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Country Commercial Guides for FY 2000: Senegal Report prepared by U.S. Embassy Dakar, released July 1999    Note*

CHAPTER VIII. TRADE AND PROJECT FINANCING

Banking System

Senegal's banking system is governed by the West African Central Bank (BCEAO), a central bank common to the eight members of the West African Economic and Monetary Union (UEMOA). Along with BCEAO, the "Commission Bancaire" is a supranational supervisory entity created in April 1990 to control financial institutions. The eight member countries use the CFA Franc, issued by the BCEAO and pegged to the French currency at a rate of 100 CFA Francs to one French Franc. Parity and fixed convertibility are guaranteed by the French Treasury: BCEAO has an operating account at the French treasury where it is required to hold at least 65 percent of its foreign exchange reserves.

Seven commercial banks operate in Senegal after the costly restructuring of the banking system in the late 1980s, and an eighth, Ecobank, opened in 1999. The system is characterized by the overliquidity of banks and their hesitancy to lend at medium and long term. BCEAO has endeavored to encourage the flow of lending by reducing the discount rate several times.

The largest commercial banks are predominantly French. Citibank, the only U.S. bank present in the country, is also very active. Ecobank has an impressive network spread throughout West and part of Central Africa. Other financial institutions such as insurance companies, a venture capital firm and a leasing company are also present here. The International Finance Corporation (IFC), the private sector lending arm of the World Bank, has a regional office in Dakar.

Foreign Exchange Controls Affecting Trade

Senegal has recently lifted all restrictions related to foreign exchange controls. Foreign exchange payments are no longer submitted to the authorization of the Ministry of Finance; they are directly executed by Senegal's commercial banks instead. There is free convertibility of the CFA Franc via the banking system for commercial transactions. The rate varies daily according to the French Franc-U.S. dollar rate. CFA Franc banknotes are not legal tender outside of the UEMOA. Travelers may exchange foreign currency for CFA Francs without limit at commercial banks. Travelers may obtain limited but adequate amounts of French Francs or other foreign currencies or travelers checks at banks upon presentation of a valid airline ticket, or at privately run foreign exchange bureaus.

General Financing Availability

The monetary policy of the BCEAO is extremely tight. However, since the devaluation of the CFA Franc, the Central Bank has reduced its discount rate numerous times, from 14.5% to 5.75% in order to boost economic growth by increasing the credit to the economy. Consequently, commercial banks have decreased their base lending rates to a range from 8-9.5%. Banks continue, however, to extend long term credit to a very limited number of borrowers. They rely more on short-term collateral loans. A common complaint from local companies and business contacts is the lack of financing to sustain the growth of the economy. The start-up of the BRVM, with local branches in each UEMOA member state, is expected to help alleviate the lack of long-term resources to finance capital goods. Already, it is estimated that the regional bond market has capitalized CFA 124 billion and a number of large companies with a good ratings have been issuing bonds in order to raise long term resources.

Medium to long-term public sector projects are financed by the multilateral lending institutions such as the World Bank, the African Development Bank and European aid institutions.

How to Finance Exports/Methods of Payment

It is recommended that new-to-the market U.S. exporters request an irrevocable confirmed letter of credit drawn on one of the major banks. It is also very common that large Senegalese importers have sources of foreign exchange outside Senegal; consequently, they can offer credit documents issued by non-Senegalese banks.

Types of Available Export Financing and Insurance

The Export-Import Bank of the United States (Eximbank) is fully on cover in the country for private sector projects in Senegal, and in September 1998 opened for short and medium term in the public sector. Eximbank is actively seeking new business in Senegal for its guarantee and direct export finance program. Contact information for Eximbank can be found in Chapter XI.

Eximbank's medium-term loans, guarantees, and insurance may support exports of capital equipment. Private sector buyers can also use Eximbank long-term loans and guarantees to commercial banks. Some U.S. commercial banks provide Eximbank-guaranteed financing to foreign buyers.

On a broader basis, Eximbank is studying way to engage in partnership with the African Development Bank and the IFC to co-finance public and private sector projects.

The USDA's West Africa Regional GSM-102 Export Credit Guarantee (GSM-102) program provides for access to financing for imports of wheat, rice, feed grains, vegetable oil, protein meal, and dairy products. The payment guarantee to the U.S. exporter is for a minimum of 90 days and a maximum of one year. The guarantor banks in Senegal are currently Citibank and CBAO. The current limit for 19 West African countries, Senegal included, is USD 50 million. The GSM-102 program is generally available only to high quality importers with a good credit history. The GSM-102 is not a flexible financing tool for U.S. exporters. Therefore, USDA has extended a more flexible tool in the West Africa region, the Supplier Credit Guarantee Program. Like COFACE, the Supplier program guarantees direct credit from a U.S. exporter to a West African importer without going through a bank. The guarantee covers 65 percent of the credit extended by the U.S. exporter, and the coverage is for 15 to 180 days.

Types of Projects Receiving Financing Support

The African Development Bank (AFDB) and the World Bank finance public projects dealing with infrastructure. AFDB is currently putting a great emphasis on private sector financing. The private sector-lending arm of the World Bank, the International Finance Corporation (IFC) was involved in the financing of the GE Capital 56 MW power plant BOOT project in Senegal. Eximbank has just approved a 4.8 million loan to a Senegalese entrepreneur for the procurement of mining equipment and the purchase of trucks. Eximbank's medium term insurance will enable the USD 782,615 sale of microwave wireless telecommunications equipment to a Senegalese

OPIC is currently examining support for the construction of a pipeline for a gas exploration project near Dakar.

The U.S. Trade Development Agency along with the AFDB offers funds for feasibility studies.

List of Senegalese Banks with Correspondent U.S. Banking Arrangements

• Citibank Dakar is the only U.S.-owned bank in Senegal. Most of the largest commercial banks are subsidiaries of French banks, many of which have representative offices in the United States.

• Crédit Lyonnais Senegal is affiliated with Crédit Lyonnais of France, which has a representative office in New York.

• Société Générale de Banques du Senegal (SGBS) is affiliated with the Société Générale de Banques of France, which has a representative office in New York. Its Foreign correspondents include Société Générale France, Banca National del Lavoro and the Credit Suisse.

• Banque Internationale pour Le Commerce et l'Industrie du Senegal (BICIS) is affiliated with the Banque Nationale de Paris. Its foreign correspondents include Barclays Bank, BNP France, Dresdner Bank, and Banque Bruxelles Lambert.

• Banque de l'Habitat du Senegal (BHS) specializes in housing. BHS has a branch in New York that targets the growing Senegalese community in the United States.

• Caisse Nationale de Crédit Agricole (CNCA) provides credit to small-scale rural enterprises. It is affiliated with France's Crédit Agricole.

• Ecobank is present in twelve African countries: Nigeria, Ghana, Benin, Mali, Cote d'Ivoire, Togo, Burkina, Liberia, Niger, Cameroon, Guinea and Senegal. Its foreign correspondents include Bankers Trust Company in New York, Swiss Bank Corporation, Royal Bank of Canada, National Westminster Bank of London, ING Barings in Holland and Standard Bank of South Africa.

• CBAO has correspondent relationships with Citibank New York and Swiss Bank Corporation.

• Banque Sénégalo-Tunisienne has correspondent relationships with Credit Commercial de France, Standard Chartered and Banca Nazionale del Lavoro.