A growing banking system is being worked on to spur investment, savings and business initiatives.

The unified Congolese franc (CDF) was introduced in 1998 during the government of Laurent Kabila. Initially set at CDF 75 to the dollar, the currency experienced problems with the outbreak of war and subsequent loss of reserves. Liberalization of the exchange rate by Joseph Kabila in 2001 caused an immediate and strong devaluation of the national currency. By the following year, the rate had stabilized and remained relatively so until the beginning of 2005 when unforeseen government expenditures arose relating to further conflict in the east of the country and the rate plummeted once more.

“Such important variations are not appreciated either by businessmen, the government, or the World Bank,” says Jean-Claude Masangu, Governor of the Congolese Central Bank (BCC). Monetary and budgetary measures were taken in February 2005 to correct the currency’s volatility. Following guidance from the World Bank (WB), the government cut all unnecessary budget expenditure and the BCC stopped issuing notes. These policies achieved their interim objective, which was to improve the exchange rate of the franc. “Since April the country has been entering a fresh period of stability, which will allow us to recuperate the growth we experienced from 2001 to 2004,” says Mr. Masangu.

Ultimately, any central bank needs to establish its credibility. The BCC has achieved this by successfully performing its two main responsibilities: introducing monetary reform and enlisting support for its efforts from foreign partners, namely the WB and the IMF. In addition, a law is being elaborated to establish the bank’s independence.

The BCC has also published a strategy program outlining the problems facing the banking and financial sectors. This strategic development plan, scaled from 2004 to 2010, will consolidate monetary policy, improve the central bank’s management system, reinforce supervision of financial intermediaries and improve the payments system.

Head office of the Banque Commerciale du Congo (BCDC), the oldest bank in the DRC

A legal framework will regulate banking operations, and the system will be modernized. “Our challenge is to establish a solid banking system,” says the BCC governor. “We now have nine banks, which is insufficient if you consider the size of our country - at present more than 80 percent of the monetary mass is outside the official channel. We need to introduce internal savings and this implies developing microfinancial institutions and collective credit ownership,” he adds.

The Ministry of Finance is working closely with the BCC in all aspects of the banking and financial reform. “We encourage the idea of getting our own banking sector,” says André-Philippe Futa, the former Minister of Finance. “We experienced a period during which there were no banks functioning, so we decided to liquidate three of them. But we wish to bring more banks into the DRC. In order for them to come, we need to create a macroeconomic framework which gives confidence; in other words, a Congolese currency that is stable enough to build a bank on.” As the ex-minister further explains, “If the domestic private sector can be made to trust the system, foreign investment will follow.”