" (CFAF).
ENDNOTE.) While the microfinance sector represents oly a small
part of the system, it has contribute to about one third of the
increase in the ratioof total assets to GDP. The dynamism of
microfinance is also reflected in an expansion of outstanding credit
by MFIs at a rate of 3.3 percent. The penetration rate of the MFIs
rose from 25 percent of all households in 2003 to 41 percent in
2005, and outstanding credit expanded four times faster than
commercial bank credit during the same period.

4. The larger Senegalese MFIs, including "Credit Mutuel du Senegal"
(CMS) and "Agence de Credit pour l'Epargne et la Production" (ACEP),
are now well positioned to compete with commercial banks to provide
financing to SMEs. In addition to effective networks around the
country, a number of MFIs are exporting their know-how and
experiences to other countries in Africa. These service exports
include business models, accounting systems and locally created
software.

5. There are also numerous small, independent institutions which
are structurally weak and pose a real challenge to the consolidation
of the sector. They rarely comply with reporting requirements,
largely escape the attention of the supervisory authorities, and
often have weak financial structures. There is a MFI surveillance
unit under the Ministry of Finance, but it lacks the necessary human
and financial resources to supervise this quickly expanding sector.
The BCEAO is working closely with the national authorities and the
WAEMU Banking Commission to supervise large MFIs.

6. Senegal's Post Office has expanded financial services available
in underserved areas by offering secure savings and money transfer
services throughout the country and abroad. Deposit balances
managed by the Post Office represent about two percent of bank
deposits, with 510,000 clients. The Post Office is planning to
create a subsidiary to take over its financial services and it has
prepared an action plan that includes creating a bank, privatizing
75 percent of its capital, and offering retail lending and
refinancing of MFIs.

7. Other financial institutions, such as insurance companies, a
French-based venture capital firm, and a leasing company, are also
present here. However, there remains a strong demand for non-bank
investment opportunities. The Abidjan-based West African regional
stock exchange, Bourse Regionale de Valeurs Mobilieres (BRVM), was
created in September 1998 and has local branches in each WAEMU
member country. The BRVM was expected to help alleviate the lack of
long-term resources to finance capital goods investment, but has yet
to have a significant impact in Senegal.

DAKAR 00002503 002.2 OF 004

EXPORTING OF NON-FINANCIAL SERVICES
-----------------------------------
8. In addition to its strong position as a regional financial
center, Senegal is also improving its position on non-financial
services, particularly in the Information Communication and
Technology (ICT) sector. Senegal has one of Sub-Saharan Africa's
(SSA) deepest penetrations of Internet that provides both sufficient
bandwidth and reasonable prices. Telephone landlines and cellular
telephones provide good service and pricing. Senegal offers some of
the most up-to-date and applicable ICT education and training in
SSA. Out of this ICT base, Senegal has a growing computer software
sector. Dakar is also becoming a significant location for
international call centers (mainly French) and has the possibility
to provide additional outsourcing of customer service operations.

RECENT STATISTICAL TRENDS
-------------------------
9. 2005 witnessed few major developments or changes in Senegal's
economic, trade and investment policies. Senegal maintained a
relatively stable macroeconomic performance in 2005 despite higher
world oil prices, with a real GDP growth rate of 6.1 percent,
inflation at 2.5 percent, and an external current account deficit
(excluding official transfers) of 7.1 percent of GDP. Senegal
depends heavily on foreign assistance, which in 2005 represented
about 2.7 percent of overall government budget (including both
current expenditures and capital investments), or CFAF 314.8 billion
(USD 572.3 million). For 2006, official statistics will likely show
GDP growth falling below 4 percent and inflation increasing to over
3 percent.

10. Overall, Senegal's efforts at economic reform have met, though
sometimes barely, their commitments to the international financial
institutions. Senegal responded favorably to many of the Heavily
Indebted Poor Countries (HIPC) benchmarks under the IMF/World Bank
Poverty Reduction Growth Facility (PRGF) programs. On April 19,
2004, the IMF and the World Bank acknowledged Senegal's
accomplishments by agreeing to a comprehensive debt reduction
package under the enhanced HIPC initiative. Senegal achieved its
HIPC completion point, in April 2004, permitting Paris Club debt
reduction totaling USD 488 million in net present value for the
period of 2004-2010. Senegal has also finalized a debt-relief
agreement through the G-8 process. Senegal's PRGF ended in April
2006, and the Government is now in discussions on the possibility of
a new non-borrowing arrangement with the IMF, such as a Policy
Monitoring Arrangement.

RECENT SIGNIFICANT FOREIGN INVESTMENT
-------------------------------------
11. There is no change in Senegal's foreign direct investment
profile. France remains the largest trading partner and controls
many sectors in the economy. Approximately 235 subsidiaries of
French companies are present in Senegal and, while official
statistics are not available, reportedly account for 25 percent of
all formal enterprises in Senegal. French investors are present in
the major multinational import-export firms, shipping companies,
banking, food production, mechanical engineering, tobacco,
agribusiness, petroleum distribution, industrial equipment,
vehicles, chemicals and pharmaceuticals, tourism, insurance,
telecommunications and water bottling.

GOVERNMENT PROMOTION EFFORTS
----------------------------
12. GOS efforts at export promotion have not been effective despite
positive actions by the GOS. The National Investment Agency (APIX),
has taken part in a number of road shows to tout Senegal's assets to
foreign investors. A public procurement code was approved and a
Presidential Investors Council (PIC) composed of foreign and local
investors was established. The PIC is designed to provide President
Wade with useful feedback and recommendations to improve the
business environment and attract investors. During 2003 and 2004,
the National Assembly passed a series of bills to enable the
implementation of some of the regulatory changes suggested by the
PIC. The National Assembly also passed a Build-Operate-Transfer
project code and established the infrastructure Council to ensure
transparent procurement practices for large projects.

13. Senegal is currently eligible for African Growth and
Opportunity Act (AGOA) benefits. The USG approved Senegal's apparel
visa control system in April 2002, and the country is vying for
foreign investors in the apparel sector in particular. Senegal's
AGOA-facilitated exports remain low, due in part to a
non-competitive textile sector and the overall lack of production
capacity. (NOTE: Last week Stafford, a Canadian company, signed a
partnership agreement with INDOSEN, a Senegalese garment producer,
for a significant expansion and modernization of a local textile

DAKAR 00002503 003.2 OF 004


factory. The goal is to export significant quantities of "work"
shirts and trousers to the U.S. under AGOA. The first exports from
this partnership could begin in late October. END NOTE.)

REGIONAL INTEGRATION DEVELOPMENTS
---------------------------------
14. Senegal is a signatory member of various free trade agreements
such as the Economic Community of West African States (ECOWAS), the
West African Economic and Monetary Union (WAEMU or UEMOA), the Lome
Convention and the World Trade Organization.

CONTACT INFORMATION
-------------------
15. Mission Senegal's primary point of contact for further
information is:

Wallace R. Bain
Economic Counselor
E-mail: BainWR@state.gov.

U.S. agencies should also copy:

Ms. Aminata Wilane Dabo
Admin Assistant, Economic Section
WilaneA@state.gov.

16. Priority Senegal contacts are:

Ms. Aminata Niane
Director
APIX
52-54 Rue Mohamed V
Immeuble Lawar
Dakar, Senegal
Tel: +221 849 05 55
Fax: +221 823 17 02
E-mail: apix@sentoo.sn

Ms. NDeye Khady Sy
Coordinator, Bourses Regionale des Valeurs Mobilieres (BRVM)
1, Place de l'independence
B.P. 22500
Dakar, Senegal
Tel: +221 821 1518
Fax: +221 821 1506
E-mail: khadyrace2@yahoo.fr

Mr. Gabriel Fall, Director
Compagnie de Gestion Financiere et de Bourse (CGF-Finance)
12, rue Dr. Theze
Immeuble Cumba Castel
B.P. 1516
Dakar, Senegal
Tel: +221 822 61 34/821 0317
Fax: +221 822 6135/823 3899
e-mail: cgfbrvm@telecomplus.sn

Mr. Bounama Signate
Managing Director
Western Union
Immeuble Sokhna Anta
5, rue Dr. Theze
B.P. 129
Dakar, Senegal
Tel: +221 839 96
Fax: +221 823 2005

Mr. Souleymane Soumare
Managing Director
Money Gram
97, avenue Andre Peytavin
Dakar, Senegal
Tel: +221 849 60
Fax: +221 823 82 38
e-mail: bst@bst.sn

Mr. Mamadou Toure
Managing Director
Credit Mutuel du Senegal
Rue 16, Malick Sy
Dakar, Senegal
Tel: +221 869 48 48

Mr. Mayoro Loum
Managing Director
ACEP

DAKAR 00002503 004.2 OF 004


Amitie 1, villa 5077
Dakar, Sngal
Tel: +221 825 29 32
Fax: +221 825 29 35

JACKSON

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