In Ivory Coast, the poor prefer to keep their savings under their mattresses or in informal community associations, while the wealthy invest directly in real estate or send their money offshore. People’s reluctance to use local banks explains to a large extent why financial intermediation is still nascent in the country. The lending rate (as of percent of GDP) is today three to four times lower than in middle-income African countries such as Morocco, Namibia, and South Africa. The gap is even greater when compared to the emerging countries of Southeast Asia. Why are Ivorians not backing up their banks even if it would be safer and potentially more profitable for each person? How could one close the apparent “trust gap” between citizens and the banking sector?
Little gains, huge costs for savers
In Ivory Coast, only one out of eight savers opts to put their savings in a bank or a financial institution. This is half of the African average and a third of the levels observed in low-income countries. There is clearly a lack of trust in the relationship between Ivorian savers and their banks, which partly broke down during the 10-year political crisis that only ended in 2011. It has also been weakened by the failure of several public banks that had to be closed down, restructured, or privatized in recent years. As expected, it will take some time to rebuild this trust.