Madagascar - The banking system

The Malagasy banking landscape has undergone significant transformation with the establishment of new foreign banks and microfinance institutions (MFIs). The banking sector is characterized by high levels of profitability but low banking penetration.

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According to a 2019 World Bank study on financial inclusion, fewer than 10,000 Malagasy people have a deposit account, placing the country among the worst performers in sub-Saharan Africa. Banks play an important role in promoting financial inclusion, particularly by providing financial and credit services to medium- and large-sized enterprises, thereby further stimulating growth and job creation. The Private Credit Bureau Act should help reduce the risk for banks lending to new clients by providing information on potential clients. Furthermore, a partial portfolio guarantee for credits (GPPC) by banks and MFIs to MSMEs in operation for more than three years has helped increase lending by banks and MFIs to MSMEs. Under this program, the GPPC Fund guarantees 50,000 credits granted to eligible borrowers. Eligibility criteria are agreed upon between the lender and the Fund. A portfolio guarantee is characterized by automaticity, since each loan meeting the eligibility criteria must be recorded on the guarantee. Eligible guarantee calls on defaulted loans are paid by the Fund within thirty days. Currently, there are eleven territorial banks, including three microfinance institutions (MFIs) with banking licenses.

The banking sector is, however, very concentrated: the four main banks hold 86% of loans.

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Furthermore, it is recognized that bank lending to the private sector plays a vital role in strengthening economic activity in the country. However, it has been noted that bank financing remains insufficient and access to finance still tops the list of obstacles facing the private sector.

Beyond the financial support offered to large groups, the banking sector limits its activities to the purchase of Treasury bonds and financing the agricultural export sector, particularly the vanilla sector. Microfinance, with a penetration rate in Madagascar of 30% – compared to approximately 6% for banks – still provides very little support to SMEs. These institutions, which are very active in rural areas, mainly finance the small informal sector.

PAOMA Post Office

Paositra Malagasy (PAOMA), or La Poste, operates the postal service in Madagascar. It is a 100% public company reporting directly to the Ministry of Post, Telecommunications, and Digital Development. With 255 branches across Madagascar, it is a major player in the financial sector. Its product and service offering is traditional: postal current accounts, transfers (postal orders), and savings (demand, term, and retirement savings). The latest figures reported indicate approximately 480,000 savings customers. Since 2015, PAOMA has entered the insurance market, signing a partnership with the insurance company CMAR Ny Havana to distribute NY Havana products in select branches. The ultimate goal is to enter the market as a fully-fledged player.